Traverse Internet Law Federal Court Report: November 2009 Trade Secret Violation Lawsuits

Traverse Internet Law Disclaimer

The facts are unproven allegations of the Plaintiff and all commentary is based upon the allegations, the truthfulness and accuracy of which are likely in dispute.


BAY VIEW DENTAL LAB, INC. v. EDDIE VON SCHLICHTING AND INTER-CHROME DENTAL LAB, LLC
EASTERN DISTRICT OF VIRGINIA (NORFOLK)
2:09-CV-00589
FILED: 11/30/2009

It is not an unusual situation to have an employee launch a competing business and walk out the door with confidential or proprietary information. “Dual employment” by an individual working for two competing businesses at the same time is obviously a major problem for that individual. And also for your business if this is happening to you. I am often surprised by the number of businesses, from Fortune 500 to small mom-and-pop affiliate marketing shops, that allow “moonlighting” in the affiliate marketing industry. It is difficult to imagine conflicts of interest not arising, and yet this practice continues. Consider prohibiting “moonlighting” totally or limit the practice so that it does not create conflicts or breaches of fiduciary duties.

The Plaintiff is a well known dental laboratory. Defendant Von Schlichting was employed by the dental lab for over six years. Plaintiff alleges that the employee began a competing business on July 10, 2009 and did not disclose the new business and continued working for the Plaintiff until December 4, 2009. During his employment the Plaintiff alleges that the Defendant deliberately retained confidential information and company records without its knowledge or consent and is using those in his new business.

The lawsuit alleges unfair competition in violation of the Lanham Act, breach of fiduciary duties, conversion of customer list and information, misappropriation of trade secrets, conversion of business name and images, and tortious interference with business relationships and expectancies. The claim for relief includes a request for the entry of an injunction prohibiting Defendant’s further interference with Plaintiff’s customers and a monetary award of compensatory damages in the amount of $150,000, punitive damages in the amount of $250,000, pre-judgment and post-judgment interest, and costs and expenses. Traverse Internet Law Cross-Reference Number 1383.

Traverse Internet Law Federal Court Report: October 2009 Trade Secret Violation Lawsuits

Traverse Internet Law Disclaimer

The facts are unproven allegations of the Plaintiff and all commentary is based upon the allegations, the truthfulness and accuracy of which are likely in dispute.

BRIGHT IMPERIAL LIMITED v. WEB ENTERTAINMENT GROUP INC., ET AL.
CENTRAL DISTRICT OF CALIFORNIA (LOS ANGELES)
2:09-CV-07840
FILED: 10/27/2009

A “Confidential Memorandum” is just like a business plan. Any time you put such a document out expect that it could become a matter of public record splattered all across the web in a matter of minutes. Consider in advance what effect, if any, that the disclosure will have on your existing business and be very careful.

The Plaintiff is a Honk Kong limited liability company that owns an adult “tube” website. The RedTube Website is the 67th most trafficked website in the world as of October 21, 2009. In early 2008 the Plaintiff considered selling the website and prepared a “Confidential Memorandum” containing extensive trade secret and proprietary and confidential information. The Defendants are alleged to have disclosed the Confidential Memorandum into the public arena and disrupted existing and potential advertising revenue.

The lawsuit includes counts for unfair competition and false designation of origin, trademark dilution, common law trademark infringement and unfair competition, violation of the Anti-Cybersquatting Consumer Protection Act, breach of contract, misappropriation of trade secrets, intentional interference with contractual relations, intentional interference with prospective economic advantage, and violation of California Civil Code 1709 and 1752. Plaintiff requests the entry of preliminary and permanent injunction against Defendants, transfer of any infringing domains to Plaintiff, return of any and all copies of the “Confidential Memorandum”, compensatory damages, disgorgement of profits, enhanced damages, exemplary damages, punitive damages, attorneys’ fees, costs, and interest, and other just and proper relief. Traverse Internet Law Cross-Reference Number 1371.

Traverse Internet Law Federal Court Report: September 2009 Trade Secret Violation Lawsuits

Traverse Internet Law Disclaimer

The facts are unproven allegations of the Plaintiff and all commentary is based upon the allegations, the truthfulness and accuracy of which are likely in dispute.


SLIM GOODBODY CORPORATION AND JOHN BURSTEIN v. STAY FIT PRODUCTIONS, LLC, ET AL.
SOUTHERN DISTRICT OF NEW YORK (FOLEY SQUARE)
1:09-CV-08030
FILED: 9/18/2009

Whether you are a licensor or licensee, it is critical that the contract (license agreement) identify with specificity information that is of a “trade secret” nature. It is also important that the contract specifically set forth how trade secret information will be handled when the contract ends.

The Plaintiff is a leader in delivering health and nutrition related information to children. Defendants are alleged to have entered into a licensing agreement so it could use copyright and trademark protected intellectual property of Slim Goodbody Corporation and also gain access to certain confidential business information including a customer database. The Plaintiff alleges that the Defendants obtained possession of their trade secrets, allowed the license agreement to lapse, and then continued to use the customer database, pricing information, marketing techniques, and other tactics that were trade secrets of the Plaintiff.

The lawsuit includes counts for trademark infringement, false designation of origin and false advertising, unfair competition, misappropriation of trade secrets, conversion, replevin (right to the recovery of the intellectual property), unjust enrichment, breach of contract, and tortious interference with contract. Plaintiff requests the entry of preliminary and permanent injunction against Defendants, an accounting of profits, actual damages, treble damages, punitive damages, attorneys’ fees, costs, and interest, and other just and proper relief. Traverse Internet Law Cross-Reference Number 1357.

Traverse Internet Law Federal Court Report: August 2009 Trade Secret Violation Lawsuits

Traverse Internet Law Disclaimer

The facts are unproven allegations of the Plaintiff and all commentary is based upon the allegations, the truthfulness and accuracy of which are likely in dispute.

DIAMOND ROSE SHEARS, LLC v. HATTORI HANZO SHEARS, LLC, ET AL.
DISTRICT OF COLORADO (DENVER)
1:09-CV-02035
FILED: 8/26/2009

We are seeing more and more distributors deciding that they can take out the “middleman” and sell directly to the consumer. This is the “disintermediation” model that drove the success of the web in the late 1990’s. However, if you have a contract that prohibits such competition, or you have acquired trade secret information that you use to launch a competing website, or you owe a potential fiduciary duty of good faith and fair dealing to an existing business relationship, launching a competing product or service is inviting litigation and can get you in hot water.

Plaintiff is a company that sells scissors and shears. Two of the Defendants were distributors of the Plaintiff and a third is a company with whom Defendants began distributing products allegedly in violation of a distributor agreement with Diamond Rose Shears. Diamond Rose alleges that the Defendants have utilized its proprietary business information, including its training manual and advertising methods, to solicit the existing and potential customers of Diamond Rose for the purpose of diverting those customers to a newly formed business, Hattori Hanzo Shears, LLC, which is in direct competition with the Plaintiff. This type of information is typically considered to be trade secrets.

The lawsuit includes counts for federal copyright infringement, unfair competition, breach of contract, and unjust enrichment. Plaintiff requests the entry of preliminary and permanent injunction against Defendants, an accounting of profits, actual damages including additional profits of Defendants, reasonable attorneys’ fees and costs, and other just and proper relief. Traverse Internet Law Cross-Reference Number 1352.

Traverse Internet Law Federal Court Report: July 2009 Trade Secret Violation Lawsuits

Traverse Internet Law Disclaimer

The facts are unproven allegations of the Plaintiff and all commentary is based upon the allegations, the truthfulness and accuracy of which are likely in dispute.


U-HAUL INTERNATIONAL, INC. AND U-HAUL CO. OF ILLINOIS, INC. v. TKG STORAGEMART PARTNERS, LP, ET AL.
NORTHERN DISTRICT OF ILLINOIS (CHICAGO)
FILED: 7/20/2009

You should really be policing the web by setting up Google Alerts and other early warning system devices to identify if anyone is using your trademark name to draw traffic and divert it to competitors.

U-Haul International is a long established company in the do-it-yourself moving and storage industry. The Defendants own and operate a website that allows consumers to search for self storage locations. The Defendants are alleged to list numerous U-Haul storage locations and then direct those interested to alternative competing businesses. The trade secret violations relate to a claim that the Defendants were former dealers with U-Haul and are misappropriating trade secret information acquired during that relationship.

The lawsuit includes counts for federal trademark infringement, false designation of origin, false advertising, federal trademark dilution, common law unfair competition, breach of contract, and violation of the Consumer Fraud and Deceptive Business Practices Act. Plaintiff requests the entry of a declaratory judgment against Defendant, preliminary and permanent injunction, compensatory damages, statutory damages, punitive damages, treble damages, reasonable attorneys’ fees and costs, and other just and proper relief. Traverse Internet Law Cross-Reference Number 1338.


MIRROR REFLECTIONS v. GOOD MILLWORD AND TYLER ALLRED
NORTHERN DISTRICT OF UTAH
1:09-CV-00097
FILED: 7/06/2009

Who owns the intellectual property developed by Independent contractors? That is an issue that is governed by the contract between the parties. Unless your web developer has agreed to assign the ownership of its work to you or agreed to provide you with an exclusive, non-cancellable license it is very difficult to prevent your developer from competing against you or licensing the intellectual property to third parties. In this instance, the Plaintiff claims that the Defendant used its “trade secrets” and this opens up the possibility of preventing a web developer or consultant from using the intellectual property, programming and creative content it developed against the client. However, the better approach is to negotiate and work out in writing, as part of the original contract, the ownership of the work delivered by a developer or consultant so that this type of issue will rarely arise.
The Plaintiff hired the Defendant to create a website and perform other web development services. Plaintiff now alleges that the Defendant misappropriated the work it performed for the Plaintiff and is competing against it.

The Defendant has been sued for breach of express contract, breach of fiduciary duty, copyright infringement, and misappropriation of confidential and proprietary trade secret information. The Plaintiff has requested preliminary and permanent injunctive relief, an accounting of gains and profits, an award of compensatory damages, an award of punitive damages, an award of treble damages, attorneys’ fees, costs, and other relief. Traverse Internet Law Cross-Reference Number 1339.


CIRCESTEEM, INC. v. PAUL MILLER AND PRO CLOWN PRODUCTIONS, INC.
NORTHERN DISTRICT OF ILLINOIS (CHICAGO)
1:09-CV-03763
FILED: 6/23/2009

Make sure that you have written contracts setting forth the specific rights and obligations of key executives in your business. Also, make sure that when you start having a problem with an executive who has control of the registrations of your domains names you change those registrations to avoid a cataclysmic interruption in your business if the domain name server is pointed away from your website.

CircEsteem is a not-for-profit corporation in Illinois that runs a variety of youth circus programs. Defendant Miller is a former Ringling Brothers clown who formed ProClown Productions, Inc. Defendant Miller served as the Chief Executive Officer of the Plaintiff and had a falling out. An extensive battle seems to have developed over control of various assets of the Plaintiff’s organization as Defendant Miller stopped serving as the Chief Executive Officer of the Plaintiff. There is pretty extensive misconduct alleged in this lawsuit.

The lawsuit claims trademark infringement, unfair competition, cyberpiracy under the Anticybersquatting Consumer Protection Act, conversion, breach of fiduciary duty and duty of loyalty, and misappropriation of trade secrets. The Plaintiff requests an order requiring Defendant to return, assign, and transfer all of CircEsteem’s assets including CircEsteem’s registered trademark, domain names, websites, email addresses, and phone numbers, statutory damages in the amount of $500,000, an award of attorneys' fees and costs, and the entry of a preliminary and permanent injunction against the Defendant. Traverse Internet Law Cross-Reference Number 1340.

Traverse Internet Law Federal Court Report: June 2009 Trade Secret Violation Lawsuits

Traverse Internet Law Disclaimer

The facts are unproven allegations of the Plaintiff and all commentary is based upon the allegations, the truthfulness and accuracy of which are likely in dispute.

PROJECT VOTE/VOTING FOR AMERICA, INC. v. ASHAWNITA MONCRIEF AND JOHN DOE
DISTRICT OF COLUMBIA (WASHINGTON, DC)
1:09-CV-01109
FILED: 6/17/2009

This lawsuit brings up the issue of “exit debriefing”. When you have an employee leave your business it is important to make sure that not only is that employee not leaving with hard documents or electronic records but also critically essential that any electronic access be terminated. Of course we do not know if these allegations are true, but it is a reminder that there must be due care taken when an employee leaves your employ.
The Plaintiff, Project Vote/Voting for America, Inc., is a nonprofit organization organized and existing under the laws of Louisiana with Washington, DC offices. It is a national organization dedicated to promoting social welfare through public education in the area of civil participation through voting and promoting voter registration for qualified U.S. citizens. The Defendant is an individual who was employed as a development assistant by the Plaintiff in its Washington, DC office for three years. The Defendant is alleged to have sharply criticized the Plaintiff for its executive director’s ties to the high profile “ACORN” organization. The allegations are that the Defendant has been publishing information and documentation that is of a trade secret nature.

The lawsuit claims trademark infringement, trademark dilution, false designation of origin, misappropriation of trade secrets, tortious interference with prospective economic advantage, trespass to chattels, civil conspiracy, conversion, negligent misrepresentation, fraud, and breach of contract. The prayer for relief requests an award for compensatory damages, exemplary damages of at least $5,000,000.00, triple damages, attorneys’ fees, and the entry of preliminary and permanent injunctive relief. Traverse Internet Law Cross-Reference Number 1331.

Traverse Internet Law Federal Court Report: May 2009 Trade Secret Violation Lawsuits

There are no Traverse Internet Law comments for May, 2009 lawsuits on Trade Secret Violations.

Google Bomb, the book about online attacks and defamation, is coming September 1.

Traverse Internet Law Federal Court Report: April 2009 Trade Secret Violation Lawsuits

Traverse Internet Law Disclaimer

The facts are unproven allegations of the Plaintiff and all commentary is based upon the allegations, the truthfulness and accuracy of which are likely in dispute.


KALEIDOSCOPE IMAGING, INC. v. DESIGNPROJECT, ET AL.
NORTHERN DISTRICT OF ILLINOIS (CHICAGO)
1:09-CV-02421
FILED: 4/21/2009

This case raises the age old issue of what information you can take with you when you leave employment. As a general rule, leaving with any documentation is often risky and can invite a lawsuit, particularly if you are going to work for a competitor.
Kaleidoscope Imaging is a service company that appears to operate as somewhat of an ad agency using state of the art digital technology. The Defendants are former employees of Kaleidoscope and left to begin their own competing business. Both businesses appear to specialize in “product design”. The Plaintiff claims that the Defendants accessed Kaleidoscope’s protected computer system and copied confidential and proprietary information, trade secrets, and other valuable property without authorization.

The lawsuit alleges violations of the Computer Fraud and Abuse Act, trademark infringement, breach of fiduciary duties, unjust enrichment, conversion, trespass to channel, misappropriation of trade secrets, tortious interference with expectancy, tortious interference with contract, breach of contract, fraud, and civil conspiracy. The claim for relief includes a request for the entry of temporary and permanent injunctions prohibiting the use of the information and a monetary award of compensatory damages, punitive damages, costs and attorneys fees. Traverse Internet Law Cross-Reference Number 1311.

Traverse Internet Law Federal Court Report: March 2009 Trade Secret Violations Lawsuits

Traverse Internet Law Disclaimer

The facts are unproven allegations of the Plaintiff and all commentary is based upon the allegations, the truthfulness and accuracy of which are likely in dispute.


SUMMA ENTERTAINMENT NETWORK, LLC AND DONALD F. SINEX v. DONALD DUPERAULT
DISTRICT OF NEVADA (LAS VEGAS)
2:09-CV-00512
FILED: 3/17/2009

The lesson from this case, if the allegations are true, is simply that every business should know with whom you are dealing. We see these types of situations often, and in almost every instance the web developer that abandons the project and goes on a mission of destruction has absolutely nothing to lose from a financial standpoint. Do your due diligence and only do business with those that have a strong track record and strong financials.
The Plaintiff was formed in 2007 and provides DVD and high definition download services to retail, mobile, and home markets. The Defendant is alleged to have been an independent contractor and outside technology consultant for the Plaintiff and walked out the door, according to the lawsuit, with copies of all files and documents relating to the technology work he had contracted to perform. In addition, the Defendant is alleged to have unlawfully accessed the Plaintiff’s computer database and transferred five domain names to his own personal account. To make matters worse, the Defendant is alleged to have falsely posted on the websites a notice that the Plaintiff’s website had been removed due to lack of payment. These allegedly false statements replaced a photograph the Defendant had previously put up at those domain names of human feces.

The Defendant has been sued for misappropriation of trade secrets, conversion, defamation, breach of contract, breach of implied covenant of good faith and fair dealing, intentional interference with contractual relationships, intentional interference with prospective economic advantage, and copyright infringement. Extensive preliminary and permanent injunctive relief is requested, as well as an award of compensatory damages, punitive damages, costs, reasonable attorneys’ fees, and other relief. Traverse Internet Law Cross-Reference Number 1305.

Traverse Internet Law Federal Court Report: February 2009 Trade Secret Violations Lawsuits

Traverse Internet Law Disclaimer

The facts are unproven allegations of the Plaintiff and all commentary is based upon the allegations, the truthfulness and accuracy of which are likely in dispute.

ENVIROGLAS PRODUCTS INC, ET AL. v. ENVIROGLAS LLC AND TIMOTHY WHALEY
NORTHERN DISTRICT OF TEXAS (DALLAS)
3:09-CV-00265
FILED: 2/10/2009

With all of the layoffs going on right now in our economy it is particularly important that your business protect its intellectual property and take appropriate precautions to manage the process of ending employment.

EnviroGLAS Products, Inc. is a Texas corporation. The Defendant, EnviroGLAS, LLC, is also a Texas corporation started by the former president of the Plaintiff, Timothy Whaley. The lawsuit alleges that Whaley, after leaving his position at EnviroGLASS, continued to access his old email accounts without authorization, use domain names of his former employer, and has flooded the Internet with his former employer’s name, trademark, website, email addresses, domain names, and related patents to further the Defendant’s interest.

The claims for relief in the lawsuit include breach of fiduciary duty against Whaley, fraud against Whaley, conversion as to all Defendants, tortious interference with existing relationships, tortious interference with prospective relations, Theft Liability Act violations, Computer Fraud and Abuse Act violations, misappropriation of trade secrets, false representation, unfair competition, injury to business reputation, trademark infringement, Quantum Meruit, violations of the Anti-Cybersquatting Consumer Protection Act, and an award of compensatory, statutory, punitive damages as well as attorneys’ fees and costs. Traverse Internet Law Cross-Reference Number 1289.

Traverse Internet Law Federal Court Report: January 2009 Trade Secret Violation Lawsuits

There are no Traverse Internet Law comments for January, 2009 lawsuits on Trade Secret Violations.

Traverse Internet Law Federal Court Report: December 2008 Trade Secret Violation Lawsuits

Traverse Internet Law Disclaimer

The facts are unproven allegations of the Plaintiff and all commentary is based upon the allegations, the truthfulness and accuracy of which are likely in dispute.


SOROUSH DESIGNER RUGS & CARPET COLLECTION, INC. v. YELENA RODINA
EASTERN DISTRICT OF VIGINIA (ALEXANDRIA)
1:08-CV-01248
FILED: 12/3/2008

It is easier today than ever before for an employee to leave an employer’s business and set up a competing enterprise overnight. A prudent business should have key employees, and those with access to trade secrets and confidential information, sign confidentiality agreements, assignments of intellectual property, and possibly non-compete agreements.

The Plaintiff is a high-end designer of rugs and carpets. The Defendant is alleged to have been an independent contractor hired to assist in the development of rug designs and after 10 years of employment left her job with the Plaintiff and joined a direct competitor. Defendant then launched a website and is featuring 43 of Plaintiff’s copyrighted designs which she had agreed were trade secrets and were based on highly confidential information.

The lawsuit claims copyright infringement, breach of contract, violation of the Virginia Trade Secrets Act, and violation of the Federal Computer Fraud and Abuse Act. Plaintiff is requesting an award of statutory fees of up to $150,000.00 for copyright infringement, actual damages, consequential damages, and extensive injunctive relief. Traverse Internet Law Cross-Reference Number 1261.