Trading Secrets : Trade Secrets Lawyers & Attorneys : Seyfarth Shaw Law Firm : Computer Fraud, Confidentiality Agreements, Corporate Espionage

By Scott Krol, New York

A six-panelist jury awarded $6.9 million in punitive damages and $126,511 in compensatory damages to CBS Radio f/k/a Infinity Radio in a dispute stemming from an action to enforce a non-compete clause against radio host Jennifer Ross, whose real name is Elena Whitby. According to published reports, CBS has spent approximately $4 million in attorney fees pursuing Ross since 2000. Ross’s attorney plans to appeal the verdict. http://www.sun-sentinel.com/news/local/palmbeach/sfl-flpross0509pnmay09,0,3372540.story

The dispute started in 2000, when after failed negotiations, Ross left “Sunny 104.3” WEAT, for rival WRMF 97.9 FM. Ross had worked for WEAT since 1995 under an agreement, as amended in 1999, which contained a non-compete clause prohibiting Ross from appearing on radio or television and for working for any competitor within 125 miles of WEAT, for 12 months after leaving WEAT. (See Elena Whitby v. Infinity Radio Inc., 951 So. 2d 890) In January 2000, Infinity send a letter to Ross stating its intent to exercise its option to renew the agreement for 5 years. The two sides were unable to negotiate a new agreement, and Ross started broadcasting for rival WRMF in September 25, 2000 at the expiration of the 1995 Agreement. Infinity sued Ross and Licensees, seeking injunctive relief, contract damages, tortious interference and punitive damages. In 2005, Infinity was awarded $17.2 million. That judgment was set aside on appeal. http://www.4dca.org/Jan2007/01-24-07/4D05-3888.op.pdf.

In 2008, the jury again found for Infinity and awarded $6.9 million in punitive damages and $126,511 in compensatory damages. According to the Sun-Sentinel, David Gorman, Ross’s attorney, plans to appeal the verdict saying that it would be a financial hardship for Ross who is being paid $200,000 a year at WRMF, to pay the $126,511 verdict plus interest plus attorney fees. Gorman contends that Ross was underpaid at WEAT, “she was paid $135,000 a year… If she’s that great, that’s all you’re going to pay her?” (See Missy Diaz, South Florida Sun-Sentinel , May 8, 2008, http://www.sun-sentinel.com/news/local/palmbeach/sfl-flpross0509pnmay09,0,3372540.story) In light of nearly 8 years of litigation, $4 million in attorney fees and only $60,000 difference in salary, perhaps the sides should have been more diligent in their contract talks in 2000.

Currently Jennifer Ross is the morning co-host of “The Jennifer and Danny Show” on WRMF. CBS’s WEAT FM has “The Sunny Morning Show” with a similar format. For the record WEAT FM is ranked number 1 in the West Palm Beach Radio market, while WRMF is third.

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The Topps Company, maker of “Bazooka” bubble gum, licensed Stani to manufacture and distribute the gum in Argentina. The original license was entered into in 1957 and was to expire in 20 years. It provided that Topps would share its “know-how, formulae, processes and techniques” with Stani in exchange for royalties on Stani’s sales. In 1976, the parties entered into a new 10-year agreement, with Stani given an option to extend it for another 10 years. The new agreement provided for the parties sharing Topps’ “manufacturing technology, marketing concepts and techniques, … and trademark use” in exchange for Stani’s payment of a yearly license fee. In the 1976 agreement, Topps also gave Stani “the exclusive non-assignable right and license to manufacture ... and sell within the [relevant] Territory, during the continuance of this Agreement, Licensed Products utilizing TOPPS Technology.” Emphasis added. Four years later, the parties entered into two new contracts: a third license agreement, and an escrow agreement. The 1980 license agreement, which expired by its terms in April 1996, gave Stani the same “exclusive non-assignable right and license” that had been given in 1976 except that the corresponding 1980 provision ended with the words “Licensed Products” and did not include "utilizing TOPPS' technology." The escrow agreement (for which Stani paid $100,000) recited that, absent a default, upon expiration of the 1980 license agreement legal title to the registration in Argentina of the trademarks “Topps” and “Bazooka” would pass to Stani.

In 1999, three years after the 1980 license agreement expired, Topps sued Stani and its parent corporation, Cadbury (to whom Stani had assigned the trademarks), alleging that Stani was continuing to use Topps technology which constituted misappropriation of trade secrets. In its answer, Stani denied that it was using Topps’ formulae but argued that, in any event, it had the right under the parties’ agreements to do so. The district court granted summary judgment to Stani and its parent, reasoning that the 1976 and 1980 documents (including the assignment to Stani of the Argentina registration of the trademarks) necessarily gave Stani the right to continue using Topps’ chewing gum formulae after April 1996. The Second Circuit reversed on the ground that summary judgment was inappropriate because the agreements were ambiguous with regard to Stani’s rights after April 1996. Topps Co. v. Cadbury Stani S.A.I.C., No. 06-5316-cv (2d Cir., May 15, 2008).

The court of appeals said that, on the one hand, the 1980 license agreement provided that the “TOPPS Trademarks and the Topps Technology shall at all times remain the exclusive property of TOPPS or its assigns” and gave Stani the right to use TOPPS formulae only “during the continuance” of the agreement. Those provisions suggest that Stani had no post-April 1996 rights. On the other hand, the “during the continuance” provision might have been intended to refer solely to what was to happen if there was an early termination of the 1980 license for cause, and there was no provision expressly granting or expressly denying Stani the right to the formulae after April 1996. Moreover, the assignment of trademark registration gave Stani at least the right to make a substantially similar product if it could do so without using the Topps formulae and without deceiving customers. Therefore, the parties’ intent was a material disputed issue requiring a trial.

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In April 2007, six Quizno's franchisees filed a class action in federal court in Chicago against the franchisor, related entities, and some individuals. Quizno's is a fast-food, toasted sandwich restaurateur. The plaintiffs alleged that they had been the victims of RICO, antitrust, and other statutory violations, as well as common law causes of action, in connection with Quizno's franchise agreement. Significantly, they claimed that they became franchisees as a result of various oral misrepresentations and material omissions.

The district court dismissed the federal law counts for failure to state justiciable causes of action. Siemer v. Quizno's Franchise Co. LLC, No. 07 C 2170 (N.D. Ill., Mar. 31, 2008) (Pallmeyer, J.), relying in large part on Westerfield v. Quizno's Franchise Co., 527 F. Supp. 2d 840 (E.D. Wis. 2007) (Griesbach, J.). Judge Pallmeyer's 18-page Memorandum Opinion and Order details the disclaimer and warning provisions of Quizno's Uniform Franchise Offering Circular as well as the franchise agreement included within the Offering Circular, which protect the franchisor from liability for alleged misrepresentations and omissions. In this regard, the decision in Siemer is recommended reading for (a) attorneys defending franchisors against claims similar to those made by the franchisees in this case, and (b) draftspersons of such documents regarding how to minimize exposure to those claims.

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