My rewrite-Brief Memo: ITSA claim against Georgia Brown

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My rewrite-Brief Memo: ITSA claim against Georgia Brown

MEMORANDUM
To:    Juliet P. O’Hara
From: New Associate
Date:  March 31, 2016
Re:   Brief Memo: ITSA claim against Georgia Brow

                                                                                             Question Presented

Under Illinois law, can an employee successfully dismiss a misappropriation of trade secret claim by the former employer where the recipes were made by the employee within her own time and efforts and were from multiple cookbooks and internet sources; where the recipes were kept in a drawer, within reach of all the bakery employees; where the employee took the recipes back home and shared with her family member?

                                                                                                 Brief   Answer  

Yes, the employer had probable cause to suspect Ms Brown of misappropriating the recipes, because she took them home and shared with non-employees. Keeping the recipes in a drawer, within reach of all the bakery employees but not everybody can approach them without difficulty, was a reasonable measure. But because of the recipes were from multiple cookbooks and internet sources, the information inside was not sufficiently secret to give the employer a competitive advantage, and it could not count for a trade secret. Overall, a court will likely to conclude  no misappropriation of trade secret in this case.

                                                                                                       Facts

Sugar High Bakery is a bakery located in Skokie, Illinois. It is suing Georgia Brown for a breach of contract (a Confidentiality Agreement) and a violation of the Illinois Trade Secrets Act (ITSA), 765 Ill. Comp. Stat. 1065/1 et. Seq (Compl. ¶ 1, 2, 7.) Sugar High Bakery’s complaint alleged that Ms Brown, who previously worked for it, misappropriated many of its recipes, including the recipe of its best-selling Cupcake, which had been key to Sugar High Bakery’s success during the last few years and sought an immediate return of its recipes in order to avoid irreparable damage to its business (Compl. ¶ 2, 7, 9.) It further asked the Court to enjoin Ms. Brown from using its recipe, or any other of its recipes, in her own business endeavors (Compl. ¶ 2.)

As Sugar High Bakery stated, it hired Ms. Brown as its head baker on October 2, 2011 (Compl. ¶ 7.)  In that position, Ms. Brown had the following responsibilities: (1) produce, develop, refine, and improve Sugar High Bakery’s baked goods during work hours, using bakery supplies and equipment. (2) develop new baked goods with the help of her assistants. (3) supervise the bakery assistants; and Ms Brown indeed did several things to keep her position such as tweaking old recipes to improve their taste and texture, identifying potential attractive recipes from multiple cookbooks and internet sources and so on (Compl. ¶ 7, 8.)

Sugar High Bakery also stated, with the popularity of the baked goods that Ms Brown created, Sugar High Bakery’s clientele and revenues had grown significantly since October 2011; and one of those baked goods by Ms Brown was the “Captain Cupcake”, which was recognized and highly recommended by the local media in Chicago; employees kept track of their work via a collection of typed and handwritten recipes and the notes on them, which were kept in two binders stored in a small desk in its kitchen, and only bakery employees ever had access to the desk (Compl. ¶ 9-12.)  

Sugar High Bakery further stated its business highly depended on those recipes and notes and that Ms Brown took the red binder, which contained some recipes she brought from home and shared them with others, along with recipes developed while at the bakery, including the recipe for the Captain Cupcake on December 30, 2015, the day of her resignation (Compl. ¶ 12-14.), while Ms Brown admitted that she had took the red binder but said nothing was in it except the Captain Cupcake recipe, which was her own work by her  personal time and efforts and she only shared it with some of  her family members for personal use.

Sugar High Bakery finally stated it had been contracting her since January 2, 2016 (Compl. ¶ 15.), while Ms Brown said she got no letters or calls and it was the first time she got the complaint.

                                                                                                  Discussion

Sugar High Bakery’s complaint does not sufficiently state a claim for a violation of the Illinois Trade Secrets Act (Hereinafter referred to as ITSA), 765 Ill. Comp. Stat. 1065/2 (2006). In order to establish a violation of a trade secret, a plaintiff is required to allege that (1) a trade secret; (2) was misappropriated; and (3) the owner of the trade secret was damaged by the misappropriation. See Traffic Tech, Inc. v. Kreiter, 2015 U.S. Dist. LEXIS 169248 (N.D. Ill. Dec. 18, 2015). 

Here, a court may conclude that the recipes were misappropriated—Ms. Brown shared them with her family members for their own personal use; however, Sugar High Bakery did not properly allege that Captain Cupcake recipe was a trade secret because all the employees in the kitchen can get it without difficulty and it is very close to recipes that are online and free; Finally, damages are assumed to be sufficiently pleaded for this memo, and they will not be discussed further below.

Meanwhile, there may be a controversy about the fact on  how many recipes there existed in the red binder Ms Brown took home,  but they both agreed that the Captain Cupcake recipe was the one at issue--even if  other recipes were included,  SHB either admitted they belonged to  Ms Brown’s own work or did not mention them in the  Complaint, which is out of the Court’s reach.  (Compl. ¶ 12.)

                                                                                            Trade Secret

The Captain Cupcake recipe is not a trade secret. ITSA defines a "trade secret" as follows:
 
 (d) "Trade secret" means information, including but not limited to technical or non-technical  data, a formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, or list of actual or potential customers or suppliers, that (1) is sufficiently secret to derive economic value, actual or potential, from not being generally known to 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 or confidentiality. 765 Ill. Comp. Stat. 1065/2.  

Courts often use six factors when determining the existence of a trade secret:
 
           (1) The extent to which the information is known outside of a plaintiff’s business; (2) the extent to which it is known by employees and others involved in a plaintiff’s business; (3) the extent of measures taken by him to guard the secrecy of the information; (4) the value of the information to him and to his competitors; (5) the amount of effort or money expended by him in developing the information; and (6) the ease or difficulty with which the information can be properly acquired or duplicated by others. Learning Curve Toys, Inc. v. PlayWood Toys, Inc., 342 F.3d 714, 722 (2003).

 Here, a court is likely to conclude that that SHB has taken reasonable efforts to maintain its secrecy under the circumstance, but a court is not likely to conclude that “The Captain Cupcake” recipe is sufficiently secret to derive economic value.

                                                                   A. Sufficient secrecy to derive economic value

 The Captain Cupcake  recipe is insufficiently secret that from one line and free resources.

 ITSA indicates that “for a trade secret, the information at issue must be sufficiently secret to impart economic value to both its owner and its competitors because of its relative secrecy.” 765 Ill. Comp. Stat. 1065/2(d). For this issue, a court will consider four of those factors mentioned above: “ (1) The extent to which the information is known outside of a plaintiff’s business; (2) the extent to which it is known by employees and others involved in a plaintiff’s business . . . (4) the value of the information to him and to his competitors; (5) the amount of effort or money expended by him in developing the information;”  Learning Curve Toys, Inc. v. PlayWood Toys, Inc., 342 F.3d 714, 722 (2003).

  In H.   MALE    pope v. Alberto-Culver Co., the inventor presented to the marketer a proposal to produce a plastic tube used to contain and apply lye-based hair relaxer, however, the marketer rejected the proposal, and later marketed a line of hair care products that included a lye-based hair relaxer in a tube.   pope v. Alberto-Culver Co., 694 N.E.2d 615,616(1998). The inventor alleged the idea for the marketer's product was taken directly from her proposal; the marketer alleged the idea was independently originated by its employee. Id. The court held that (1) the proposal was not entitled to trade secret protection as a matter of law as the product could be readily duplicated without considerable time, effort, or expense, and (2) the alleged trade secrets were within the general skills and knowledge of the industry. Id at 617. The court reasoned information generally known or understood within an industry even if not to the pubic at large was precluded for trade secret protection. Id

 Similarly, in System Development Services,INC., v. Timothyf. Haarmann, the court found the plaintiff’s customer list mentioned was not sufficiently secret under ITSA,because no evidence showed that the names, addresses, and contact information contained in the list were secret in the computer network service industry. The court held information that is”within the realm of general skills and knowledge can not be a trade secret.” Id at 78.

 In contrast, in Mangren Research and Development Corporation., plaintiff manufactured a mold release agent that it developed and protected as a trade secret, while two of plaintiff's former employees were hired by defendants and subsequently imparted the formula to defendants, which was slightly altered and then marketed to compete with plaintiff's product. Mangren Research & Dev. Corp. v. Nat'l Chem. Co., 87F. 3D 937,937-942(1996). The court found the formula was not originally from plaintiff but“the plaintiff developed a distinctive formula based on information not generally known or accepted within the industry.” Id at 942. The court stated “[Plaintiff] proved, moreover, that secrecy imparted considerable economic value to its new formula, although its mold release agent was relatively inexpensive to produce...”. Id at 942.

Here, the alleged trade secret recipe-Captain cake is based on a combination of the recipes from pinterest and the internet and that means the Captain cake is done by using generally known information or information that is not well protected. Same like in pope, the information in plaintiff's proposal was based on existed resources before she sent the idea for the product to the defendant. Indeed, the information was well-known, consisting of  a combination of two existing products-lye-based hair relaxer and a stock caulk tube, and the defendant clearly had the knowledge within the realm of general skills and knowledge in the industry.

Also like in Sys. Dev. Servs, the customer list  mentioned can be duplicated simply by looking at the telephone directories without difficulty, and that the information in the customer list to comprise is general, which is nothing unique or special for any computer technician to service the customers' computer system and network. In our case, as a head barker, Ms Brown got  access to general information needed but none trade secret involved.

Unlike in in Mangren, the original product of Du Pont was quite expensive, and Mangren was required to develop a cheaper and more effective one, then she develop a distinctive formula based on information not generally known or accepted within the industry, which is sufficiently secret and finally proved to of real value. In our instant case, information used by Ms Brown is obtainable by general public and it can not be kept confidentially so to create economic value, although in fact the Captain Cupcake recipe contributed significantly to SHB’s business.

Thus, SHB can not prove the recipe’s sufficient secrecy.

                                                                                         B. Reasonable efforts to maintain

SHB had taken reasonable efforts to maintain “The Captain Cupcake” recipe’s secrecy
.
To comprise a trade secret, the information must be “subjected to affirmative measures to prevent other from acquiring or using it.” 765 Ill. Comp. Stat. 1065/2. A court will consider the following four factors for this: (1) The extent to which the information is known outside of a plaintiff’s business; (2) the extent to which it is known by employees and others involved in a plaintiff’s business; (3) the extent of measures taken by him to guard the secrecy of the information; . . .and (6) the ease or difficulty with which the information can be properly acquired or duplicated by others.  Learning Curve Toys, Inc. v. PlayWood Toys, Inc., 342 F.3d 714, 722 (2003).

In 205 Corporation d/b/a The Tavern Restaurant. V. Ron Brandow, the court found that employee used to work for restaurant and that after he was terminated, employee went to work for competing restaurant and disclosed restaurant's secret recipes to competing restaurant. 517 N.W.2d 548, 548 (1994). The court concluded “substantial evidence supported the conclusion that plaintiff's secrecy procedures were reasonable under the circumstances.”, because none of the recipes were used by or given to the public, and defendant was told the recipes were confidential and were not to be left anywhere readily accessible to others, and that all recipes, including the crust recipe, were in a safe deposit box at all times. Id at 551.

    In contrast, in Liebert Corporation. V. JohnMazur, the court held that, although the customer information and bids  had been compiled with great effort, there had been little effort to protect them, because there was no restriction to any physical copies of the list and plaintiff did not require employees to sign confidentiality agreement. 357 Ill. App. 3d 265, 279 (2005).

   Here, like in  205 Corp., where the recipes mentioned were well confided  although the crust recipe became known to all kitchen employees, SHB kept the recipes in two binders stored in a small desk in its kitchen, and only bakery employees ever had access to the desk.

    Unlike in Liebert Corp., where there existed limited security measures and no confidentiality agreement, and plaintiff did not advise employees that the contact information and bids and sales quotations were confidential or label the information as confidential. SHB and all the bakery employees had signed a confidentiality agreement, which is enough sufficient to ensure the secrecy of the recipe, and the employees were supposed to return all the recipes upon resignation.

Thus, SHB can  prove a reasonable measure to protect the recipe.

                                                                                                Misappropriation

A court is likely to conclude that Ms Brown misappropriated the Captain Cupcake recipe.The Illinois Trade Secrets Act defines "misappropriation" as:

in pertinent part as disclosure or use of a trade secret of a person without express or implied consent by another person who at the time of disclosure or use, knew or had reason to know that knowledge of the trade secret was: derived from or through a person who utilized improper means to acquire it; acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use. 765 Ill. Comp. Stat. 1065/2(b)(2)

  Misappropriation can be shown one of three ways--by improper acquisition, unauthorized disclosure, or unauthorized use. 765 ILCS 1065/2(b)(West 2002).

 In Traffic Tech, Inc. V. Jared Kreiter, the plaintiff alleged that a former employee misappropriated confidential and proprietary business information which was exploited by his new employer. N.D. Ill. Dec. 18, 34 (2015). The court held that the defendant Total Transportation Network misappropriated plaintiff’s trade secrets, because of the repeated unauthorized disclosure of the trade secrets. Id at 34. 

 In contrast, in Mangren Research & Development. Corporation. v. National Chemical Co., the court found that plaintiff's former employee revealed plaintiff's formula to the defendant, which were let in on the secret and defendant then used that secret to develop their own product. 87 F.3d 937, 939 (1996). The court reasoned that, without use of plaintiff's formula, defendant could not have created their new one and concluded willful and malicious misappropriation existed. Id at 946.

Here,like in Traffic Tech, Inc., the defendant directly disclose plaintiff’s trade secret without any authorization. In our instant case, Ms Brown had shared recipes directly with individuals who are not employed by SHB, while she was subject to the Confidentiality Agreement.

In contrast with the defendant in Mangren Research & Dev. Corp., who used the formula without authorization--to say more accurate, defendant was not plaintiff’s employee who have express or implied authorization to use the formula, Ms Brown was authorized to use the recipes only when she was under employment, but she took the recipes home and  disclosed them to non-SHB employees no matter whom they were after her resignation, which was an unauthorized disclosure.

 Hence, it can be concluded  that Ms Brown had appropriated the Captain Cupcake recipe..

蔡和

联系方式：15902097047

蔡和

联系方式：15902097047