5 minute read
Candice Smith: Are Your Business Secrets Safe?
ARE YOUR BUSINESS SECRETS S A F E ?
CANDACE SMITH
Steptoe & Johnson, PLLC
Many companies in the agriculture industry have developed techniques, processes, formulas, or products that are “secret” and give their company an edge over the competition. The real value of these developments, sometimes called “trade secrets,” is that other companies do not know about them and cannot easily replicate them. In the recent case Caudill Seed & Warehouse Co., Inc. v. Jarrow Formulas, Inc., a Kentucky federal court explained what can happen when a company employee takes those secrets and gives them to the competition. No. 3:13-CV-082-CRS, 2020 WL 3065626 (W.D. Ky. June 9, 2020). In this case, Caudill Seed & Warehouse Co., Inc. (“Caudill Seed”) was a 65- year old family-owned business which produced and supplied agricultural products, such as seeds and sprouts, to commercial producers and distributors. It also sold some of its own nutritional supplements. Caudill Seed’s former Director of Research (the “Former Director”) worked for years to help Caudill Seed develop new compounds and processes related to broccoli seed. The Former Director had access to all of Caudill Seed’s proprietary and confidential information related to this research. Indeed, Caudill Seed entrusted most ofits scientific information on this subject to the Former Director. One of Caudill Seed’s former customers was Jarrow Formulas, Inc. (“Jarrow Formulas”). Both Caudill Seed and Jarrow Formulas produced and marketed their own broccoli extract nutritional supplements and were competitors in this regard. In 2011, Jarrow Formulas decided to “cut out the middleman” and manufacture its own broccoli extract instead of buying it from Caudill Seed. Up to that point, Jarrow Formulas had not done any research and development or manufacturing of broccoli extract, and it had no employees who were capable of doing so. In order start manufacturing broccoli extract, it hired Caudill Seed’s Former Director. When the Former Director left Caudill Seed, he took the documents and hard drive containing Caudill Seed’s research. Without these documents, Caudill Seed had to “reverse engineer” its own processes, and the progress that it had previously made was set back nine months. Meanwhile, the Former Director gave Caudill Seed’s confidential information to Jarrow Formulas, and, despite having no prior experience, Jarrow Formulas was able to create, patent, and market a broccoli extract formula within four months. As a result, Caudill Seed sued Jarrow Formulas claiming that Jarrow Formulas had misappropriated Caudill Seed’s trade secrets. Kentucky’s Uniform Trade Secrets Act allows businesses to protect their “trade secrets,” which includes things like techniques, processes, formulas, methods, and other information that have independent economic value from not being generally know or available to others and are treated as secret. Ky. Rev. Stat. Ann. § 365.880 (West 2020). A company, such as Caudill Seed, can bring legal action if its trade secrets are misappropriated, which may occur when another company, such as Jarrow Formulas, acquires the trade secret by improper means. In this case, the jury found in favor of Caudill Seed, determined that Jarrow Formulas had misappropriated Caudill Seed’s trade secrets, and awarded Caudill Seed damages for its losses. The federal court agreed that the jury had sufficient evidence to reach this conclusion. The federal court explained that, although it is not wrong, and can actually be good business, for a company like Jarrow Formulas to try to cut out the middle man to reduce costs, a company cannot do so by misappropriating another’s trade secrets. This case demonstrates why it is important for a business to take steps to protect its confidential information from its competitors. In this case, Caudill Seed entrusted essentially all of its scientific information to one individual, who later turned Caudill Seed’s secrets over to the competition. Although Caudill Seed was unable to prevent its Former Director from taking the information, Caudill Seed did recover much of its damages by bringing a legal action. An attorney can help you determine if your business has techniques, data, processes, or other information that is worthy of “trade secret” protection, and how to best protect that information to prevent what happened to Caudill Seed from happening to your business. If you believe another person or company has improperly taken and used your company’s trade secrets, an attorney can also help you decide if you should file a lawsuit to try to recover damages.
These materials are public information and have been prepared solely for educational purposes. These materials reflect only the personal views of the authors and are not individualized legal advice. It is understood that each case is fact-specific, and that the appropriate solution in any case will vary. Therefore, these materials may or may not be relevant to any particular situation. Thus, the authors and Steptoe & Johnson PLLC cannot be bound either philosophically or as representatives of their various present and future clients to the comments expressed in these materials. The presentation of these materials does not establish any form of attorney-client relationship with the authors or Steptoe & Johnson PLLC. While every attempt was made to ensure that these materials are accurate, errors or omissions may be contained therein, for which any liability is disclaimed.
DON’T FALL BEHIND THE HERD!
ALL SALES! Bid & Buy at: DVAuction
Seedstock Plus Fall Sale Dates!
Fall Bull & Female Sale October 17, 2020 Joplin Regional Stockyards, Carthage, MO Selling 150 - 18 month old BLACK Gelbvieh, Angus & Balancer bulls & BLACK females - commercial fall open heifers & spring breds
RED REWARD ‘Fall Edition’ Bull & Female Sale November 7, 2020 Wheeler Livestock Auction, Osceola, MO Selling 40 RED Gelbvieh, Balancer bulls & RED females - registered &commercial!
