Preparing for a Smack Down: Local Wrestling Company Sues Former Employee and World Wrestling Entertainment for Trade Secrets Violation

June 27, 2012 by

A local professional wrestling promotions company, TNA Entertainment, LLC (“TNA”), has sued former employee, Brian Wittenstein, and direct competitor, World Wrestling Entertainment, Inc. (“WWE”), for unlawfully using TNA’s trade secrets against them in unfair competition.  The case, entitled TNA Entertainment, LLC v. Wittenstein and World Wrestling Entertainment, Inc., was filed on May 23, 2012 in the Davidson County Chancery Court, Docket No. 12-746-III and alleges that Wittenstein and WWE violated Tennessee’s Uniform Trade Secrets Act.

According to TNA, Wittenstein was terminated from the company on August 3, 2011.  In connection with his separation, Wittenstein entered into a Separation Agreement and General Release (the “Agreement”), which expressly prohibited him from disclosing TNA’s confidential trade secrets, including information about TNA’s contracts with other wrestling talent.

TNA claims that Wittenstein violated the agreement by downloading TNA’s company policies, contractual agreements with other wrestling talent, and detailed information about its wrestling talent (including compensation). TNA then claims that Wittenstein disclosed the gathered information to his new employer, and direct competitor of TNA, WWE.  TNA asserts that WWE’s possession and use of TNA’s confidential trade secrets provide WWE an unfair competitive advantage regarding wrestling talent.

TNA alleges that WWE has used TNA’s confidential trade secrets to solicit wrestling talent currently, under contract with TNA, and encourage them to join WWE.  Wrestler Ric Flair is a recent example of a client that TNA claims attempted to terminate his exclusive contract with them to sign up with WWE.

To date, the court has entered a temporary restraining order, prohibiting WWE from using TNA’s confidential information.  Though this case is relatively new, it is a prime example of how costly unlawful use of trade secrets can be to former employees and new employers.  Under the Tennessee Uniform Trade Secrets Act, the unlawful user of trade secrets can be liable for the plaintiff’s actual loss caused by the misappropriation of trade secrets and any “unjust enrichment.”  In certain cases, the defendant may also be liable for “exemplary damages” resulting in up to twice the award for the plaintiff’s damages and the plaintiff’s attorney fees.

Ultimately, employers should always be aware of and protect themselves against potential liability when hiring an employee who may possess a former employer’s confidential trade secrets. If you need more information on confidential trade secrets and defenses against former employees, please contact any of the Burr & Forman Non-Compete & Trade Secrets team members for assistance.

Filed Under: Tennessee, Trade Secrets Tagged With: , , , , , , , , , , , ,

Court Ruling Helps Define Factors Used in Trade Secret Classification

May 23, 2012 by

What is an allograph? And why doesn’t a company’s sterilization process violate the trade secrets of another company that allegedly invented and protected the sterilization protocol?  And why, you might ask, do these questions appear on our blog?

First, an allograph is a transplant of tissue from one person to a genetically dissimilar person. To successfully complete this transplant, you must sterilize the human tissue. In April 2012, Florida’s Fifth Circuit of Appeal ruled on a case involving allographs: Duane Duchame, Tai T. Huynh, et al. v. Tissuenet Distribution Services, LLC, et al., 37 Fla. L. Weekly D875a.

This case established several factors that Florida courts now use in determining whether to uphold injunctions enforcing trade secrets. These factors are important when recognizing the undeniable link between success with a trade secret claim and the existence of a valid non-compete agreement.

The court ultimately decided in a reversal of the lower court’s temporary injunction in this sterilization case, based on several things.

  • The chemicals used in the case were well-known in the industry and therefore use of them did not constitute qualities of a trade secret.
  • The former employee who created the sterilization protocol did not use a direct replica of the system for a new employer. Rather, he “used his education, knowledge, skill, and experience” to formulate a protocol for his new employer, indicating it was a new creation instead of a stolen trade secret.
  • And most importantly, if the plaintiff wanted to prevent the departed employee from working for a competitor, then the plaintiff should have issued a non-compete agreement to the former employee—which they did not do.

This case stands demonstrates two propositions that all employers seeking to protect trade secrets should remember.  First, if a trade secret exists, it should be kept secret.  Additionally, verify that it does qualify as a trade secret. If you use industry-known materials and use them in a special or untraditional manner (i.e. the sterilization protocol in this case), make sure you can prove in court that your methods are significantly different enough to classify them as trade secrets, and not merely a variation of a widely-accepted process.

Second, if you have a key employee capable of taking their talents to a competitor which could adversely impact your business, then you should always consider executing a valid non-compete agreement to protect your company.  In the Tissuenet case discussed above, it is impossible to say whether or not a valid non-compete agreement would have justified the plaintiff’s claims, but it is likely that the lack of a valid non-compete agreement caused the fatal blow.  Are trade secret claims and non-compete claims different?  Of course! However, as this example has demonstrated, they are often compatible tools working with sensitive information and skilled employees.

For more information, if you have any questions about trade secrets or non-compete agreements, or if you have an unfair competition issue, please contact any of the Burr & Forman’s Non-Compete & Trade Secrets team members and we will be happy to assist you.

 

Other articles you may be interested in:

What is a Trade Secret?

Key Ingredients for an Effective Non-Compete Agreement

Filed Under: Florida, Non-Compete Agreements, Trade Secrets Tagged With: , , , , , , , , ,

What is a Trade Secret?

April 11, 2012 by

Most businesses are familiar with the concept of a trade secret, but few can accurately define the legal meaning of the term.  Those seeking protection will claim that basically all of their business information qualifies as a trade secret, while defendants fighting a claim will argue that the requirements for something to be a trade secret are extremely restrictive. The answer, of course, is somewhere in the middle.  So, what exactly constitutes a trade secret?

The Uniform Trade Secrets Act has been adopted by 46 states (all except New York, Massachusetts, North Carolina and Texas).  Georgia’s version of the Act defines a trade secret as follows:

“Trade secret” means information, without regard to form, including, but not limited to, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, or a list of actual or potential customers or suppliers which is not commonly known by or available to the public and which information:

(A) Derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

(B) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Whether or not a supposed trade secret satisfies the definition of a trade secret often decides the winners and losers in trade secret disputes.  Here are some examples of decisions by state and Federal courts in Georgia regarding the determination of a trade secret:

Items Ruled as Trade Secrets

  • Written, or electronically-stored, customer lists, if not readily available to the public
  • Computer software
  • Packaging idea
  • Logistics system
  • Healthcare provider’s referral log and workbook containing doctor referral statistics

Not a Trade Secret

  • Intangible customer information existing in the mind of the former employee
  • Recollection of cities that franchisor considered to be good location for future franchises (deemed to be similar to intangible customer information, and thus not protectable)
  • Accumulated technical information in employee’s mind
  • A particular bearing in a cleaning system  (since bearing was stamped with the name of a third party, anyone could call the bearing manufacturer to find out the specifications of the bearing)
  • Name for future newspaper planned by publisher
  • Matters generally known in the industry
  • Process of evaluating amount to bid on tax deeds   (the information was available to the public, and the process was not a unique combination affording possessor a competitive advantage)
  • A customer list that does not provide a competitive advantage (even though it was not publicly available)
  • Investor lists

BURR POINT:  The Uniform Trade Secret Act can be a powerful tool for protecting a confidential business and customer information, but claiming a trade secret and meeting the legal definition of same are two different matters.  Businesses of all types would be well-served to have an attorney review their processes, employment agreements and policies to ensure they are set up to take full advantage of the protection that trade secrets laws provide.

 

Filed Under: Florida, Georgia, Trade Secrets Tagged With: , , , , , , , , , , , , , , , , , , ,