Craft Beer Cellar (“CBC”) accuses Brian Beaucher, Jessica Beeby and Nerd Craft, LLC for breach of a franchise agreement and subsequent infringement of Craft Beer Cellar’s trademark and trade dress. Beaucher and Beeby are former CBC franchisees, running a bottle shop and tap room in Grand Rapids, Michigan. CBC, which focuses on the sale of specialty and craft beers, has a franchise agreement that places operational requirements on its franchisees that prohibits the sale of mass produced macro-brewed beers. Franchisees are required to have detailed education and knowledge about the craft beers that they sell, and to obtain certain industry certifications along with their training from CBC. Beaucher and Beeby are said to have formed Nerd Craft for the purposes of running their franchise in 2016. By 2018, the defendants are accused of repeatedly violating the franchise agreement by selling prohibited mass-marketed beer, failing to update branding as CBC changed its branding, and failing to adhere to requirements relating to credit card and gift card processing, and failure to adhere to marketing requirements. Defendants are accused of ignoring both friendly reminders and formal demands regarding these obligations. In March 2020, CBC notified defendants of its intention to terminate and invoked a mediation clause of the franchise agreement. The COVID pandemic pushed the planned mediation date to September. Prior to that taking place, however, CBC discovered that the defendants had hacked CBC’s website and implanted a redirect link that drove traffic to an unauthorized site, craftbeercellargr.com, that extensively uses CBC’s marks without authorization. CBC says that the defendants then escalated their non-compliance by setting up another website, run.beer, that extensively used CBC’s marks. CBC terminated the franchise agreement, but say that the defendants continue to utilize CBC marks and ignoring their other obligations, including their opening a bar using the marks. CBC says that this suit can be maintained despite the alternative dispute resolution language of the franchise agreement because the agreement has terminated, and because the defendants voluntarily waived the right to ADR by proposing and agreeing to forgo the previously scheduled mediation. CBC brings counts of trademark infringement and breach of contract. The case is before Judge Saylor.
Plaintiff UIU is a Nebraska non-profit corporation made up of descendants of Umuoji, Nigeria, and which raises funds to benefit people of that region. UIU sued defendants UIU (MA) and UIU, Massachusetts, Inc., both Massachusetts non-profit corporations, as well as Victor Ide-Okoye and his wife Ogor Okoye, who are officers of the two Massachusetts corporations. According to the complaint, Ide-Okoye was removed as president of UIU in 2018 for embezzling UIU funds. Ide-Okoye then allegedly created the two defendants corporations as counterfeit organizations designed to fool donors into believing that they were UIU. He is said to have used UIU letterhead to create falsified board meeting minutes that purported to close out UIU as a Nebraska corporation and to establish it instead as a Massachusetts corporation. UIU (which was never dissolved in Nebraska) brings counts of trade infringement and false designation of origin under the Lanham Act, use of counterfeit marks in violation of Mass. G.L. c. 110 section 12, fraud, unjust enrichment, slander of title, and tortious interference with contracts.
Cindy Foss and Hunter Foss Design & Interest filed suit against Eastern States Exposition, accusing Eastern States of creating marketing videos that prominently feature Foss’ copyrighted artworks. She says that her artwork, which was a part of a fairground exhibition at western Massachusetts’ “Big E” exposition in 2017, were used by Eastern States in an advertising campaign, without her permission and without attributing the works to her. The work in question was a recreation of the refectory in St. Joseph’s Abbey that served as a private tasting room for Spencer Brewery’s trappiest ales, which are brewed in association with the Abbey. Foss asserts that Eastern States created a promotional video that featured her work for more than eight minutes and that asserted that the work was the creation not of Foss but of Spencer Brewery.
Foss already brought three different suits related to these allegations, all in 2018 and all naming Spencer Brewery and/or St. Joseph’s Abbey as defendants along with Eastern States. She asserts that those suits do not bar this new filing because (a) none of the rationales under which dismissal was obtained in the prior lawsuits were on the merits; (b) the present claims involve copyrighted works that were not implicated in the prior cases; and (c) the present claims involve conduct that occurred after dismissal of those cases, namely Foss’ formal assertion of her right to claim authorship and Eastern States’ continued airing of the commercial containing the subject works. Foss’ assertion of on-going infringement appears to be based on Eastern State’s refusal to confirm that it is no longer airing or otherwise using the video, as opposed to actual knowledge of on-going publication.
Endobotics sued Design Standards and Medrobotics on April 15, 2020, asserting patent infringement, trade secret misappropriation, breach of contract, and other claims. The complaint was served on Medrobotics on April 22nd, meaning an answer or other response was due by May 13, 2020. When Medrobotics failed to do so, Endobotics requested a notice of default on May 22nd, and the Court entered default on June 5th. Endobotics then moved for entry of default judgment on June 25th. Endobotics, noting its inability to take discovery as a result of Medrobotics’ failure to appear, sought to quantify damages based on publicly-available information regarding Medrobotics’ business, revenues and profits. Endobpotics sought disgorgement of Medrobotics profits that resulted from the misappropriation of its trade secrets (and as restitution damages under the breach of contract claim and damages under the unjust enrichment, conversion, and other claims), which it estimated to be $53.2 million.
The court has now entered default judgment and awarded Endobotics the principal amount sought, trebled pursuant to c. 93A, along with prejudgment interest from the date of the filing of the complaint at a 12% rate for a whopping total judgment of $171,248,614, with post judgment interest also granted.
This may not be the end of Medrobotics’ troubles. Design Standards filed a crossclaim against Medrobotics, based on a clause in the contract under which Design Standards manufactured the accused product for Medrobotics. This clause had Medrobotics warrant that it had no knowledge of any existing intellectual property infringement, and the agreement further included an indemnification clause. Design Standards state that Medrobotics has ignored its many written notices demanding indemnification, and brings crossclaims for indemnification and for breach of contract for thus far failing to indemnify.
As the next wave of COVID cases builds, it is important to consider the steps you should take to protect your company’s trade secrets while you and your employees work remotely. Please read an article on this subject that I wrote with Peter Lando, one of the founders of my firm Lando & Anastasi, LLP. You can find the article on Entrepreneur.com’s website at this link. My thanks to Entrepreneur.com for publishing this!
The District of Massachusetts is holding a pair of events between now and the end of the year related to trial practice during the pandemic. On December 7, 2020, Judge Hillman and a number of state court trial judges will be presenting on the return of the jury trial. The Court will hold a discussion on virtual bench trials on December 15th at 4:00. The panel, which will be hosted by Erika Reis, President of the Federal Bar Association, will include Judges Saris, Talwani and Burroughs as well as attorneys from two Boston firms.
SoClean sued Sunset in early 2020, accusing Sunset of infringing a patent covering a system using ozone to sanitize CPAP devices. Judge Talwani has now granted Sunset’s motion for leave to amend its invalidity contentions to include new obviousness and indefiniteness contentions following her order construing the claims in SoClean’s favor. She noted that, pursuant to Local Rule 16.6(d)(5)(A), a claim construction that differs from that proposed by a party supports a finding of good cause for that party to amend its preliminary patent-related disclosures, without further need to show good cause. She noted that Sunset had sought the amendment promptly and that SoClean had not demonstrated any prejudice that would result from allowing the amendment. She also rejected SoClean’s argument that the proposed amended contentions were insufficiently detailed, determining that the sufficiency can be judged when the invalidity arguments are before the court.
Arbella was formed in 2015 to find a treatment for non-small cell lung cancer. After years of effort, Arbella identified several promising drugs, and sought development partners to move from the laboratory to clinical trials. Arbella’s founder was introduced to Scorpion’s owner, Gary Glick, who expressed interest in a collaboration to develop a treatment drug. At that time, according to the complaint, Scorpion did not have a program or any scientists working in this particular area. Glick sought access to sensitive, trade secret information on Arbella’s work, explicitly promising that Scorpion would not develop such a drug without Arbella as a partner. Glick subsequently, however, decided to withdraw from partnering with Arbella, and made clear that he did not intend to abide by his promise. Arbella asserts that Glick is known for “pry[ing] away other scientists’ work so he can claim it as his own,” calling Glick’s actions in this case as a “simple case of the most brazen fraud.” Indeed, Arbella says that Glick had openly bragged about similar dealings with other entities, obtaining their trade secret information and then using it to design around their IP and enter the market with competing products.
Arbella brings claims under the Defend Trade Secrets Act, and Massachusetts Uniform Trade Secret Act as well as asserting unfair and deceptive trade practices under c. 93A, breach of contract, fraudulent inducement, and false advertising under the Lanham Act. This last claim is based on Scorpion having allegedly touted its intent to enter a deal with Arbella to investors, while knowing at the time that it would not do so. This case is before Judge Stearns.
Rawshon accuses Redwan and NS International, NS of infringing its RICHDALE and RICHDALE FOOD SHOPS trademarks. Rawshon, the current assignee of the marks, asserts that RICHDALE was first used in commerce in 1961, and that it runs (either independently or through licensees and affiliates) about seventy convenience and grocery stores throughout Massachusetts and New Hampshire. Redwan is a former licensee that operated a Richdale store in Salem, Massachusetts, while NS (which is alleged to be owned by the same individual as Redwan) operated a store under license in Lynn. Neither defendant has paid the required license fees since December 2018, and are alleged to owe $2675 apiece in past due fees. After a number of missed promises to pay the late fees, Rawshon terminated the licenses in August 2020. Under the agreements, the defendants were to cease use of the RICHDALE marks within 30 days of termination; however, neither have done so, and the owner of the defendants is asserted to have informed Rawshon that Rawshon would need to take him to court to obtain the past-due balance and get him to stop using the marks. Rawshon asserts breach of contract, willful trademark infringement, and violation of c. 93A. Judge Young has the case.
Judge Talwani denied Dell EMC’s motion to dismiss Mitrend’s claims for alteration or removal of copyright management information (CMI), unjust enrichment, unfair competition under the Lanham Act and violation of c. 93A. Mitrend developed a set of tools for analyzing IT and data management systems that included collection software and analysis software. Mitrend’s complaint asserts that it developed these tools independently from EMC and that all such software it provided to EMC contained or pointed to copyright protection notices identifying Mitrend as the owner. Mitrend’s relationship with EMC deteriorated upon EMC’s acquisition by Dell, and Mitrend says that Dell EMC pressured Mitrend into extending the software license through unequal bargaining power and baseless accusations of breach of contract, and then utilized that extended access time to build a competing product known as “Live Optics.” Mitrend asserts that the Live Optics software includes large portions copied from the Mitrend tools, with Mitrend’s copyright notices removed.
Judge Tawlani utilized the Twombly standard, under which a complaint must state a claim, including specific factual allegations of the claim, that is “plausible on its face.” She rejected Dell EMC’s assertion that the unjust enrichment, unfair competition under the Lanham Act and violation of c. 93A claims were preempted by or duplicative of the copyright infringement claim. She found that the unfair competition claim relied on allegations beyond those of the copyright infringement claim, including statements made by Dell EMC about ownership of the Live Optics software and that Live Optics was not new, but was merely the prior (Mitrend-owned) product in rebranded form. These additional elements meant that the unfair competition claim went beyond the mere unauthorized use of a copyrighted work and were directed specifically to the source of the software, and thus this claim was not preempted. Similarly, the 93A claim required proof of elements that are not required by the copyright claim, specifically in this case an allegation of unfairly pressuring Mitrend to accept an unreasonable extension of the software license to permit Dell EMC to copy the software into its own product. This unfair pressure is what forms the basis of the 93A claim, and it therefore survives the preemption challenge. The unjust enrichment claim, which relies on the same elements as the other two claims, survives for the same reasons.
Judge Talwani also rejected Dell EMC’s contention that the CMI and 93A claims sound in fraud or misrepresentation that mandate the heightened pleading standard of Rule 9(b). That rule requires a plaintiff to state with particularity the circumstances surrounding an alleged fraud. In a case of first impression, Judge Talwani determined that a CMI claim, while requiring allegations that the removal was intentional, does not include a deceptive intent requirement, taking it out of the gambit of Rule 9(b). She further noted that, while Rule 9(b) applies to a claim where the core allegations effectively charge fraud, the 93A claim in this case included allegations that did not sound in fraud that could stand alone, without the allegations related to misleading the public as to the ownership of the software, which did sound in fraud. Because the claim could stand without relying on claims of fraud, it too survived dismissal.