Subsequent Licensing Agreement Calls Into Question Earlier NDA’s Enforceability 

By: Krista Marrocco

Edited by: Anthony Berlenbach, Cara Regan, and Brian Kacedon

Abstract: In Internet Sports International, Ltd. v. Amelco USA, LLC, the plaintiff alleged the defendants stole confidential information and trade secrets to use in competing sports betting kiosk in violation of a non-disclosure agreement (“NDA”). The defendants argued that a subsequent licensing agreement terminated the confidentiality obligations of the NDA. Based on the license agreement’s ambiguity regarding the treatment of the NDA, the district court denied summary judgment, leaving an open question regarding whether the NDA obligations had expired.

Background

Internet Sports International (“ISI”) is an American company specializing in retail sport-betting kiosks. It sought to partner with Amelco UK and Amelco USA (collectively “Amelco”), software providers for online sports betting and financial trading.

In March 2019, the parties entered into an NDA to facilitate a “Possible Transaction.” The NDA required any confidential information be used only for the purposes of the parties’ “Possible Transactions.” A termination clause provided that the NDA would “expire and terminate two years from the date either Party notifies the other in writing that discussions concerning the Possible Transaction are terminated.” 

Six weeks after the NDA was signed, the parties entered into a license agreement. Under this subsequent agreement, ISI paid royalties for a license to use Amelco’s software on ISI’s kiosks. The license agreement imposed a duty of confidentiality on ISI to keep Amelco’s information confidential, but did not impose a reciprocal confidentiality obligation on Amelco.

Over the next several years, the parties negotiated a longer-term kiosk agreement, where Amelco would pay ISI for its kiosks and maintenance. But the parties never finalized this later kiosk agreement. 

Shortly after Amelco began providing its own retail kiosks to major casinos, ISI sued Amelco for allegedly stealing confidential information and trade secrets shared with Amelco during the course of the parties’ relationship. Amelco argued that the license agreement nullified and superseded the prior NDA, extinguishing Amelco’s confidentiality obligations. ISI argued that the NDA continued to bind Amelco. All parties moved for summary judgment.

Key Findings of the Court

The district court found that there were disputed issues of fact, such that the NDA’s obligations may have survived the subsequent license agreement based on the contracts’ ambiguous terms and the parties’ intent. For instance, the NDA contemplated expiration if the “Possible Transaction” did not take place, but it left open whether the NDA would expire if the parties did enter into a subsequent transaction. The court also noted the NDA’s use in places of “Possible Transactions,” in the plural, allowing for a reasonable inference that the NDA was meant to co-exist with subsequent transactions. Further, while the license agreement included an integration clause, stating that it was the “entire understanding and agreement” of the parties, it did not include an express intent to extinguish the NDA. And ISI’s conduct showed that ISI did not intend to extinguish the NDA by signing the license agreement because its president stated in an email that he believed the NDA was still in force. 

Due to these disputed issues, the court held that it was “ambiguous whether the parties intended to extinguish the NDA” and denied all motions for summary judgment as to whether the NDA had been superseded by the license agreement.

Strategy and Conclusion

When drafting an agreement, it is worthwhile to expressly address whether any earlier agreements or NDAs are being superseded or terminated, removing any ambiguity about the parties’ obligations. Boilerplate integration clauses may not suffice to terminate earlier agreements, and absent an express provision, the parties may face a fact-bound inquiry should there later be a dispute about continued obligations from an earlier agreement.

Further Information

The Internet Sports International decision can be found here.

Editors and Authors

The editors are attorneys and the author is a summer associate at Finnegan, Henderson, Farabow, Garrett & Dunner, LLP.

This article is for informational purposes and does not constitute legal advice.

The views expressed do not necessarily reflect the views of LES or Finnegan.

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