Articles Posted in Trade Secrets

Indianapolis, Indiana – Plaintiff Heartland Consumer Products LLC of Carmel, Indiana filed an intellectual property lawsuit in the Southern District of Indiana alleging trademark and trade dress infringement, trademark dilution and unfair competition under the Lanham Act, as well as related wrongdoing under the Indiana State Trademark Act, the common law of the State of Indiana and the Indiana Crime Victims Act.  The intellectual property at issue pertains to Splenda®, a Heartland trademark under which it offers sucralose, a low-calorie sweetener.

Defendants in the litigation are Dunkin’ Brands, Inc. and Dunkin’ Donuts Franchised Restaurants LLC Untitled-1-300x102of Canton, Massachusetts.  They are accused of “deceiving customers into believing the Dunkin’ Donuts restaurants carry Splenda® Brand Sweetener,” by both tacitly and affirmatively misrepresenting that the non-Splenda sucralose product that the Dunkin’ Defendants offer is, in fact, Heartland’s Splenda.  Plaintiff contends that consumers were confused about whether the sweetener that the Dunkin’ Defendants offered was Splenda and that some have complained that adding the other sweetener to their Dunkin’ Donuts products imparted a “funny taste.”

Defendants discontinued their agreement to purchase and offer Heartland’s Splenda in April 2016.  According to the Indiana complaint, following that decision, Defendants began offering sweetener in yellow packets similar to the single-serving packets in which Splenda is offered to the public.  Plaintiff contends that, when asked, Defendants in a “clear majority of stores affirmatively represented, through their agents or employees, that non-Splenda® sucralose sweetener was instead Splenda® Brand Sweetener.”  Plaintiff further contends that Dunkin’ Defendants are misappropriating Plaintiff’s trademarked “Sweet Swaps®” by the use of a similar term “Smart Swaps.”

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Earlier this month, the Defend Trade Secrets Act (“DTSA”) became federal law. The DTSA grants the owners of trade secrets the right to sue in federal court for misappropriation of a trade secret that is “related to a product or service used in, or intended for use in, interstate or foreign commerce.” Previously, protection of trade secrets was offered only under state law, with most states having adopted a version of the Uniform Trade Secrets Act (“UTSA”). The new federal law will supplement, not replace, those state laws.

The DTSA, while it mirrors the UTSA in many respects, adds several notable elements. In addition to creating original jurisdiction in federal district court over civil actions brought under the law, the DTSA also provides for the ex parte seizure of property where necessary to prevent the disclosure of the trade secret at issue in the lawsuit. This seizure is permitted only in “extraordinary circumstances,” including those situations where immediate and irreparable injury to the plaintiff will result if the seizure is not ordered. The party requesting an ex parte seizure must post security and, in cases where such a seizure is obtained wrongfully, the DTSA makes damages available to the defendant. Moreover, the Act recognizes the problem of international trade secret theft. The provision allowing for ex parte seizure of property is “expected to be used in instances in which a defendant is seeking to flee the country.”

The DTSA also includes a provision permitting the entry of an injunction prohibiting a person from accepting employment if there is a sufficient threat of misappropriation of a trade secret. In lesser cases, the individual may begin employment but will be subject to conditions enunciated by the court.

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Washington, D.C. – The Defend Trade Secrets Act (“DTSA”) recently became federal law. This statute creates a federal right of action for misappropriation of trade secrets.

Among the provisions of the DTSA are new protections for whistleblowers. Under the DTSA, immunity is granted to persons who disclose a trade secret to a government official or attorney for the sole purpose of reporting or investigating a suspected violation of law. This immunity covers both civil and criminal liability under either federal or state trade secret law.

The DTSA also provides that trade secret information may be used in litigation by an employee who sues an employer alleging retaliation for having reported a suspected violation of law. The law requires that certain steps be taken during litigation to prevent disclosure of the trade secret.

Washington D. C. – The United States Senate Judiciary Committee approved S. 1890, the Defend Trade Secrets Act (“DTSA”). If enacted, the bill would create a private cause of action in the federal courts for trade secret misappropriation.

Under Indiana’s Access to Public Records Act, a trade secret is defined as:

information, including a formula, pattern, compilation, program, device, method, technique, or process, that:

(1) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

(2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

The proposed legislation uses a similar definition:

[T]he term “trade secret” means all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if —

(A) the owner thereof has taken reasonable measures to keep such information secret; and

(B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the public.

The DTSA would be the civil counterpart to the Economic Espionage Act of 1996, a criminal statute that uses the same definition of “trade secret” as the DTSA.

This would be the first time that individuals would have a private, federal right of action for theft of trade secrets. Presently, those seeking redress in civil court for theft of trade secrets must resort to claims based on state law or seek to have a claim for injunctive relief filed by the Attorney General.

The DTSA, if enacted, would address the current patchwork of state laws protecting trade secrets. While those state statutes are similar, with many states having enacted some form of the Uniform Trade Secrets Act (“UTSA”), they are not identical.

The DTSA does not preempt any other law. Thus, where a state’s law governing trade secrets is more generous, a plaintiff retains the ability to sue under that state law also, either in state court or as a pendant claim in a federal lawsuit.

The relief offered under the DTSA contains such remedies as monetary damages, including royalty payments, reimbursement of actual losses caused by the defendant and trebling of a monetary award where punitive damages are found to be appropriate. Injunctive relief and attorneys’ fees may also be recoverable.

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Indianapolis, Indiana – An Indiana copyright lawyer for Defendant Wrightspeed, Inc. of San Jose California filed a notice of removal in the Southern District of Indiana on the basis of both federal-question jurisdiction and diversity-of-citizenship jurisdiction.

Plaintiff Precision Rings, Inc. of Indianapolis, Indiana had filed its lawsuit in Marion County Superior Court seeking declaratory relief, injunctive relief, unspecified damages and attorney’s fees. Among Plaintiff’s contentions was the breach of a nondisclosure agreement. Included in this alleged breach was the misappropriation of Plaintiff’s trade secrets, which involved the use or disclosure by Defendant of certain copyrighted drawings that Plaintiff had registered with the U.S. Copyright Office.

Defendant Wrightspeed contended that federal-question jurisdiction was proper and asked that the federal court in the Southern District of Indiana hear and decide all further matters in the litigation. Defendant asserted that the complaint arose under copyright law because Plaintiff’s complaint included a claim that would require construction of the Copyright Act. Consequently, subject matter jurisdiction rested exclusively in federal court.

Defendant Wrightspeed also asserted that diversity-of-citizenship jurisdiction was a proper basis for the Indiana federal court to hear the litigation. The parties were completely diverse, it stated, with Plaintiff being a citizen of Indiana and Defendant being a citizen of both Delaware and California. Defendant contended further that, considering the potential damages, fees and costs, the amount at stake was well in excess of the $75,000 threshold necessary for diversity-of-citizenship jurisdiction.

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Evansville, Indiana – Responding to a complaint filed in Indiana state court by Indiana copyright attorneys, a defense lawyer filed a motion to remove the lawsuit to a federal court in the Southern District of Indiana – Evansville Division.

Plaintiff Professional Transportation, Inc. of Evansville, Indiana (“PTI”) is the former employer of Defendant Robert Warmka of Savage, Minnesota. Warmka worked for PTI from September 2012 to December 2013. PTI contends that this employment was governed in part by a trade-secrets agreement. Subsequent to leaving employment with PTI, Warmka began employment with Minnesota Coaches Inc. (“MCI”) d/b/a Crew Motion, a competitor of PTI.

PTI filed this copyright lawsuit in Vanderburgh Superior Court alleging that Warmka infringed its intellectual property by his use of Plaintiff’s copyrighted driver’s manual within MCI’s driver’s manual. PTI contends that multiple sections of PTI’s manual were reproduced nearly verbatim in MCI’s manual. PTI claims that this manual was filed with the U.S. Copyright Office “on or before 2012.” Plaintiff further contends that Defendant appropriated Plaintiff’s confidential material and trade secrets in violation of a trade secret agreement executed by both parties in 2012.

In this lawsuit, filed by Indiana copyright lawyers, the following counts are asserted:

• Count I: Indiana Trade Secret Violation
• Count II: Unfair Competition

• Count III: Copyright Infringement

Plaintiff alleges loss of business and profits and seeks injunctive relief and monetary damages.

Copyright attorneys for Warmka filed a notice of removal, stating that federal subject-matter jurisdiction was proper on the basis of both federal-question jurisdiction and diversity-of-citizenship jurisdiction.

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Indianapolis, Indiana – Indiana intellectual property lawyers for Angie’s List Inc. of Indianapolis, Indiana sued in the Southern District of Indiana alleging theft of trade secrets. The Defendants in this litigation are AmazonLocal LLC of Seattle, Washington, Michael Albo, Kristin Baker, Dan Beary, Colton Bozigian, Jake Connerton, Adam DiVincenzo, Brandon Goodwyn, Kristen Haught, Justin Hillman, Amit Jain, Joshua Keezer, Olivia Landergan, Daniel Malamud, Raissa Masket, Samantha McDonald, Jason Patrao, Sharon Porter, Darren Reinstein, Billy Restrepo, Michael Shmunis, and Jacquelyn Vail.

In its 42-page complaint, Angie’s List alleges that competing business Amazon Local

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 and some of its employees misappropriated proprietary information belonging to Angie’s List by fraudulently obtaining membership accounts and, using this members-only access, obtained and misused proprietary information about thousands of service providers about which Angie’s List had gathered data.

This federal lawsuit alleges that the data downloaded by Defendants from Angie’s List was subject to a membership agreement, which was a condition of membership and wherein members agreed not to “reproduce, duplicate, copy, sell, re-sell or exploit” any of the data. These restrictions were ignored, says Angie’s List, and instead its proprietary information has been used to build a database of service providers for Amazon Local’s use.

The complaint, filed by Indiana trade secret attorneys for Angie’s List, includes the following claims:

• Count I: Computer Fraud and Abuse Act
• Count II: Breach of Contract
• Count III: Tortious Interference with Contract
• Count IV: Misappropriation of Trade Secrets
• Count V: Conversion
• Count VI: Theft
• Count VII: Unfair Competition
• Count VIII: Computer Tresspass [sic]
• Count IX: Violation of the Stored Communications Act
• Count X: Civil Conspiracy and Concert of Action

• Count XI: Request for Preliminary and Permanent Injunctive Relief

Angie’s List seeks damages and injunctive relief.

The case was assigned to Chief Judge Jane E. Magnus-Stinson and Magistrate Judge Debra McVicker Lynch in the Southern District of Indiana and assigned Case No. 1:15-cv-00968-JMS-DML.

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Los Angeles, California – Chinese professors have been accused of having stolen valuable technology from Avago Technologies and Skyworks Solutions to benefit a university in the People’s Republic of China.

On May 16, 2015, Tianjin University Professor Hao Zhang was arrested upon entry into the United States from the People’s Republic of China (“PRC”) in connection with a recent superseding indictment in the Northern District of California, announced Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Melinda Haag of the Northern District of California and Special Agent in Charge David J. Johnson of the FBI’s San Francisco Division.

The 32-count indictment, which had previously been sealed, charges a total of six individuals with economic espionage and theft of trade secrets for their roles in a long-running effort to obtain U.S. trade secrets for the benefit of universities and companies controlled by the PRC government.

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South Bend, Indiana – Trademark attorneys for Integrity Trade Services, Inc. (“ITS”) of Frankfort, Illinois filed an intellectual property complaint in the Northern District of Indiana naming as Defendants Integrity Employment Partners, LLC, Integrity Trade Services, LLC, Janice Hernandez, James Hernandez, Michaela Williams, and Jason Reis, all of Indiana, and alleging multiple claims, including trademark infringement, conversion of ITS trade secrets, breach of contract, and tortious interference with business relationships.

ITS is a national staffing services company, doing businesses in multiple states, including Indiana, Florida, Illinois, and Texas. ITS is wholly owned by John E. Cumbee, III. In 2008, ITS acquired all of the operational assets of the Knox, Indiana branch of a staffing company owned by CES America, Inc. ITS also hired most, if not all, of the CES employees then working at the Knox facility, including defendants James and Janice Hernandez.

ITS contends that, since purchasing the Knox facility, it has invested well over $1 million to build the Knox business and the ITS brand as it is related to that facility. It asserts in this federal lawsuit, inter alia, that Defendants conspired to convert ITS’ customers, employees and trade secrets for their own use.

The accused in this case are husband and wife Janice Hernandez and James Hernandez; several family members of Janice Hernandez, including Michaela Williams, and Jason Reis; and two entities apparently owned by the Hernandezes, Integrity Employment Partners, LLC, Integrity Trade Services, LLC.

Defendant James Hernandez (“James”) worked for ITS from the time that ITS acquired the business until April 30, 2015 when he was fired. ITS asserts that James engaged in a conspiracy to solicit away and convert (a) ITS’ office employees at the Knox location, (b) at least the active ITS field employees servicing the Knox location, and (c) customers comprising the Knox-area business. He is accused of attempting to transfer them to Integrity Employment Partners, LLC, an Indiana limited liability company formed to process the Knox business converted from ITS for his benefit and the benefit of the other co-conspirators.

Defendant Janice Hernandez (“Janice”), also became employed by ITS when ITS was acquired from its prior owner. She has been accused of not only being an integral part of the alleged conspiracy but also of being “likely its “‘mastermind.'” Defendant Michaela Williams is Janice’s daughter. Defendant Jason Reis is the ex-son-in-law of James and Janice, having been married to another of Janice’s daughters.

ITS states that, in the last two weeks in April 2015, it discovered various anomalies in the Knox business. These anomalies alerted ITS to the activities that triggered this federal lawsuit. They included a drop off in weekly gross sales, the formation of Integrity Employment Partners, LLC (“IEP”), and checks issued by existing ITS customers made payable to IEP (and not ITS).

Defendants are accused of orchestrating a scheme to confuse ITS’ customers and employees regarding with which staffing businesses using the name “Integrity” – Plaintiff’s firm or Defendants’ firms – those customers and employees were transacting business. In doing so, ITS contends, Defendants attempted with some success to convert ITS’ business assets and relationships for Defendants’ benefit. Allegations of criminal conduct by Defendants were also made. In a 48-page complaint, filed by trademark lawyers for Plaintiff, those claims and others are made:

• Count I: Federal Trademark Infringement
• Count II: Federal Unfair Competition
• Count III: Illinois Deceptive Trade Practices Act
• Count IV: Breach of Fiduciary Duty
• Count V: Breach of Agreement
• Count VI: Tortious Interference with Contract
• Count VII: Tortious Interference with Business Relationships
• Count VIII: Conversion
• Count IX: Computer Fraud and Abuse Act
• Count X: Uniform Trade Secrets Act
• Count XI: Civil Conspiracy
• Count XII: Unjust Enrichment

• Count XIII: Breach of Contract

Plaintiff asks the court for, inter alia, injunctive relief, compensatory damages, punitive damages, attorneys’ fees, interest and costs.

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Indianapolis, Indiana – The Court of Appeals of Indiana affirmed the directed verdict of Special Judge William E. Alexa of Porter Superior Court. Writing for the Indiana appellate court, Judge John Baker concluded that the trial court had not erred in ruling that Defendants’ information was insufficiently private to constitute trade secrets.

Appellant-Plaintiff Think Tank Software Development Corporation, d/b/a Think Tank Networking Technologies Group and Think Tank Information Systems (“Think Tank”) is engaged in computer-related business activities, including systems and network engineering, problem solving, systems design, implementation, sales, client training, and computer maintenance. During 2001 and 2002, multiple employees left Think Tank and joined its competitor, Chester, Inc.

In 2002, Think Tank sued Chester as well as former Think Tank employees Mike Heinhold, John Mario, Joel Parker, Thomas Guelinas, Jon Meyer, Daniel Curry, Eric M. Wojciechoswki, Michael Gee, Philip Ryan Turner and Carl Zuhl alleging: 1) breach of the covenant not to compete, 2) breach of the confidentiality clause, 3) breach of the agreement not to solicit its employees for other work, 3) tortious interference with contracts, 4) misappropriation of trade secrets, 5) tortious interference with business relationships, 6) unjust enrichment, and 7) defamation. Think Tank also included a claim for unfair competition against Chester.

After much litigation, including two prior appeals to the Indiana Court of Appeals, this Indiana trade secret lawsuit was again heard by the trial court on the remaining claims: misappropriation of trade secrets, tortious interference with contracts, and breach of the covenant not to compete and confidentiality provisions.

The most interesting of the claims in this lawsuit is Think Tank’s assertion of misappropriation of trade secrets. Defendants moved for a directed verdict on that count, as well as all other claims against them. The trial court granted the directed verdict on Think Tank’s claim for misappropriation of trade secrets, reasoning that, “[it] is a question of law for the Court relative to what is and what is not a trade secret. Plaintiff has failed to show that the information obtained was ever, in law, a trade secret.”

Shortly after this ruling, Think Tank sought review a third time from the Indiana Court of Appeals. It claimed that its trade secrets included: 1) the nature and design of its technical solutions; 2) the design of its customers’ computer systems; 3) pricing; and 4) customer identities. Think Tank further argued that the trial court could not determine as a matter of law whether information was a trade secret under Indiana Code section 24-2-3-2, which defines a trade secret as:

information, including a formula, pattern, compilation, program, device, method, technique, or process, that:

(1) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

(2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

The Indiana appellate court declined to address Think Tank’s argument whether a trial court could determine as a matter of law whether information was a trade secret under Indiana law. However, it concluded that Think Tank had failed in its burden to avoid the directed verdict: “as a matter of law, Think Tank failed to produce enough evidence to allow a reasonable fact finder to determine that the proffered information was trade secrets.” Specifically, it found that Think Tank failed to show that any of the information alleged to be trade secrets was not generally known to or ascertainable by the public.

The appellate court agreed with the Indiana trial court that: 1) the computer certifications and intellectual capital that Think Tank possessed was readily available information; 2) knowledge of customers’ computer systems and current or future needs was readily ascertainable, as such information belonged to the customers in question; and 3) pricing information did not constitute a trade secret, as it too was readily available from the customers. Thus, the information was not a trade secret.

The Indiana appellate court continued that Think Tank appeared not to be trying to protect its trade secrets, but instead to prevent competition. Such a goal, the court said, might be effectuated by a non-competition agreement. However, the use of Indiana legislation designed to protect trade secrets could not properly be stretched to hinder the use of information that appeared to be generally known or readily obtained from another source.

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