Trade Secrets

January 15, 2015

Indiana Trade Secret Law: Federal Prosecutors Drop All Charges Against Scientists Accused of Theft of Lilly Trade Secrets

Indianapolis, Indiana – All federal criminal charges against Guoqing Cao and Shuyu Li, who were formerly employed by Eli Lilly and Company (“Lilly”), were recently dropped by federal prosecutors, who stated that “additional information” had been received that altered “the investigative facts initially relied upon by the government” in its case against Cao and Li.

This federal indictment was brought in 2013 in the Southern District of Indiana. Defendants Cao and Li, two doctoral-level scientists, were charged with multiple counts of theft. At issue was intellectual property belonging to Indiana-based Lilly valued at $55 million. Counts one through three of the indictment, as well as counts five through ten, were listed as theft of trade secrets and aiding and abetting. Count four alleged conspiracy to commit theft of trade secrets.

In the initial proceedings, the United States maintained that Defendants were traitors who had conveyed “American trade secrets” – specifically, “crown jewels” in the form of many millions worth of intellectual property belonging to Lilly – to Jiangsu Hengrui Medicine Co., Ltd., a company located in Shanghai, China.

November 26, 2014

Indiana Trademark Litigation: Hoosier Momma Sues Founding Member Erin Edds

By Overhauser Law Offices, LLC

Indianapolis, Indiana – Indiana trademark attorneys for Hoosier Momma, LLC (“Hoosier Momma”) of Brownsburg, Indiana sued Erin Edds (“Edds”) of Marion County, Indiana in the Southern District of Indiana. In this Indiana litigation, Hoosier Momma accuses Edds of violations of the federal Lanham Act, the Computer Fraud and Abuse Act and Indiana’s Uniform Trade Secret Act, as well as computer tampering, misappropriation and attempted misappropriation of trade secrets, breach of contract, breach of fiduciary duties, tortious interference with business relationships, and conversion. Among its allegations, Hoosier Momma contends that Edds tarnished its “Hoosier Momma” trademark as well as its “Betty Design” trademark, U.S. Trademark Registration Nos. 4584165 and 4584167, which have been registered with the U.S. Trademark Office.

In 2010, Kimberly Cranfill (“Cranfill”), Catherine Hill and Edds formed Hoosier Momma. They are the sole members of Hoosier Momma, which is in the business of developing and selling vegan, gluten-free products that are sold in more than 600 restaurants, stores and hotels in at least six states.

Hoosier Momma alleges multiple wrongs by Edds, including making damaging false statements, engaging in conduct that conduct negatively affects Hoosier Momma’s reputation and sales of its products, tarnishing its trademarks, and changing passwords to Hoosier Momma’s social media accounts without authorization, refusing to relinquish control of the accounts and continuing to post to those accounts.

Edds is also accused of accessing Cranfill’s e-mail account to obtain confidential information as well as sharing confidential information with Wilks & Wilson, a competitor of Hoosier Momma. Hoosier Momma also contends that Edds contacted Tone Products, Inc. (“Tone,”) a direct competitor of Hoosier Momma’s packer, and asked that Tone reverse engineer a Hoosier Momma product to allow Tone to determine the confidential recipe of such product, a trade secret of Hoosier Momma, and provide it to Edds for her personal use and/or a use that jeopardized the disclosure of Hoosier Momma’s trade secrets. Hoosier Momma also claims that Edds improperly contacted several of Hoosier Momma’s distributors, clients, manufacturers and other business partners.

Further, Edds allegedly attempted to sell her interest in Hoosier Momma without the consent purportedly required under the Hoosier Momma operating agreement. Finally, Hoosier Momma contends that Edds sold and traded Hoosier Momma product and improperly retained the proceeds.

In its Indiana trademark complaint, filed by trademark lawyers for Hoosier Momma, the following is claimed:

Count I: Violation of the Lanham Act, 15 U.S.C. § 1051, et seq.
Count II: Violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, et seq.
Count III: Computer Tampering
Count IV: Misappropriation and Attempted Misappropriation of Trade Secrets and Violation of Indiana Uniform Trade Secret Act
Count V: Breach of Contract
Count VI: Breach of Fiduciary Duties
Count VII: Tortious Interference with Business Relationships
Count VIII: Conversion
Count XI [sic]: Unjust Enrichment

Hoosier Momma asks for injunctive relief; compensatory and exemplary damages; costs; expenses; and attorneys’ fees.

November 14, 2014

Indiana Trade Secret Law: Court Rules on Enforceability of Trade Secret Agreements

By Overhauser Law Offices, LLC

Indianapolis, Indiana – Pennsylvania trade secret attorneys, in conjunction with Indiana co-counsel, for Distributor Service, Incorporated (“DSI”) of Pennsylvania sued in the Southern District of Indiana alleging that Rusty J. Stevenson (“Stevenson”) of Indiana and Rugby IPD Corp. d/b/a Rugby Architectural Building Products (“Rugby”) of New Hampshire violated an agreement containing non-competition, non-solicitation, and non-disclosure provisions. In the instant order, the court ruled on motions for summary judgment filed by DSI and Stevenson.

Plaintiff DSI is a seller and distributor of wholesale specialty building products to businesses in the Middle Atlantic and Midwest regions of the country. It has eight locations in Indiana, Pennsylvania, Ohio, Kentucky, and Michigan. Defendant Rugby is also in the business of selling and distributing wholesale specialty building products. It does so throughout the United States, including in Indiana, and is a direct competitor of DSI. Stevenson, formerly an employee of DSI, is currently employed by Rugby.

DSI hired Stevenson in October 1999 to be a salesman. When he started, Stevenson had no sales experience in the specialty-building-products industry or any related industry. DSI indicated that it had invested significant time and resources to provide specialized training to Stevenson. In April 2005, DSI promoted Stevenson to the position of sales manager. Later, as part of his employment, Stevenson signed a Confidentiality and Non-Competition Agreement with DSI. This agreement contained provisions for Non-Competition/Non-Solicitation and Non-Disclosure of Confidential Information.

During his employment with DSI, Stevenson had access to information that DSI considered to be protectable as intellectual property assets. This information included all of DSI’s “Customer Lists,” “Customer Product Preferences,” “Competitive Pricing,” and “Competitive Cost Structure” for DSI’s Indianapolis branch. DSI asserted that this information was “the cornerstone of DSI’s ability to compete effectively in the specialty building products industry in Indiana,” and that the information “derives economic value from not being generally known to other persons who can obtain economic value from its disclosure or use.”

In August 2013, Mr. Stevenson resigned from DSI to take a position as the general manager of Rugby’s Indianapolis branch. Shortly thereafter, DSI sued Rugby and Stevenson seeking, inter alia, damages and injunctive relief. DSI asserted claims for: (1) breach of the Non-Compete Provision; (2) breach of the Non-Solicitation Provision; (3) breach of the Non-Disclosure Provision; (4) recovery of attorneys’ fees and expenses under the Agreement; (5) misappropriation of trade secrets; (6) breach of duty of loyalty, and (7) tortious interference.

In this opinion, District Judge Jane Magnus-Stinson reviewed cross-motions for summary judgment filed by DSI and Stevenson. DSI’s motion was denied in its entirety. Stevenson’s motion for summary judgment was granted as to Count 1, breach of the Non-Compete Provision, and Count 2, breach of the Non-Solicitation Provision. Stevenson’s motion for summary judgment on Count 3, breach of the Non-Disclosure Provision, was denied.

The court began by discussing the standard for upholding the provisions at issue. It is a longstanding principle in Indiana that covenants that restrict a person’s employment opportunities are strongly disfavored as a restraint of trade. To be enforceable, such restraints, such as a noncompetition agreement, must be reasonable. The court noted that it, while in many other contexts reasonableness was a question of fact, the reasonableness of a noncompetition agreement was a question of law and, thus, was capable of evaluation in response to the parties’ motions for summary judgment.

The first hurdle for DSI was to show that the agreement protected a legitimate interest, defined as “an advantage possessed by an employer, the use of which by the employee after the end of the employment relationship would make it unfair to allow the employee to compete with the former employer.” Indiana law provides that goodwill, including “secret or confidential information such as the names and addresses of customers and the advantage acquired through representative contact,” is a legitimate protectable interest. DSI argued that it had a legitimate interest in protecting the customer relationships that Stevenson had developed during his years working for DSI as well as the information embodied in DSI’s Customer Lists, Customer Product Preferences, Competitive Pricing, and Competitive Cost Structure, to which Stevenson had been permitted access. The court agreed that this was a protectable interest.

DSI next had to establish that Non-Compete Provision of the agreement was “reasonable in scope as to the time, activity, and geographic area restricted.” DSI argued that the provision was limited merely to restricting Stevenson from engaging in competitive business activity. The court was not convinced. Instead, it noted that, as drafted, the “competitive business activity” restriction applied to the activities of Stevenson’s new employer, not to Stevenson himself. Thus, because Rugby engaged in business activities that were competitive to DSI, the agreement would de facto prohibit Stevenson from working for Rugby in any capacity, despite that no “in-any-capacity” language was explicitly applied to Stevenson in the agreement. “For example,” the court explained, “[under DSI’s agreement,] Mr. Stevenson could not serve lunch in Rugby’s cafeteria or change light bulbs in Rugby’s offices because Rugby competes with DSI.” The court concluded that, as a result, the Non-Compete Provision was overly broad and unreasonable.

Regarding this provision, DSI also contended that alleging and proving that the employee had been provided with trade secrets could render an otherwise unenforceable non-competition clause enforceable. The court rejected this argument.

The court also granted summary judgment for Stevenson on the Non-Solicitation Provision. This provision attempted to restrict Stevenson’s ability to solicit “any customer or prospective customer of [DSI] with which [Stevenson] communicated while employed by [DSI].” The court found this restriction to be vague as to “prospective customer” as well as overbroad and unreasonable in scope.

Finally, the court declined to rule on the Non-Disclosure Provision on summary judgment. It held that, to evaluate whether this provision had been violated, it would need to determine whether “customer lists” and “the identities of key personnel and the requirements of the customers of [DSI]” were confidential. As the evidence submitted regarding confidentiality was “vague, generalized, and conflicting,” the court found that a genuine issue of material fact existed with regard to the Non-Disclosure Provision and, consequently, partial summary judgment in favor of either party was inappropriate on the record before it.

Practice Tip #1: Summary judgment in federal court is guided by Rule 56 of the Federal Rules of Civil Procedure. A motion for summary judgment asks the court to find that a trial on a particular issue or issues is unnecessary because there is no genuine dispute as to any material fact and, instead, the movant is entitled to judgment as a matter of law. The moving party is entitled to summary judgment only if no reasonable fact-finder could return a verdict for the non-moving party.

Practice Tip 2: In a similar case, decided earlier this year, the Indiana Court of Appeals affirmed the trial court’s ruling that the noncompetition agreement binding an ex-employee of the plaintiff was overly broad and, thus, unenforceable.

October 31, 2014

Indiana Patent and Copyright Litigation: Lake Lite Sues Multiple Defendants for Patent and Copyright Infringement

By Overhauser Law Offices, LLC

Fort Wayne, Indiana – A patent and copyright attorney for Lake Lite Inc. of Laotto, Indiana filed a complaint in the Northern District of Indiana asserting, inter alia, that Universal Forest Products, Inc. of Grand Rapids, Michigan (“UFP”); Universal Consumer Products, Inc., also of Grand Rapids, Michigan (“UCP”); and Maine Ornamental, LLC of Greene, Maine infringed “Solar Dock Light” and “Low Profile Solar LED Lamp,” Patent Nos. D697,246 and 8,845,126, which have been issued by the U.S. Patent Office.

Lake Lite is in the business of designing and selling dock lights and other related products and accessories in the boating/dock industry. Its product line includes solar-related dock lights.

In April 2012, Lake Lite first began to offer a “Solar Dot” line of products. Lake Lite indicates that UFP inquired about collaborating with Lake Lite to offer the Solar Dot products to UFP’s customers and that, in November 2012, a mutual non-disclosure agreement was entered so that confidential information regarding Lake Lite’s Solar Dot products could be disclosed and the potential collaboration evaluated. The disclosed information included Lake Lite’s copyright applications to now-copyrighted materials, registered as U.S. Copyright Nos. VAu001118627 and VAu001156962.

Lake Lite asserts that, during these negotiations, it made numerous modifications requested by UFP for which it was not compensated. Lake Lite and UFP failed to reach an agreement about licensing terms and discontinued negotiations. Instead, Lake Lite asserts, UFP has now wrongfully begun offering its own “Solar Deck and Dock Lights.”

In this Indiana copyright and patent litigation, Plaintiff Lake Lite’s specific complaints include that Defendants have been unjustly enriched as a result of their manufacture, importing, marketing and sale of their solar deck and dock light products. Lake Lite contends that Defendants’ acts include infringement of Lake Lite’s copyrights and patents, unauthorized use and misappropriation of Lake Lite’s confidential information and trade secrets and violation of the mutual non-disclosure agreement between Lake Lite and UCP.

The complaint, filed by a copyright and patent lawyer for Lake Lite, alleges the following:

• Count One – Copyright Infringement

• Count Two – Infringement of U.S. Patent No. D697,246

• Count Three – Infringement of U.S. Patent No. 8,845,126

• Count Four – Breach of Contract

• Count Five – Breach of Implied Duty of Good Faith and Fair Dealing

• Count Six – Violation of Indiana Uniform Trade Secret Act

• Count Seven – Unjust Enrichment

Lake Lite asks for a judgment of infringement of its copyrights-in-suit, of infringement of its patents-in-suit, that the non-disclosure agreement was violated by Defendants, that Defendants violated the implied duty of good faith and fair dealing in their dealings with Lake Lite regarding the Solar Dot products, that Defendants have misappropriated Lake Lite’s trade secrets and that Defendants have been unjustly enriched.

Lake Lite seeks injunctive relief; damages, including punitive damages; costs and fees, including attorneys’ fees.

Practice Tip:

Indiana Code Section 24-2-3-2 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 four general characteristics of a trade secret are:

1. it is information;

2. that derives independent economic value;

3. that is not generally known, or readily ascertainable by proper means by others who can obtain economic value from its disclosure or use; and

4. that is the subject of efforts, reasonable under the circumstances, to maintain its secrecy.

October 13, 2014

Indiana Teen Indicted for Theft of Intellectual Property Valued More Than $100 Million

By Overhauser Law Offices, LLC

District of Delaware – Four members of an international computer hacking ring were

indicted for stealing gaming technology and Apache helicopter training software. Two have already pled guilty.

Four members of an international computer hacking ring have been charged with breaking into computer networks of prominent technology companies and the U.S. Army and stealing more than $100 million in intellectual property and other proprietary data. Two of the charged members have already pleaded guilty. The alleged cyber theft included software and data related to the Xbox One gaming console and the Xbox Live online gaming system; popular games such as “Call of Duty: Modern Warfare 3” and “Gears of War 3”; and proprietary software used to train military helicopter pilots.

July 30, 2014

Indiana Trade Secret Law: Removing Allegation of Theft of Trade Secrets Results in Defendants’ Release from “Lockdown”

By Overhauser Law Offices, LLC

Indianapolis, Indiana – In 2013, a federal indictment including counts of theft of trade secrets belonging to Eli Lilly and Company (“Lilly”) was presented to the Southern District of Indiana. On the basis of this indictment, the court ordered Defendants Guoqing Cao and Shuyu Li, formerly employed by Eli Lilly and Company, to be detained at housing provided by Volunteers of America – Indiana (“VOA”), pending their criminal trial. When the 2013 indictment was superseded by a second indictment that did not include counts for the theft of trade secrets, the court granted Defendants’ request to be released to home detention.

On August 14, 2013, Defendants Cao and Li, two doctoral-level scientists formerly employed by Lilly, were charged with multiple counts of theft. At issue was intellectual property belonging to Lilly valued at $55 million. Counts one through three of the indictment, as well as counts five through ten, were listed as theft of trade secrets and aiding and abetting. Count four alleged conspiracy to commit theft of trade secrets.

In the initial proceedings, the United States maintained that the Defendants were traitors who had conveyed “American trade secrets” – specifically, “crown jewels” in the form of many millions worth of intellectual property belonging to Lilly – to Jiangsu Hengrui Medicine Co., Ltd., a company located in Shanghai, China. These arguments strongly impacted the court’s decision to order “lockdown” detention at the VOA.

A second indictment was later filed by the United States. Under the new indictment, the Defendants faced no charges of trade-secret theft. Instead, they were charged with one count each of wire fraud, aiding and abetting, and conspiracy to commit wire fraud. Based on the absence of allegations relating to trade-secret theft in the subsequent indictment, the Defendants asked the court to modify the terms of their detention.

The court was persuaded that such a change was warranted. It noted that there was “a difference between allegations of ‘theft of trade secrets’ and disclosure of ‘Lilly Property.'” It further stated that the earlier allegation – that Lilly’s “crown jewel” secrets had been stolen and provided to China – had been a critical factor in justifying the Defendants’ incarceration.

When the allegations of trade secret misappropriation were removed, the court found that those justifications were no longer applicable: “No longer are the Defendants accused of stealing ‘trade secrets’–those words are found nowhere in the superseding indictment” and released the Defendants from lockdown to the less-restrictive conditions of home detention.

Practice Tip #1: Nine Lilly trade secrets pertaining to pharmaceuticals under development for cardiovascular disease, diabetes and cancer were at issue in this Indiana criminal prosecution for theft of intellectual property.

Practice Tip #2: Defendants’ home detention restricts individuals to their residence at all times except for employment; education; religious services; medical, substance abuse, or mental health treatment; attorney visits; court appearances; court-ordered obligations; or other activities approved in advance by the pretrial services office or supervising officer. Defendants were also ordered not to access or use any internet-enabled device with the exception of utilizing email to communicate with counsel.

July 25, 2014

Indiana Passes New Statute Criminalizing Offenses Against Intellectual Property

By Overhauser Law Offices, LLC

Indianapolis, Indiana – Indiana Code § 35-43-1-7 has been made effective as of July 1, 2014.

This new criminal statute, enacted by P.L.158-2013, SEC. 458, covers certain computer-related offenses against intellectual property. It takes the place of 35‐43‐1‐4, which was repealed.

Indiana Code § 35-43-1-7 reads, in full:

May 16, 2014

Indiana Trademark Law: Seventh Circuit Holds Indiana Court Lacked Personal Jurisdiction Over RAP4

By Overhauser Law Offices, LLC

Chicago, Illinois – Indiana trademark attorney Paul B. Overhauser, on behalf of K.T. Tran and Real Action Paintball, Inc., a California corporation (collectively “RAP4”), argued before the United States Court of Appeals for the Seventh Circuit that the trademark infringement suit brought in the Northern District of Indiana by Advanced Tactical Ordnance Systems, LLC, an Indiana corporation (“ATO”), was not properly before the Indiana court, as it lacked personal jurisdiction over RAP4. The Seventh Circuit agreed and instructed the district court to dismiss the complaint.

RAP4 and ATO are competitors in the “irritant projectile” market. Unlike the more familiar game of paintball, in which a paint-filled sphere is shot at opponents as part of a war game, these irritant projectiles are used by the police and military to intervene in hostile situations where lethal force is unnecessary. While paintballs are filled with paint, irritant projectiles use capsaicin, the active ingredient in pepper spray. Irritant projectiles, thus, allow law enforcement personnel to use less-than-lethal force from a distance.

Among the many issues in this lawsuit, including assertions by ATO of trade-dress infringement, unfair competition and misappropriation of trade secrets, were allegations that RAP4 had infringed the trademarked term “PEPPERBALL,” to which ATO claimed ownership. That trademark, Registration No. 2716025, was issued in 1999 by the U.S. Trademark Office to a non-party to this suit.

The trouble began when another company, non-party PepperBall Technologies, Inc. (“PTI”), began to have financial problems. PTI had also been a competitor in the irritant-projectile market. To address its difficulties, PTI held a foreclosure sale, the validity of which was hotly contested. ATO claimed that it had purchased PTI’s trademarks – including “PEPPERBALL” – and other property during this foreclosure sale.

During the time that PTI ceased its operations and was attempting to convey its assets, RAP4 was contacted by an executive of non-party APON, a company which had manufactured some of PTI’s irritant projectiles. He asked if RAP4 was interested in acquiring irritant projectiles from APON.

RAP4 agreed to purchase irritant projectiles from APON. After having negotiated this access to APON’s machinery, recipes, and materials – which had had at one time been used by PepperBall Technologies Inc. – RAP4 announced this fact to the people on its e-mail list. Specifically, it stated in its e-mail that it had acquired access to, “machinery, recipes, and materials once used by PepperBall Technologies Inc.” It was this language to which ATO, which claimed to be the successor in interest to PTI, particularly objected.

ATO sent a cease-and-desist letter to RAP4. In response, RAP4 added a disclaimer that it was not affiliated with PTI. ATO then sued in the Northern District of Indiana. It claimed several different theories of recovery, including intentional violations of the Lanham Act, 15 U.S.C. § 1111 et seq., common law trademark infringement and unfair competition, trade dress infringement, and misappropriation of trade secrets.

Of particular interest to the Seventh Circuit in addressing this Indiana trademark litigation was the issue of personal jurisdiction over RAP4 in the Northern District of Indiana. RAP4 contested that such jurisdiction over it was lacking. ATO countered that RAP4 had sufficient contacts, including a “blast e-mail” announcement from RAP4 that would suffice for jurisdiction in Indiana, stating that “many [RAP4 customers] are located here in the state of Illinois. I mean, state of Indiana.” It also contended that RAP4 regularly e-mailed customers or potential customers from all over the United States, including Indiana, and that RAP4 had made at least one sale to an Indiana resident.

ATO conceded that it lacked general jurisdiction. Thus, the Seventh Circuit turned to an analysis of specific jurisdiction. “For a State to exercise jurisdiction consistent with due process, the defendant’s suit-related conduct must create a substantial connection with the forum State,” noted the appellate court. Moreover, the relation between the defendant and the forum “must arise out of contacts that the ‘defendant himself’ creates with the forum.”

In determining that personal jurisdiction existed, the Indiana district court had relied on several facts: “first, [RAP4] fulfilled several orders of the allegedly infringing projectiles for purchasers in Indiana; second, it knew that Advanced Tactical was an Indiana company and could foresee that the misleading emails and sales would harm Advanced Tactical in Indiana; third, it sent at least two misleading email blasts to a list that included Indiana residents; fourth, it had an interactive website available to residents of Indiana; and finally, it put customers on its email list when they made a purchase, thereby giving the company some economic advantage.”

The Seventh Circuit held that these facts were insufficient to support specific jurisdiction. The only Indiana sales that would have been relevant were those that related to RAP4’s allegedly unlawful activity. ATO failed to meet its burden of proof of any such Indiana sales. Similarly, the court held that any effects that were purportedly felt in Indiana by ATO did not support specific jurisdiction. Instead, the relation between RAP4 and the Indiana forum “must arise out of contacts that the defendant himself creates with the forum State.”

Further, neither RAP4’s e-mail communications nor its website were held to create specific jurisdiction. If such contacts were sufficient, the court held, there would be no limiting principle on personal jurisdiction and a plaintiff could sue almost any defendant with an Internet presence or which utilized e-mail in almost any forum in the United States or the world. To find jurisdiction on such vanishingly small contacts would offend the long-held and traditional “notions of fair play and substantial justice.”

The Seventh Circuit remanded the case to the Indiana district court with instructions to vacate the judgment and dismiss the complaint for lack of personal jurisdiction.

Practice Tip #1: RAP4’s references to “Pepperball Technologies, Inc.” could not as a matter of law constitute trademark infringement, counterfeiting or false advertising. Instead, RAP4’s use of its competitor’s name is a merely a wholly permissible nominative use of that mark. As a matter of law, a “nominative use of a mark – where the only word reasonably available to describe a particular thing is pressed into service – lies outside the strictures of trademark law.”

Practice Tip #2: Personal jurisdiction is an essential element of federal court jurisdiction, without which the court is powerless to adjudicate the matter before it. However, a defendant’s argument that personal jurisdiction does not exist can easily be waived inadvertently by the incautious litigant. In this case, an evidentiary hearing regarding personal jurisdiction was conducted in December 2012. It was only by careful preservation of this argument by trademark counsel for RAP4 while litigating in the district court that the appellate court was able to hear RAP4’s claim and reverse the district court.

Practice Tip #3: This case was successfully argued before the Seventh Circuit by Paul B. Overhauser, Managing Partner of Overhauser Law Offices.

April 3, 2014

Indiana Trademark Litigation: Noble Roman’s Sues for Trademark Infringement

By Overhauser Law Offices, LLC

Indianapolis, Indiana – An Indiana trademark attorney for Noble Roman’s, Inc. of Indianapolis, Indiana filed a lawsuit in the Southern District of Indiana alleging that Sahara Sam’s Indoor Water Park, LLC of Pennsauken, New Jersey (“Sahara”) infringed its trademarks. These trademarks are: Noble Roman’s®, Trademark Registration No. 987,069; THE BETTER PIZZA PEOPLE, Trademark Registration No. 1,920,428; and a design mark, Trademark Registration No. 1,682,308. Noble Roman’s also states that it has registered the Tuscano’s® mark. In addition to trademark infringement, Noble Roman’s asserts that Sahara engaged in false designation of origin and unlawful competition. Noble Roman’s has registered its marks with the U.S. Patent and Trademark Office.

Noble Roman’s is in the business of franchising the operation of Noble Roman’s pizza franchises that feature pizza, breadsticks, and other related food items to various franchisees throughout the world. Noble Roman’s has used its trademarks, among them “Noble Roman’s” and “The Better Pizza People,” registered in 1974 and 1995, respectively, in commerce in connection with marketing, identifying, and promoting its pizza franchises.

On or about June 27, 2005, Noble Roman’s and entered into two franchise agreements. Under the terms of the agreements, Sahara became a franchisee of Noble Roman’s, licensed and authorized to sell “Noble Roman’s” and “Tuscano’s” branded food products using Noble Roman’s intellectual property assets. Noble Roman’s asserts that these agreements included terms relating to the accurate reporting of sales and timely payment of franchise fees and other fees.

Sahara is accused of failing to pay royalties as required under the agreement and of misreporting sales, among other things. Noble Roman’s contends that Sahara purposely, intentionally and knowingly misreported its sales to Noble Roman’s for the purpose of avoiding payment of franchise fees and/or royalties which were due.

Noble Roman’s also contends that, after electing not to renew the franchise agreements, Sahara violated certain post-termination provisions of the Agreements, including those which require Sahara to: (1) cease to use any Noble Roman’s proprietary products; and (2) remove from public view and display any signage or other articles containing or depicting the trademarks.

Sahara is further accused of having violated the non-competition covenants by selling, after termination of the franchise agreements, various food items “which can be utilized without knowledge gained from Noble Roman’s.”

Noble Roman’s states that Sahara’s actions were without the authorization or consent of Noble Roman’s and that they constitute trademark infringement, in violation of 15 U.S.C. § 1114(1), as well as false designation of origin in violation of 15 U.S.C. § 1125.

The complaint, filed by an Indiana trademark lawyer, lists the following:

• Count One (Trademark Infringement)
• Count One [sic] (Breach of Contract)
• Count Two (Fraud)
• Count Three (Injunctive Relief)

Noble Roman’s asks for injunctive relief, as well as judgment in its favor in amount to be proven at trial, together with interest, punitive damages, costs of collection and reasonable attorney’s fees.

Practice Tip: Noble Roman’s has been particularly aggressive in enforcing franchise agreements. Since 2007, it has also filed the following suits in the Southern District of Indiana:

February 12, 2014 – NOBLE ROMAN’S, INC. v. B & MP and LESLIE PERDRIAU

September 5, 2012 – NOBLE ROMAN’S, INC. v. VILLAGE PANTRY

March 17, 2011 – NOBLE ROMAN’S, INC. v. FINDLAY TIFFIN OIL, LLC and AYMAN MAGDADDI

January 27, 2011 – NOBLE ROMAN’S INC. et al. v. BRABHAM OIL COMPANY and BRABHAM OIL COMPANY

October 9, 2009 – NOBLE ROMAN’S, INC. v. CITY CENTER FOOD CORP., INC.

August 31, 2009 – NOBLE ROMAN’S INC. v. W.J. INTERNATIONAL GROUP, LLC

July 17, 2009 – NOBLE ROMAN’S, INC. v. MARDAN, INC.

July 8, 2009 – NOBLE ROMAN’S, INC. v. RENTON WILLIAMS

April 21, 2009 – NOBLE ROMAN’S, INC. v. RICHARD A. GOMES and RRCM FOODS, INC.

April 2, 2009 – NOBLE ROMAN’S, INC. v. KANDAKAR ALAM

February 17, 2009 – NOBLE ROMAN’S, INC. v. EXPRESS LANE, INC.

February 10, 2009 – NOBLE ROMAN’S, INC. v. JJP&L, LLC

November 6, 2008 – NOBLE ROMAN’S, INC. v. PARDIS & ASSOCIATES, INC.

October 24, 2008 – NOBLE ROMAN’S, INC. v DELTA PROPERTY MANAGEMENT LLC, ZACK BROTHERS TRUCK STOP, LLC and STANDARD PETROLEUM CORP.

October 6, 2008 – NOBLE ROMAN’S INC. v. JAY’S GAS LLC

April 9, 2008 – NOBLE ROMAN’S, INC. v. SHAHRAM RAHIMIAN

March 17, 2008 – NOBLE ROMAN’S, INC. v. MEDALLION CONVENIENCE STORES, INC.

December 20, 2007 – NOBLE ROMAN’S, INC. v. MICHAEL J. BRUNSWICK, LAURIE BRUNSWICK, and M&L RESTAURANTS, LLC

September 17, 2007 – NOBLE ROMAN’S, INC. v. THE FRENCH BAGUETTE, LLC et al.

July 26, 2007 – NOBLE ROMAN’S, INC. v. MR. RON’S, L.C.

July 19, 2007 – NOBLE ROMAN’S INC. v. BAUER BUILT, INC. et al.

January 15, 2014

Indiana Tax Court Shields Orbitz from Disclosure of Trade Secrets

By Overhauser Law Offices, LLC

Indianapolis, Indiana – In the matter of Orbitz, LLC v. Indiana Department of State Revenue, Orbitz, LLC of Chicago, Illinois was heard by the Indiana Tax Court on its request to prohibit public access to information in the court record. The court granted the request, holding the trade secrets contained in documents submitted to the court were protected against public disclosure by both the Access to Public Records Act (Indiana Code § 5-14-3-1 et seq.) and Indiana Administrative Rule 9.

Orbitz, an online travel company, provides travel-related services on its website that enable its customers to search for and make reservations for a broad array of travel products, including airline tickets, lodging, rental cars, cruises and vacation packages.

The broad issue in this Indiana-state tax appeal was the appropriate base on which to calculate the Indiana state and local taxes due. Generally speaking, a hotel will contract with Orbitz to make its rooms available for reservation through Orbitz’s website. Pursuant to the contract, the hotel agrees to accept a certain amount for its rooms (“net rate”). Nevertheless, a customer who books a room through the website sees – and ultimately pays – a different amount, as Orbitz has added a facilitation fee, a service charge, and a tax recovery charge to the net rate. The tax recovery charge is equal to the amount of state and local taxes due on the room’s rental at the net rate.

After the customer has occupied the room, Orbitz forwards to the hotel the portion of the payment it collected from the customer that constitutes the room’s net rate and tax recovery charge. The hotel is then responsible for remitting to the taxing authorities the appropriate state and local taxes due on the room’s rental.

Following an audit in which the Indiana Department of Revenue found Orbitz to have underpaid the taxes due, Orbitz brought this appeal. Orbitz argued to the court that tax was due only on the net amount paid by Orbitz to the hotel. The Indiana Department of Revenue, in contrast, maintained that Orbitz had been deficient in remitting Indiana’s gross retail (sales) and county innkeeper taxes on the hotel bookings at issue. It contended that the total amount paid by the customer to Orbitz for the room was the correct figure on which to base the Indiana-state tax.

When asking the Indiana Tax Court for summary judgment, Orbitz also asked that the court prohibit public access to its contracts with the Indiana hotels, stating that the contracts were “proprietary [and] competitively sensitive” and that they contained trade secrets belonging to Orbitz.

The general rule in Indiana is that the public has access to court records. Citing the Access to Public Records Act, Ind. Code § 5-14-3-1, the court stated “all persons are entitled to full and complete information regarding the affairs of [their] government.” However, in certain circumstances, that right of access is restricted. An example of such a circumstance is when materials submitted to the court qualify as a trade secret. Trade secrets are protected from disclosure by statute in Indiana.

Indiana Code Section 24-2-3-2 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 court then enumerated the four general characteristics of a trade secret:

1. it is information;

2. that derives independent economic value;

3. that is not generally known, or readily ascertainable by proper means by others who can obtain economic value from its disclosure or use; and

4. that is the subject of efforts, reasonable under the circumstances, to maintain its secrecy.

The court granted Orbitz’s motion to shield Orbitz’s contracts with Indiana hotels, holding the information in those contracts to be properly protected as trade secrets. It stated, “Competition is the bedrock of our country’s economic system. The protection afforded to trade secrets under [the Access to Public Records Act] and Administrative Rule 9 helps to foster a healthy, competitive marketplace . . . . Here, Orbitz’s contracts contain trade secrets and therefore are protected from public disclosure under both APRA and Administrative Rule 9.”

Practice Tip:

When, as here, the documents sought to be protected fall within a mandatory exception set forth in the Access to Public Records Act or Indiana Administrative Rule 9, a court can seal those records without holding a hearing and balancing the competing interests. However, in other cases, when issuing an order to shield information from public access, the court must specifically outline why the need for privacy outweighs the strong public policy to allow such access.

In such a case, Indiana Code § 5-14-3-5.5(d) requires that the court’s order be based on findings of fact and conclusions of law and show “that the remedial benefits to be gained by effectuating the [state’s] public policy of [public access] are outweighed by proof by a preponderance of the evidence by the person seeking the sealing of the record that: (1) a public interest will be secured by sealing the record; (2) dissemination of the information contained in the record will create a serious and imminent danger to that public interest; (3) any prejudicial effect created by dissemination of the information cannot be avoided by any reasonable method other than sealing the record; (4) there is a substantial probability that sealing the record will be effective in protecting the public interest against the perceived danger; and (5) it is reasonably necessary for the record to remain sealed for a period of time.”