Pennsylvania Jury Returns First Verdict Under Defend Trade Secrets Act
April 3, 2017
A Pennsylvania jury recently returned a verdict under the federal Defend Trade Secrets Act of 2016 (DTSA)—the first verdict of its kind in the country.
In Dalmatia Import Group, Inc. et al. v. FoodMatch, Inc. et al., Dalmatia claimed that FoodMatch, Lancaster Fine Foods, Inc., and Earth Pride Organics, LLC (Defendants) misappropriated the proprietary recipe and production process for Dalmatia’s signature fig spread. Dalmatia had entered into contracts with Defendants for those companies to produce and distribute the spread. Due to quality concerns, Dalmatia terminated the relationships. Defendants then went into the fig spread business for themselves, using Dalmatia’s “secret sauce” and even manufacturing counterfeit Dalmatia products. Dalmatia sued under the recently enacted DTSA in addition to the Pennsylvania state law known as the Pennsylvania Uniform Trade Secrets Act (PUTSA). On February 24, 2017, a federal jury in Philadelphia returned a verdict in favor of Dalmatia for misappropriation of trade secrets, violation of the Lanham Act (trademark infringement), and other state law violations. The case now enters the damages phase where Dalmatia seeks approximately $5 million in damages and permanent injunctive relief.
This type of wrongful conduct is not uncommon, and parties have been litigating this type of dispute under common law and state statutes for decades. So what is newsworthy about this case? It serves as a reminder that DTSA is a new tool available to companies and individuals seeking damages and injunctive relief for theft of trade secrets. DTSA allows companies whose trade secrets have been misappropriated to sue in federal court as long as the trade secrets at issue relate to interstate commerce. Before the enactment of DTSA, access to federal court for redress of trade secret theft was more limited.
In addition to providing access to federal courts, DTSA provides some significant substantive advantages over PUTSA and state court proceedings. DTSA increases the maximum criminal penalties for organizations convicted of foreign espionage or trade secret theft, enables law enforcement to seize trade secrets (in appropriate cases), allows the United States Attorney General to file a civil proceeding (an injunction) against a party for misappropriation, provides stronger measures to safeguard trade secrets during litigation, and defines “trade secret” more broadly than many state laws.
When your confidential business information is threatened, attorneys in the McNees Injunction and Intellectual Property Practice Groups stand ready to respond within days—or hours—in state and federal courts throughout the country. McNees attorneys routinely help businesses protect their trade secrets and trademarks and enforce non-compete, non-solicitation, and non-disclosure agreements.