Dalmatia Import Group, Inc. (“Dalmatia”) won more than $5.2 million in treble damages earlier this year, marking the first award of its kind under the government’s new federal trade secrets law. Dalmatia, a Miami-based jam maker, enjoyed widespread success and popularity for its gourmet “Divinia” Fig Spread, a recipe and production process that Dalmatia claimed to be proprietary and heavily safeguarded for secrecy. For example, Dalmatia required both non-disclosure and non-compete agreements to be signed by its manufacturer, FoodMatch, Inc. (“FoodMatch”) and by its distributor, Lancaster Fine Foods, Inc. (“Lancaster”). Since 1999, the three companies had worked harmoniously to bring Dalmatia’s “Divinia” Fig Spread to households across the country.

In 2015, however, Dalmatia became dissatisfied with FoodMatch and Lancaster’s performance, informed the two companies that Dalmatia would be changing partners. Soon after the October announcement, FoodMatch and Lancaster continued to work together, launching their own fig spread that also used the “Divinia” name.

After losing considerable business to its former manufacturer and distributor, Dalmatia sued the two companies in Pennsylvania under the Pennsylvania Uniform Trade Secrets Act (“PUTSA”). Additionally, Dalmatia added claims of trademark infringement under the Lanham act, breach of contract, and unfair competition. And after the federal Defense of Trade Secrets Act (“DTSA”) law was passed in 2016, Dalmatia amended its pleadings to add a claim of misappropriation under the DTSA. In its suit, Dalmatia claimed that the defendants not only relied on using Dalmatia’s secret recipe to produce the spread, but Dalmatia also alleged that they were illegally using Dalmatia’s proprietary manufacturing process and client list.

After a lengthy trial, the jury awarded Dalmatia approximately $2.5 million in damages. Further, because the new federal law allows for the trebling of damages if counterfeiting is involved, the damages awarded rose up to $5.2 million.

FoodMatch and Lancaster are appealing the verdict, claiming that the jury instructions were improper because the jury was not specifically instructed on how to sufficiently differentiate between the claims filed under PUTSA and the DTSA. Specifically, because PUTSA and DTSA have different standards for what constitutes “willfulness,” and because the jury did not find “willfulness” under the more stringent PUTSA standard, the defendants argue that the damages were improperly awarded and that Dalmatia was not entitled to judgment under the DTSA.

As such, it remains to be seen how the court will handle the issues on appeal. Going forward, attorneys should be cautious about lumping together state and federal trade secret claims. Instead, counsel should ensure that specific jury instructions are used for each law to avoid these issues on appeal.

For more information on this topic, please visit our Trade Secret Litigation service page, which is part of our IP & Business Litigation Practice.

Klemchuk LLP is an Intellectual Property (IP), Technology, Internet, and Business law firm located in Dallas, TX.  The firm offers comprehensive legal services including litigation and enforcement of all forms of IP as well as registration and licensing of patents, trademarks, trade dress, and copyrights.  The firm also provides a wide range of technology, Internet, e-commerce, and business services including business planning, formation, and financing, mergers and acquisitions, business litigation, data privacy, and domain name dispute resolution.  Additional information about the litigation law firm and its litigation attorneys may be found at www.klemchuk.com.

Klemchuk LLP hosts Culture Counts, a blog devoted to the discussion of law firm culture and corporate core values with frequent topics about positive work environment, conscious capitalism, entrepreneurial management, positive workplace culture, workplace productivity, and corporate core values.