NEW YEAR’S RESOLUTION EDITION: As Americans Trudge To The Gym, We Review Trade Secrets Fights In The “New You” Industry

http://blogs.orrick.com/trade-secrets-watch/files/2014/01/NewYearsResolution-200x150.pngThe gyms are packed, the diet cookbooks are flying off the shelves, and smokers are struggling to kick the habit.  It’s the resolution season, and surveys say half of the top 10 most popular new year’s goals aim for better health.  Entire industries exist to serve these pledges:  everywhere you look, someone is touting a new diet or exercise “secret.”  Some of these “new-you” purveyors claim their formulas are actually trade secrets, and have gone to court to protect them.  But are they really so secret?  Below, a look at five (alleged) trade secrets to a healthier you:

1.  The Boot Camp Brawl 

With the onslaught of new gym members come January, it’s no surprise that the ability to attract and retain customers is very valuable.  We recently covered a lawsuit brought by Equinox Holdings against SoHo Strength Lab, alleging misappropriation of trade secret customer information.  But this is not the first case of two popular workout providers facing off in court.  Back in 2008, the founder of Pure Power Boot Camp sued Warrior Fitness Boot Camp, a competitor program created by former Pure Power trainers.  Among the allegedly stolen confidential information was Pure Power’s client list containing customer contact information, buying histories, and training programs.  The court ultimately ruled that the client list was a protectable trade secret and that the defendants breached the non-disclosure obligations of their employment agreements by sharing the information.  (The case is also noteworthy for its discussion of the Stored Communications Act, as Pure Power obtained some of its key evidence by accessing a former employee’s personal email account.)

2.  The Clinic Conflict

Leading a healthy lifestyle would be a whole lot easier if we just had someone to tell us what to eat, how to exercise, and when.  Unfortunately, the professionals who develop such wellness programs don’t give them away.  Just ask the former owners of Arizona Wellness Center, who had entered into an agreement with Medi Weightloss to operate a clinic using Medi methods and products.  After Medi terminated the franchise relationship, the AWC owners continued to operate their clinics in the same way, prompting Medi to sue for trade secret misappropriation.  The court granted a preliminary injunction, finding that the “Medi-System” comprised valuable trade secrets and confidential information including operations methods and techniques, program software and presentations, and food, supplement, and injection recipes and formulas.  The court ultimately entered a permanent injunction forbidding the owners from using or disclosing any of 22 categories of “Medi-Confidential Information” or operating a competitive business within 25 miles of another Medi clinic.

 3.  The Music Melee

It’s no secret that good music can put you in the right mood for a workout.  Literally — it’s not a secret.  Spa Time, Inc. learned this the hard way when it attempted to sue Bally Total Fitness in New Jersey federal court.  Spa Time, which was in the business of operating music broadcast systems for use in health clubs and spas, had contracted with Bally to operate the system in some of Bally’s locations.  When Bally switched to Muzak’s services, Spa Time sued Bally for trade secret misappropriation and breach of a trade secret covenant.  The court dismissed Spa Time’s claims, and the Third Circuit Court of Appeals affirmed: misuse by Bally was only possible if the trade secret encompassed the very idea of broadcasting music and advertising in a health club, an interpretation that the court rejected.

4.  The Hypnosis Hostilities

Lifestyle Improvement Centers offer weight-loss hypnosis therapy through their Positive Changes Hypnosis Center franchises.  When East Bay Health, a former franchisee, shut down the franchise and converted it into the Smart Body Institute — which also offered hypnosis therapy — Lifestyle sued for breach of the parties’ two-year non-compete agreement.  A federal court in Ohio rejected Lifestyle’s request for a preliminary injunction because Lifestyle had not shown that the non-compete was necessary to protect its trade secrets.  The court did not reject outright the prospect of hypnosis therapy being a secret, though; the problem was that Lifestyle had not sufficiently identified the alleged trade secrets it said were jeopardized.

5.   The Cookie Controversy

There has even been a trade secret dispute over a diet based on eating nine cookies throughout the day.  The understandably popular “Cookie Diet” was the subject of a dispute between Dr. Sanford Siegal, the cookie’s creator, and Dr. Sasson Moulavi, who had an exclusive license to operate weight-loss centers using Siegal’s cookies and diet program.  After termination of the license agreement, Moulavi had to develop his own cookies because the specifics of the cookie recipe were trade secrets known only to Siegal and his wife.  But when Moulavi continued to use the valuable “Cookie Diet” trademark, Siegal sued.  Siegal asserted claims for trademark infringement and cyberpiracy, and ultimately won a preliminary injunction.  The court barred Moulavi from any further use of the Cookie Diet mark.  And as for the recipe itself?  That’s still a secret.  (Well, kind of.)

Will the New Year bring a new batch of health-related trade secrets disputes?  Only time will tell.  But when it comes to quick weight-loss claims, remember: sometimes things really are too good to be true.

Topics:  Health, Stored Communications Act, Trade Secrets, Weight-Loss Products

Published In: Civil Procedure Updates, General Business Updates, Communications & Media Updates, Intellectual Property Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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