Legal & Courts  July 6, 2007

Cheese decision may help keep trade secrets

FORT COLLINS – The owners of a defunct Fort Collins cheese company did everything they needed to do to protect their intellectual property, and that’s why they prevailed in a strongly worded court decision, attorneys involved in similar cases say.

“They did all the right things to protect their property, absolutely,´ said William Cochran, a Fort Collins attorney specializing in intellectual property law.

On June 14, Larimer County District Court Judge John-David Sullivan awarded Bingham Hill Cheese Co. $550,000 in damages in a lawsuit filed by the company’s owners, Tom and Kristine Johnson, against Morning Fresh Cheese Co. in Bellvue.

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The Johnsons had accused Morning Fresh and its owner, Robert Graves, of theft of trade secrets after Graves hired former Bingham Hill cheese maker Brad LaRocco to be Morning Fresh’s cheese maker shortly after he left employment at Bingham Hill.

After a three-day trial in March and two months of deliberation, Sullivan found that Morning Fresh had stolen Bingham Hill recipes by hiring LaRocco to reproduce their award-winning cheeses even though he had signed a non-disclosure agreement while employed at Bingham Hill.

“The court finds that defendant Brad LaRocco did violate this agreement by not only disclosing trade secrets of Bingham Hill, but using all of this to make duplicate cheeses at Morning Fresh Cheese Co. and Morning Fresh Dairy,” Sullivan wrote in his decision.

“The court finds that the cheeses produced by Morning Fresh Cheese were designed to fool the customers into believing this was the same award-winning cheese made as Bingham Hill by Mr. LaRocco,” Sullivan wrote. “Mr. LaRocco and the other defendants knowingly engaged in unfair competition with Bingham Hill and violated trade secrets and confidential information in making its cheese.”

Sullivan awarded Bingham Hill $400,000 for the loss of its ability to sell its intellectual property and another $150,000 in exemplary damages. Greeley attorney Todd Taylor, who represented Morning Fresh and Graves in the lawsuit, said immediately after the decision that an appeal might be mounted in the case.

Taylor was out of the country and unavailable for comment for this story.

The Johnsons have moved to Michigan since closing Bingham Hill in early 2006. Kristine Johnson, an attorney who also focuses on intellectual property cases at a Michigan law firm, said she could not comment on the issues of the lawsuit.

‘NDA’ ignored

But Cochran said Sullivan’s decision appeared to be based primarily on the Johnsons’ precaution of getting LaRocco to sign a non-disclosure agreement and “the employee basically ignored that.”

“This is just an extreme example of the theft of trade secrets,” Cochran said. “It’s very provable and it looks like the defendants just ignored the law.”

Kay Collins, who practices trademark law with the Fort Collins legal firm of Santangelo Law Offices, agreed. “I think the court recognized the value of intellectual property and the investment the Johnsons put into developing their award-winning cheeses,” she said. “It’s a strong statement that the theft of trade secrets and the violation of the confidentiality of non-disclosure agreements will not be tolerated.”

Despite the judge’s strong opinion, Collins said it’s unlikely it will have any citable value for future cases. “It’s just a district court opinion and it would have to get to the appellate court level to have any precedent value,” she said.

Cochran agreed. “As far as that goes, it’s better precedent to have it out of the court of appeals” but added, “I think it would be very hard to win an appeal in this case.”

Cochran said the case highlights the importance of getting key employees, those given access to information critical to a business’ success, to sign non-disclosure or non-compete agreements.

“It’s very important to have exit interviews with employees to remind them they signed a non-disclosure agreement and they can’t compete or disclose trade secrets,” he said.

Cochran said non-disclosure/non-compete agreements are carefully spelled out in Colorado law to apply to specific employees holding confidential information gained during their employment. The agreements can’t be aimed at just any employee, however.

“The general idea in Colorado is you shouldn’t be kept from making a living, but if you have some control over the business you can be subject to non-disclosure agreements,” he said.

The enforceability of such agreements varies by state, Cochran notes, with stricter enforcement found in the East and less enforcement in the West. For example, New Jersey courts take a strict view of such agreements while California courts do not recognize or enforce them.

Cochran said he’s uncertain how much weight the Bingham Hill decision will ultimately have but he’s happy Sullivan ruled as he did.

“I just think this case is important because it does show that the law of trade secrets is alive and well and people can’t steal your intellectual property and get away with it,” he said.

FORT COLLINS – The owners of a defunct Fort Collins cheese company did everything they needed to do to protect their intellectual property, and that’s why they prevailed in a strongly worded court decision, attorneys involved in similar cases say.

“They did all the right things to protect their property, absolutely,´ said William Cochran, a Fort Collins attorney specializing in intellectual property law.

On June 14, Larimer County District Court Judge John-David Sullivan awarded Bingham Hill Cheese Co. $550,000 in damages in a lawsuit filed by the company’s owners, Tom and Kristine Johnson, against Morning Fresh Cheese Co. in Bellvue.

The Johnsons had…

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