The Sixth Circuit vacated a $1.3 million award to an Ohio lighting company that had claimed its former supplier had misappropriated its trade secrets.
Best Lighting Products, Inc. makes exit signs and emergency lighting products for commercial buildings.
According to the court,
Since its beginnings in 1987, Best’s modus operandi generally has been to model its products on other companies’ patented products and then alter the products’ design in order to make “something unique or different” about them and to produce them at a lower cost than competitors.
In 2000, Best began buying parts from Pace Electronic Products and its related companies.
After Pace made enough units to fill Best’s orders, Pace used the same molds to make thousands of “cloned” units that it sold under its own name to several of Best’s customers.
The parties sued each other and a district court found that Pace was liable to Best for (among other things) misappropriation of trade secrets under Ohio law, “reverse passing off” under trademark law, and false advertising under the federal Lanham Act.
The circuit court found that the district court erred in its ruling on the trade secret and Lanham Act claims.
One issue in the case was when the statute of limitations for trade secret misappropriation ran. Ohio law provides for a four year period, and Best filed its trade secret claims more than four years after learning about the use of its know-how by Pace.
Best asserted that “Pace misappropriated new and different trade secrets each time it manufactured a new knockoff product.”
The district court allowed the case to proceed because the misappropriation had continued into a more recent period, but the circuit court found this was error because “a continuing misappropriation constitutes a single claim” and thus “the first discovered (or discoverable) misappropriation of a trade secret commences the limitation period.”
It’s important for the owner of trade secrets to bring suit as soon as it discovers the theft, in order to avoid the running of the applicable statute of limitations.
Leech Tishman’s Intellectual Property Group is based in Pasadena, California with a team of highly-regarded legal professionals with prosecution and litigation expertise in the fields of patent, trademark, copyright, and trade secrets.
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Photo Attribution: “Glowing exit sign” by Leon Brooks. Licensed under Public Domain via Wikimedia Commons.