Eleventh Circuit: Restaurant’s Stolen Recipe Claims Are Stale

by Orrick - Trade Secrets Group
Contact

It should be obvious that if you want trade secret protection, you shouldn’t wave your purported trade secret around in public. Likewise, if you see someone openly disclosing your trade secret on television, you should probably do something about it.

This is the scenario that arose in a recent case between two Miami fine-dining restaurants called Mr. Chow and Phillipe.  Among the 16 claims in a colorful complaint filed in the Southern District of Florida, Mr. Chow alleged that one of its former kitchen employees misappropriated several of its trade secret “signature dishes” and was using them at Phillipe. The district court dismissed the trade secret claims based on New York’s three-year statute of limitations, and earlier this month the Eleventh Circuit affirmed.

New York law, like the Uniform Trade Secrets Act (UTSA), creates a three-year statute of limitations for misappropriation. The UTSA gives trade secret owners a bit of a break by establishing a “discovery” rule under which the limitations period does not start to run until the trade secret owner discovers the misappropriation, or should have discovered it by the exercise of reasonable diligence. New York, on the other hand, favors trade secret owners by recognizing a “continuing tort” rule, whereby each successive wrongful nonpublic use of a trade secret constitutes a new tort that restarts the statute of limitations. In most other states, and under the UTSA, subsequent acts of misappropriation do not restart the clock. A lawsuit must be brought within three years after the owner discovers the first unlawful use, disclosure, or other act of misappropriation.

As we hinted above, the most brazen act of trade secret usage that should have tipped off Mr. Chow was Philippe’s preparation of the signature dishes on television. In fact, a recipe from that show is available online — Green Prawns with Chinese Noodles. But the court found that the defendant had also publicly disclosed the trade secrets by openly serving the dishes to the public in the Phillipe restaurants and by giving a restaurant tour and a menu to a Mr. Chow employee before the first restaurant even opened. All of these acts took place more than three years before the lawsuit was filed. During that time, Mr. Chow never sent a cease-and-desist letter or voiced an objection as the Phillipe business grew and opened a new location. The result is that Mr. Chow’s secret recipes are no longer so secret, though the restaurant owner was able to secure a million-dollar jury verdict for false advertising and unfair competition.  Phillipe has since gone out of business in South Beach.

Mr. Chow isn’t the only one who got burned by leaving his pan unattended on the fire. In Portman v. New Line Cinema, the plaintiff claimed trade secret protection in a motion picture comedy idea that he said was reflected in the movie Wedding Crashers. But like the owner of Mr. Chow, he sat on his rights for too long. With the movie’s release on July 15, 2005, the purported trade secrets were disclosed to the public, but the plaintiff did not file suit until July 2009. By that time, the trade secret claim was barred by the statute of limitations.

Even if delay in filing suit does not bar a claim under the statute of limitations, such delay can create problems in other ways. For example, in Cypress Semiconductor Corp. v. Superior Court, the California Court of Appeal held that a third party’s inadvertent use of a trade secret did not constitute misappropriation and would not trigger the statute of limitations. But the court observed that the law still provides incentives for action by the trade secret owner. Standing idle in the face of such inadvertent use could amount to a failure to exercise reasonable efforts to maintain secrecy, thereby depriving the information of trade secret status. Failure to act could also defeat any future claim against the inadvertent user, since the UTSA protects parties who acquire trade secrets in good faith and materially change their position before receiving notice that they are using the secrets.

These cases highlight the perils of inaction in the face of trade secret theft. If you want to have your cake and eat it too, it’s best to act quickly to protect your trade secrets.

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.

© Orrick - Trade Secrets Group | Attorney Advertising

Written by:

Orrick - Trade Secrets Group
Contact
more
less

Orrick - Trade Secrets Group on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.