Thursday, April 05, 2018

multi-million dollar award for trade secret theft & false advertising of "local" origin

Bimbo Bakeries USA, Inc. v. Sycamore, 2018 WL 1578115, No. 13-cv-00749-DN-DBP (D. Utah Mar. 29, 2018)

A relatively large trade secret/false advertising verdict in this case.  Bimbo prevailed at trial on its trade secret claim that Sycamore revealed Bimbo Bakeries’ secret recipe for Grandma Sycamore’s brand “granny” style white bread, which U.S. Bakery obtained and used in the production of its own granny bread. In addition, Bimbo prevailed on its false advertising claim that U.S. Bakery’s use of the word “local” in the tagline “Fresh. Local. Quality.” was misleading in markets, including Utah, where U.S. Bakery’s bread was baked out of state.

The jury found that U.S. Bakery’s trade secret misappropriation was willful and malicious (by clear and convincing evidence), and resulted in $1,578,942 in damages.  Syacamore was responsible $526,314 in damages, and the misappropriation was willful and malicious (by a preponderance of the evidence).  The jury also found that U.S. Bakery’s false advertising of “local” was willful and resulted in $8,027,720 in profits (apparently all the profits from its sales using the tagline, with no deductions).

The court declined to enhance damages on the false advertising claim, because though the jury found actual damages, the verdict form didn’t ask the jury to quantify those damages, at Bimbo’s request. Thus, there was no basis on which the court could “enter judgment, according to the circumstances of the case, for any sum above the amount found as actual damages, not exceeding three times such amount,” as provided for in the statute—there was nothing to multiply. Instead, the finding of actual damages allowed the profit award.  The equitable factors weighed in favor of disgorging profits, including (1) the jury’s finding that the false advertising was willful, (2) evidence of Bimbo’s lost sales, (3) U.S. Bakery’s direct role in marketing its products under the “Fresh. Local. Quality.” tagline; and (4) the inadequacy of Bimbo Bakeries’ unquantified actual damages.

The court declined to award attorneys’ fees for the false advertising claim. This was not an “exceptional” case in terms of litigating in an unreasonable manner, and the issues were close; U.S. Bakery “meaningfully challenged” Bimbo on falsity and consumer confusion.

The trade secret award, however, did include exemplary damages and fees due to the jury’s finding of “willful and malicious” misappropriation. The court awarded a “less exacting” amount. Though the misappropriation was willful and malicious and continued for nearly four years, the issues were closely litigated and U.S. Bakery is the smaller company; nor was a desire to harm Bimbo, apart from competing with it, shown.  The court also took into account the false advertising disgorgement and awarded 50% of the compensatory damages, or $789,471, along with reasonable attorneys’ fees.

The court also awarded a permanent injunction on the trade secret claim, though the injunction did not extend to blocking U.S. Bakery from producing a granny-style bread product as long as it didn’t use the trade secret.

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