Trade Secrets and Noncompete Blog : Non-Compete Lawyer & Attorney : Epstein Becker Green Law Firm : Trade Secrets & Confidentiality Agreements

Vienna Beef, the official hot dog of the Chicago Cubs, recently struck out in its effort to obtain a temporary restraining order against hot dog rival Red Hot Chicago, Inc. and the grandson of one of the founders of Vienna Beef, Scott D. Ladany.

Among other beefs in its federal court lawsuit, Vienna Beef accused the defendants of misappropriating trade secrets by using Vienna Beef recipes. As evidence of misappropriation, Vienna Beef pointed to Red Hot Chicago advertising material which made reference to using “family recipes” – that is, recipes now owned by Vienna Beef, rather than the defendants.

In response to Vienna Beef’s motion for a temporary restraining order to halt such alleged trade secret misappropriation, Ladany submitted an affidavit stating that Red Hot Chicago does not use the Vienna Beef recipe developed by his grandfather and that Red Hot Chicago’s recipe was in fact independently developed.

Based on this affidavit, the court held that, notwithstanding Red Hot Chicago’s advertising, “Vienna Beef has shown no evidence that the recipes were used in [Red Hot Chicago’s] business and therefore cannot show that it is likely to succeed on the merits of this claim.” Accordingly, injunctive relief was not appropriate on this claim.

The court’s ruling does not mean that Vienna Beef lacks a valid trade secrets claim or that it won’t be able to eventually prove it. Rather, it merely illustrates the challenge of obtaining injunctive relief with a limited evidentiary record, particularly where there are disputed issues of fact.
 

Employers across all sectors of industry rely on narrowly tailored employment agreements to prevent employees from unfairly competing and stealing clients and customers post-employment. Last week, the adult nightclub chain, Penthouse Club, filed a suit seeking a temporary restraining order and other injunctive relief against a former director for violating a noncompete and nondisclosure agreement.

Penthouse claims that after the former director was fired for cause, he became employed at a rival nightclub not far from the Penthouse Club. Such mere employment allegedly directly violated the terms of his noncompete agreement. Penthouse also alleges that he is now using his contacts and intimate knowledge of Penthouse’s customers and employees to bring business to his new employer. As a result of his high-level position, which included access to the club’s VIP room where members pay a $2,500 fee to join and then a $1,000 fee each year, the former director obtained extensive knowledge concerning the real names of members and exotic dancers who worked there. Penthouse is relying on the “inevitable disclosure” theory to assert that it would be inevitable that the former director would use his knowledge of clients and employees to his and his new employer’s competitive advantage.

The agreement that the former director signed in 2004 contained restrictive covenants including a noncompete, nondisclosure, and nonsolicitation provisions. Penthouse is relying on the unique nature of its business, and, in particular, the fact that its exotic dancers and entertainers specifically attract particular customers, in order to establish its legitimate business interests and the competitive disadvantage that the former director’s solicitations could cause to Penthouse.

Penthouse attempted to resolve the dispute informally through a cease and desist letter but ultimately filed suit in federal court in Illinois seeking an injunction and monetary damages in excess of $75,000.