Intellectual property (client list) developed by independent contractor - ownership?

Hi, Your question is a good one and very nuanced. I do not believe the answer will very straight forward. There are tons of NY cases dealing with trade secrets under a variety of circumstances. I would want to understand the facts and circumstances in more detail before I would feel comfortable offering my insights. I too am in NYC and I invite you to contact me for a free phone consult to flesh it out in more detail. Best regards, Frank Natoli-Lapin, LLC (see Disclaimer)

You have the right issue pegged. You will need to consult a NY IP attorney or employment lawyer, with my guess being the employment lawyer will actually be more current on the latest cases. The key question to me is what sort of fiduciary relationship was or was not implied from the nature of your being hired in a business development capacity. At the very least there is a strong chance this list belongs to the company that contracted for you to develop it. After all, it is the very thing they were paying you to create. This is not a copyright question in my view since the company will not care how the contact data is expressed but rather what it contains, i.e. the information itself. I think a fiduciary responsibility will be implied and for you to take the confidential data, which you were paid to develop, will be held to be misappropriation of trade secrets. Here in Illinois and Missouri, you would not be able to use the list without serious legal liability. I suspect NY will be the same. California might be a little more liberal. At any rate, there is serious risk of legal exposure so you need to consult a lawyer and get your ducks in a row legally before making use of this list. I think there is a way to accomplish your objective if you are properly advised from a legal standpoint, but you are certainly not there yet.

I assume that when you say there was no contract, that means that there was no independent contractor's agreement, no non-disclosure agreement and no other policies that you received and signed for. If my assumption is incorrect, then the balance of the answer is also liable to be incorrect. Given the assumption above, I think that this is going to be a fact specific analysis. There are a lot of cases out there on this subject and most of them come down to what a court thought in that particular instance was fair and right. You should also keep in mind that, even if you might have an arguable right to continue to use the customer list (and I am not saying you do), the fact that there are a lot of cases on this subject reflects another very important reality. What you are considering doing carries with it a significant risk of litigation. While asking the question "will I win or lose the case" is an important question, you should also ask "is it worth spending tens or hundreds of thousands of dollars defending myself." If you are going to proceed, you should definitely get proper, fact-specific advice from a New York employment or intellectual property lawyer. An employment lawyer is probably the better choice.

You have already received great advice. I would add that in New York, the label "independent contractor" (as opposed to employee) does not help someone in your situation as much as many people believe. This is because in many circumstances, independent contractors are assigned very sensitive business tasks that necessarily create either an agency relationship and/or fiduciary duties to the employer. Your question suggests that more than list building was involved---you also would find clients "close the deal". In so doing, you were most likely involved in the establishment of confidential business relationships, and you would have had access to confidential information concerning such relationships. Since you were paid for your efforts, most courts would not look with favor on your attempt to exploit the list and customer relationships that you helped to build for a competitor. Nonetheless, the devil is the detail in cases like this. For example, if the client names were derived from publicly available sources and anyone could easily replicate your list from such sources, then there might not be any way for your former company to object. Since there was no written agreement containing a non-compete clause, you might be able to argue that you were free to compete with this former client as long as you were not using confidential information. Thus, you may have some reasonable arguments here (although this is an uphill battle). But your real problem here is that these situations invariably wind up in litigation unless the parties are proactive in negotiating a solution. There are literally thousands of non-compete/confidentiality/customer list cases in New York alone, and the outcome normally turns on the detailed facts and equities. Therefore, it is not easy to predict how a court would rule until all of the evidence is reviewed. Even then, these cases are unpredictable and there are no bright-line rules. And most importantly, these cases are expensive---it is not unusual for legal fees in these cases to be in the six figures---which means that even if you win the case you may lose the economic battle. Your former company's economic interests may be well served by spending hundreds of thousands of dollars to knock out a competitor, but if you have to spend a similar amount to defend yourself it may be devastating for you. I advise clients in situations lie this to retain counsel to negotiate a solution and, if necessary, use alternative dispute resolution mechanisms (mediation and arbitration), because otherwise the costs of litigation are often out of hand.