## Facts

- Two professionals developed a computerized “book-entry” system for issuing and trading municipal securities without paper certificates.
- The parties executed a confidentiality agreement so the bank could review a detailed written summary of the techniques.
- After negotiations, they entered a sale agreement transferring plaintiffs’ rights in the techniques and certain trade names to the bank.
- The bank agreed to pay a stipulated rate based on its use of the techniques from October 1982 to January 1988.
- The agreement stated the bank’s payment obligation would continue even if the techniques became public knowledge or standard industry practice and even if patent and trademark applications were denied.
- Plaintiffs represented they had not previously disclosed the techniques and agreed to maintain confidentiality until the techniques became public.
- The bank implemented and promoted the system and, at least initially, was the only underwriter using it.
- After a personnel change, the bank stopped making payments, asserting the techniques were already in the public domain at the time of contracting and therefore plaintiffs sold nothing they owned.
- Patent efforts were unsuccessful.
- The trial court narrowed the case to breach of contract while allowing a lack-of-consideration theory to remain; summary judgment was denied.
- The intermediate appellate court held novelty was required for consideration in an idea-sale contract and treated novelty as a triable fact question.
- The state’s highest court reviewed whether novelty is required for consideration in an idea-sale contract.

## Issues

1. Whether an idea-sale contract fails for lack of consideration if the idea is not novel or is already in the public domain.
2. Whether consideration is satisfied where the buyer receives value from the idea, regardless of novelty.

## Decision

- The court modified the intermediate appellate court’s order and rejected novelty as a requirement for consideration in an idea-sale contract.
- The court held the decisive question is whether the idea had value to the buyer, not whether it was novel.
- The court treated the agreement’s risk-allocation clause (payment due even if public or unpatentable) as enforcing the parties’ bargain rather than importing intellectual-property prerequisites into contract consideration.
- The contract was enforceable on ordinary contract principles; the bank could not avoid payment solely by claiming the idea lacked novelty.

## Legal Principles

- Consideration in an idea-sale contract turns on whether the idea confers value to the buyer, not on whether the idea is novel, patentable, or a protectable property right against the world.
- Lack of novelty does not, by itself, establish lack of value; a buyer may receive value through lead time, reduced development costs, or a ready-to-use package of information and related assets.
- Sophisticated parties may allocate the risk that information will become public or fail to receive intellectual-property protection, and courts will generally enforce that allocation.
- Contract consideration does not require the subject matter to be exclusive or legally protectable as intellectual property; the focus is the bargained-for exchange between the parties.

## Conclusion

The court enforced the idea-sale agreement because the plaintiffs’ techniques had value to the bank as part of a bargained-for exchange, and the bank’s obligation to pay did not depend on proving the idea’s novelty or exclusivity.


Apfel v. Prudential-Bache Sec., Inc., 81 N.Y.2d 470 (1993)