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Archive for the ‘Business Law’ Category

In 2004, Mercatus Group partnered with Evanston Northwestern Healthcare to open a physician center in the village of Lake Bluff, a short distance away from the almost 70-year-old Lake Forest Hospital. Recognizing the threat a competing facility would pose, Lake Forest Hospital began a lobbying and public-relations campaign to prevent the center’s launch. The hospital directly lobbied the village board and community members and offered incentives to keep physician-practice groups from leaving the hospital to join the new center. After the village board refused to rezone the land for medical use, the physicians stayed at the hospital, killing the Mercatus center. Mercatus then sued the hospital, alleging anti-competitive practices under the Sherman Act. The trial court found that the hospital’s efforts were constitutionally protected speech and granted summary judgment to the hospital.

On appeal, Mercatus argued that the hospital made misrepresentations to the board, the public, and the physicians it pulled away from the center and that those misrepresentations negated constitutional protection. The Seventh Circuit Court of Appeals rejected the arguments, noting antitrust litigation "’cannot be used to chill [the] constitutional right’ to ‘petition without fear of sanctions.’" The court further stated the following:

To make such injuries from public relations campaigns actionable under the antitrust laws would ‘be tantamount to outlawing all such campaigns.

Finally, the court explained that, though the hospital allegedly lied to physicians that Mercatus had violated certain anti-kickback regulations, antitrust laws do not prohibit "conduct that is only unfair, impolite, or unethical.” Accordingly, the court affirmed the trial court’s decision.

For the full story, click here.

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Bradshaw v. Alpha Packaging, Inc., No. CA09-1141.

Facts

Alpha Packaging, Inc. (“Alpha Packaging”), manufactures and sells packing and shipping supplies. In January 2006, Alpha Packaging formed Edge Marketing division (“Edge Marketing”), which was devoted to point-of-purchase (“POP”) design and sales. Luke Bradshaw was hired as division president, and Bill Davis, Andrew Powviriya, and Ed Wonnacott were hired as at-will employees. Each of the four employees signed a “Confidentiality and Proprietary Information Agreement” that precluded the employees from using or disclosing the company’s trade secrets, confidential information, or other proprietary data to benefit themselves or others. The agreement’s definition of “trade secrets” included customer lists and pricing data.

Edge Marketing generated appreciable revenue in 2006 and was forecasted to do well in 2007. In April or May 2007, however, the four employees began planning to leave Edge Marketing and form their own POP marketing and design firm, A.W. Bravis Agency (“Bravis”). The employees submitted their resignation letters in May. Once the employees had left, Alpha Packaging learned that (1) there were no invoices for ongoing jobs in May, even though there had been considerable billing for the previous months; (2) the employees had enlisted an Edge Marketing client, Novus Products, LLC (“Novus Products”), as the financial backer for their new firm; (3) the employees obtained new computers and cell phones for their new firm, courtesy of Novus Products, while on Edge Marketing time; (4) one of the employees forwarded all Edge Marketing cell phones to the new firm’s cell phones; and (5) the employees had deleted all information from their Edge Marketing computers including customer artwork, invoices, and price quotes. Alpha Packaging attempted to bring in new personnel to continue the business at Edge Marketing. However, the plan was not feasible, in part, because of the loss of computer data.

Later, Alpha Packaging retrieved from one of the hard drives a business plan that Bradshaw had prepared for the new venture in early May 2007. The plan included an eighteen-month history of Edge Marketing sales, as well as client names, projects, project dates, sales invoice amounts, and net profits for each project. By June 2007, Bravis began invoicing clients. The company’s projects included some that had begun at Edge Marketing in April or May 2007.

On August 1, 2007, Alpha Packaging sued Bravis, Novus Products, and the four employees for misappropriation of trade secrets, conversion, breach of the confidentiality agreement, violation of the Arkansas Deceptive Trade Practices Act, fraud, and unjust enrichment. At trial, the jury awarded Alpha Packaging $185,000 in compensatory damages and $7,500 in punitive damages.

Appeal

Bravis, Novus Products, and the four employees argued on appeal that customer lists and account information were not trade secrets. The Arkansas Court of Appeals listed the six factors for determining whether information qualifies as a trade secret: (1) the extent the information is known outside the business; (2) the extent the information is known by employees involved in the business; (3) the extent of measures taken to guard the secrecy of the information; (4) the value of the information to the business and its competitors; (5) the amount of effort or money expended in developing the information; and (6) the ease or difficulty with which the information could properly be obtained by others. The court noted that the customer lists and account information at issue qualified as trade secrets and stated the following:

[T]he economic advantage to Bravis acquiring Edge’s pricing and profit data is apparent. The new company was able to get up to speed in a matter of weeks on the shoulders of that knowledge, virtually closing down a competitor in the process.

The court held that the jury has substantial evidence on which to find Bravis, Novus Products, and the four employees liable for theft of trade secrets and, consequently, affirmed the decision.

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Supreme Lobster and Seafood Company tried to register that trademark for "fresh and frozen salmon"; however, the National Pork Board and National Pork Producers Council opposed the slogan as too close to its trademark for pork, "the other white meat." The Trademark Trial and Appeal Board ruled refused to rule that the salmon slogan would cause confusion, but it did determine that it would dilute the pork industry’s trademark. Survey information shows that 80-85% of consumers are familiar with the "other white meat" slogan, and 70% correctly identify it with pork. A "dilution survey" showed that 35% of respondents who heard the salmon slogan incorrectly associated it with the pork slogan. Accordingly, the board refused the slogan because it is too similar to the pork industry’s trademarked phrase.

For the full story, click here.

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