Dalmatia Import Group Inc. Awarded Damages Under Defend Trade Secrets Act (DTSA)
One year after the Defend Trade Secrets Act (DTSA) took effect, fig jam maker Dalmatia Import Group Inc. became the first plaintiff to be awarded damages for federal trade secret misappropriation. The company’s trade secrets suit alleged that its former manufacturer and distributor used its jam recipe to create a competing product that nearly drove Dalmatia out of business.
The DTSA created a federal cause of action for trade secret misappropriation. Prior to the federal law taking effect one year ago, businesses had to rely on a patchwork of state intellectual property laws to protect their trade secrets. The key provision of the DTSA provides that “an owner of a trade secret that is misappropriated may bring a civil action under this subsection if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.”
The DTSA offers several legal remedies that were not available under state law. Notably, the federal law allows trade secret owners to seek a civil seizure “to prevent the propagation or dissemination of the trade secret.” When “exceptional circumstances” exist that render injunctive relief “inequitable,” courts are also authorized to order the defendant to pay a reasonable royalty for the continued use of the trade secret. Once the court determines that a trade secret has been unlawfully misappropriated, the owner is entitled to compensatory damages, which may include (i) “actual loss of the trade secret”; (ii) “any unjust enrichment”; or (ii) a reasonable royalty for the use. Punitive damages are available when a trade secret is “willfully and maliciously misappropriated,” while attorneys’ fees are available in cases of bad faith.
Dalmatia’s DTSA Suit
In Dalmatia Import Group, Inc. et al. v. FoodMatch, Inc. et al., Dalmatia alleged that FoodMatch, Inc., Lancaster Fine Foods, Inc., and Earth Pride Organics, LLC (Defendants) misappropriated the proprietary recipe and production process for the company’s fig jam. Its complaint included claims for misappropriation of trade secrets, trademark infringement, trademark counterfeiting, conversion, and breach of contract. Dalmatia initially filed suit in a Pennsylvania state court but removed the case to federal court following the enactment of the DTSA.
According to Dalmatia, FoodMatch conspired with Lancaster and Earth Pride to use Dalmatia’s proprietary fruit spread recipes and production processes to launch a copycat line of fruit spreads under FoodMatch’s Divina brand. After Dalmatia terminated its distribution agreement with FoodMatch in 2015, the company hired Lancaster, Dalmatia’s fig spread manufacturer in the United States, to create FoodMatch’s own fig and orange fig spreads. “As Dalmatia’s contract manufacturer for more than seven years, Lancaster had full knowledge of Dalmatia’s proprietary recipes and manufacturing processes – information it was obligated to keep confidential and to use only for Dalmatia’s benefit,” Dalmatia’s complaint alleged. “Lancaster used that knowledge to create fig and orange fig spreads for FoodMatch to sell in competition with Plaintiff’s fig spread products.”
In February, a Pennsylvania jury returned a verdict in favor of Dalmatia for trade secret misappropriation, trademark infringement, trademark counterfeiting, and additional state law violations. The jury awarded $500,000 in damages for misappropriation of trade secrets. Overall, the jury awarded $2.5 million in damages.
On May 10, U.S. District Judge Edward Smith of the Eastern District of Pennsylvania entered judgment, rejecting the defendants’ argument that Dalmatia failed to prove it incurred damages after DTSA’s effective date. The court also awarded treble damages on the trademark counterfeiting claim, which brings the final award to $5.2 million.
Do you have any questions regarding the DTSA? Would you like to discuss the matter further? If so, please contact me, Fred Zemel, at 201-806-3364.
Dissolving Your Business: Essential Legal Steps to Protect Your Interests
If you’re considering closing your business, it’s crucial to understand that simply shutting your doors does not end your legal obligations. Unless you formally dissolve your business, it continues to exist in the eyes of the law—leaving you exposed to ongoing liabilities such as taxes, compliance violations, and potential lawsuits. Dissolving a business can seem […]
The Role of Corporate Restructuring in Mergers & Acquisitions
Contrary to what many people think, corporate restructuring isn’t all doom and gloom. Revamping a company’s organizational structure, corporate hierarchy, or operations procedures can help keep your business competitive. This is particularly true during challenging times. Corporate restructuring plays a critical role in modern business strategy. It helps companies adapt quickly to market changes. Following […]
Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public
Cryptocurrency intimidates most people. The reason is straightforward. People fear what they do not understand. When confusion sets in, the common reaction is either to ignore the subject entirely or to mistrust it. For years, that is exactly how most of the public and even many in law enforcement treated cryptocurrency. However, such apprehension changed […]
Understanding Chattel Paper: A Key Component in Secured Transactions
Using chattel paper to obtain a security interest in personal property is a powerful tool. It can ensure lenders have a legal claim on collateral ranging from inventory to intellectual property. To reduce risk and protect your legal rights, businesses and lenders should understand the legal framework. This framework governs the creation, sale, and enforcement […]
For years, digital assets operated in a legal gray area, a frontier where innovation outpaced the reach of regulators and law enforcement. In this early “Wild West” phase of finance, crypto startups thrived under minimal oversight. That era, however, is coming to an end. The importance of crypto compliance has become paramount as cryptocurrency has […]
Supreme Court and Title VII: Implications for Reverse Discrimination
Earlier this month, the U.S. Supreme Court issued a decision in Ames v. Ohio Department of Youth Services vitiating the so-called “background circumstances” test required by half of federal circuit courts.1 The background circumstances test required majority group plaintiffs pleading discrimination under Title VII of the Civil Rights Act to meet a heightened pleading standard […]
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!
