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Bimbo Bakeries USA, Inc. v. Sycamore

United States District Court, D. Utah, Central Division

April 28, 2017

BIMBO BAKERIES USA, INC., Plaintiff,
v.
LELAND SYCAMORE, TYLER SYCAMORE, WILD GRAFNS BAKERY, LLC, and UNITED STATES BAKERY, INC., Defendant.

          SEALED MEMORANDUM DECISION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S [119] MOTION FOR SUMMARY JUDGMENT

          David Nuffer, District Judge

         Plaintiff Bimbo Bakeries (Bimbo) filed this case against multiple Defendants, principally alleging that the Defendants misappropriated Bimbo's trade secrets for making bread. [1] The trade secrets were originally developed by Defendant Leland Sycamore and acquired by Bimbo. One of the Defendants, United States Bakery (U.S. Bakery), moves for summary judgment on all of Bimbo's claims against it.[2] These claims include: (1) trade secret misappropriation, (2) trade dress infringement, (3) trade dress dilution, and (4) false designation of origin, advertising, and unfair competition. [3] For the reasons stated in this order, Defendant's motion for summary judgment is GRANTED as to Bimbo's trade dress infringement claims that pertain to whole grain bread, and possible infringement after January 2014. The motion is DENIED on all other claims.

         BACKGROUND FACTS...............................................................................................................2

         UNDISPUTED FACTS..................................................................................................................4

         LEGAL STANDARD.....................................................................................................................6

         DISCUSSION.................................................................................................................................7

         Trade Secret Misappropriation.......................................................................................................8

         1. U.S. Bakery Has Not Shown Bimbo's Purported Trade Secret is Generally ....................................8

         2. The Use of Additional Ingredients Does Not Absolve U.S. Bakery From Trade Secret Misappropriation Liability...........................................................................9

         3. Faull Owed a Duty to Bimbo Not to Acquire Information By Improper Means................................ 10

         4. Whether U.S. Bakery Used Bimbo's Purported Trade Secret Is Disputed.............................11

         Trade Dress Infringement and Dilution........................................................................................12

         1. Bimbo Does Not Assert Trade Dress Claims As To Multigrain Bread................12

         2. Dr. Christensen's Surveys Are Admissible..........................................................12

         3. Summary Judgment Is Granted Only as to Possible Infringement After January .......................13

         4. Damages Will Not Be Limited for Grandma Emilie's Failure to Make a Profit..................... 14

         False Designation of Origin, False Advertising, and Unfair Competition..................................15

         1. The Fresh. Local. Quality. Taglineis Sufficiently Definite.................................15

         2. Whether U.S Bakery Wrongly Used Its Shelf Liners Is Disputed ....................................16

         3. The Admissibility of Damages Has Been Decided...............................................17

         ORDER.........................................................................................................................................17

         BACKGROUND FACTS [4]

         Leland Sycamore ("Leland") invented the process and formula - including the elements constituting the alleged trade secrets at issue - for making Grandma Sycamore's Home-Maid Bread ("Grandma Sycamore's") in 1979 at Aaron Bakery.[5] Leland used packaging for Grandma Sycamore's that was substantially similar to packaging his successor, Bimbo, still uses to sell the bread today.[6] Leland received federal trademark protection for part of the packaging's design in 1999.[7]

         When Leland's son, Tyler, was 14 years old, he worked for his father's company.[8] It is, however, disputed whether Tyler was actually involved in making Grandma Sycamore's bread.[9] Bimbo claims that, through years of working at the company, Tyler was well aware of the process for baking Grandma Sycamore's bread. Tyler, however, asserts that he was merely involved in simple tasks such as slicing bread and has no knowledge of the process for making the bread. [10]

          In 1998, Leland sold Grandma Sycamore's rights to one of Bimbo's predecessors-in-interest for *****[11] The purchase was a complete transfer of all assets of the business, including all intellectual property, trade secrets, machinery, and equipment relating to the production of Grandma Sycamore's products. [12] As part of the transaction, Leland executed a nondisclosure agreement, which requires, among other things, him to keep confidential and refrain from using Grandma Sycamore's production formulations, manufacturing processes, and trade secrets. [13]

          Bimbo asserts trade secret protection over the production process of Grandma Sycamore's white bread. [14] Bimbo claims that the production process is composed of the compilation of *****: [15][16][17][18]

         *****

         UNDISPUTED FACTS

         U.S. Bakery bought Grandma Emilie's bread brand from Hostess when Hostess went through bankruptcy. [19] To re-introduce the Grandma Emilie's brand, U.S. Bakery used Tyler Sycamore's company, Wild Grains Bakery, LLC (Wild Grains), as a contract baker until it could expand its Nampa, Idaho bakery to handle the production. [20] For a period of three months starting in May 2013, Wild Grains baked and wholesaled Grandma Emilie's to U.S. Bakery.[21]

         U.S. Bakery re-introduced Grandma Emilie's to the market on May 13, 2013.[22]In June 2013, Bimbo's counsel wrote to U.S. Bakery complaining that Grandma Emilie's packaging infringed on Grandma Sycamore's trade dress.[23] After June 2013 U.S. Bakery changed its labels and informed Bimbo of the change. Bimbo did not respond to U.S. Bakery's letter informing Bimbo of the change in packaging. [24]

         The last order of Grandma Emilie's made by Wild Grains was produced on August 10, 2013.[25] U.S. Bakery's facility in Nampa, Idaho then took over production. U.S. Bakery had to develop a new recipe because Wild Grains did not disclose the recipe it was using. U.S. Bakery also changed its labels to avoid infringing on Grandma Sycamore's trade dress.[26]

         In May 2013, _ Jeremy Faull went to work for U.S. Bakery.[27] In November 2013, Faull transferred to the Nampa location and helped U.S. Bakery develop its bread recipe.[28] Although Faull never worked for a company that produced Grandma Sycamore's bread, Faull learned the basic recipe for producing the bread from Leland.[29] Bimbo claims that Faull improperly misappropriated Grandma Sycamore's recipe for making white bread in transferring it to U.S. Bakery. [30]

         Toward the end of 2015, the Grandma Emilie's brand was discontinued due to poor sales.[31] In February 2015, U.S. Bakery relaunched its BreadLover's White product using the same formula and process that it had been using for Grandma Emilie's. [32]

         U.S. Bakery currently has bakeries in Alaska, Idaho, Montana, Oregon, and Washington, and bakery outlets and depots in Northern California, Utah, and Wyoming.[33] In July 2012, U.S. Bakery adopted a new tagline for its products, "Fresh. Local. Quality."[34] In the spring of 2015, U.S. Bakery began phasing out the tagline from its product packaging.[35]

         LEGAL STANDARD

         Summary judgment is appropriate if "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."[36] A factual dispute is genuine when "there is sufficient evidence on each side so that a rational trier of fact could resolve the issue either way."[37] In determining whether there is a genuine dispute as to material fact, the court should "view the factual record and draw all reasonable inferences therefrom most favorably to the nonmovant."[38]

         The moving party "bears the initial burden of making a prima facie demonstration of the absence of a genuine issue of material fact and entitlement to judgment as a matter of law."[39]

         DISCUSSION

         Bimbo claims: (1) U.S. Bakery misappropriated its trade secrets by hiring a competitor's employee and by use of confidential methods of making Grandma Sycamore's bread disclosed by that employee, (2) U.S. Bakery is liable for trade dress infringement because U.S. Bakery mimicked the Grandma Sycamore's trade dress in an effort to confuse consumers into buying Grandma Emilie's when the consumers meant to purchase Grandma Sycamore's, and (3) U.S. Bakery is liable for false advertising based on its "Fresh. Local. Quality" tagline when the products were produced in out of state bakeries and were therefore not local.

         U.S. Bakery moves for summary judgment on each claim on the following bases: (1) The individual elements of Bimbo's purported trade secret are generally known; (2) U.S. Bakery uses additional ingredients in its bread recipe; (3) Faull did not owe a duty to Bimbo not to misappropriate trade secrets; (4) U.S. Bakery did not use the trade secret process Faull provided; (5) Bimbo has no evidence of infringement as to multigrain bread; (6) Secondary meaning cannot be established because surveys used by expert Dr. Christensen are inadmissible; (7) U.S. Bakery changed its design and therefore did not infringe on Bimbo's trade dress after January 2014; (8) U.S. Bakery did not receive a profit from its alleged trade dress infringement because its product was not profitable; (9) the term "local" cannot constitute false advertising because it is indefinite and not measurable; (10) U.S. Bakery's "Freshly Baked in Utah" shelf-liners were only used in connection with products baked in Utah; and (11) Bimbo only has evidence of damages suffered in Utah.

         TRADE SECRET MISAPPROPRIATION

         1. U.S. Bakery Has Not Shown Bimbo's Purported Trade Secret is Generally Known.

         Bimbo asserts trade secret protection over the compilation of ***** in the production process of Grandma Sycamore's bread. These steps include: (*****

         Utah has adopted the Uniform Trade Secrets Act. Under the act, a trade secret can be a "compilation" that "derives independent 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."[40] "A compilation can be made up of known elements, if the combination itself is outside the general knowledge and not ascertainable by proper means."[41]The Tenth Circuit has been clear that when the plaintiff asserts trade secret protection under a compilation theory, an analysis of the individual trade secret components in isolation is improper. [42]

         U.S. Bakery analyzes each individual element of Bimbo's purported trade secret and argues that the elements in isolation are generally known. While viewing each individual element may be helpful in determining whether the compilation of the elements is generally known, the fact that an individual element is generally known in isolation otherwise proves very little.

         Even if U.S. Bakery's piecemeal analysis was valid and it was found that each individual step in the process of producing Grandma Sycamore's bread was generally known, judgment still could not be entered in U.S. Bakery's favor. As the moving party, it is U.S. Bakery's burden to show that the compilation of individually generally known processes is also generally known.

         Because U.S. Bakery has not met this burden, summary judgment cannot be granted. Whether each individual element of the trade secret is generally known need not be discussed because U.S. Bakery does not argue that the compilation of elements is generally known. Furthermore, the facts in the record show that despite Grandma Sycamore's existence in the market for many years, competitors have tried to replicate the production process and have failed.[43] At a minimum, that the fact that competitors have not been able to replicate the production process is evidence that the process for making Grandma Sycamore's bread is not generally known.

         2. The Use of Additional Ingredients Does Not Absolve U.S. Bakery From Trade Secret Misappropriation Liability.

         U.S. Bakery argues that even if Bimbo has a protectable trade secret, U.S. Bakery did not misappropriate it because it used different ingredients and processes. For example, U.S. Bakery argues that Grandma Emilie's/BreadLover's White uses ingredients that Grandma Sycamore's does not. Such ingredients include: (1) unsalted butter, (2) soybean oil, (3) honey, (4) wheat gluten, (5) mono/di GMS 90, (6) SSL Emplex, (7) calcium propionate, (8) ICS Softase 699P, and (9) vinegar. [44]

         Additionally, U.S. Bakery argues that its bread uses a sponge and dough process, where approximately 60% of the ingredients are mixed together and allowed to ferment for approximately four hours before the remaining ingredients are added and mixed to full development. [45]

          "The user of another's trade secret is liable even if he uses it with modifications or improvements upon it effected by his own efforts, so long as the substance of the process used by the actor is derived from the other's secret."[46] "[I]f trade secret law were not flexible enough to encompass modified or even new products that are substantially derived from the trade secret of another, the protections that law provides would be hollow."[47]

         Bimbo's purported trade secret is the combination of ***** Bimbo argues that even though U.S. Bakery may have used additional ingredients, U.S. Bakery still used Bimbo's trade secret. Summary judgment is denied because adding additional ingredients to an otherwise ...


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