Trade secrets and trade dress investments can payoff

Magnolia Bakery opened its first store in Greenwich Village, New York over 15 years ago. It is known for its cupcakes. The bakery believes its cupcakes are distinguishable and highly valued because of their “unique, distinctive, and immediately recognizable look — the ‘Magnolia Signature Swirl’ icing topping” (quote from its lawsuit Complaint). Magnolia maintains its cupcake recipes as trade secrets, including the Signature Swirl, which it claims has become well recognized and associated with the Magnolia brand name. Magnolia said it takes anywhere from 8 to 40 hours of training to perfect the Signature Swirl icing technique.

Magnolia Bakery knows the importance of its proprietary information. It requires each of its bakers to sign confidentiality agreements to protect its trade secrets, as well as other proprietary and confidential information. After one of its bakers left to start a competing bakery, Apple Café Bakery Corporation, which produced knock-off cupcakes with the knock-off signature swirl, it was able to defend its market and reputation quickly.

This competitor posed a serious risk to Magnolia’s market share. Because it had a strong intellectual property protection program in place, it was able to swiftly act by bringing litigation against the competitor for federal and state statutory trade dress infringement, trade dress dilution, breach of contract, trade secret misappropriation, unfair competition, and tortious interference. By demonstrating its aggressive approach to maintaining its trade secrets and trade dress, this lawsuit will serve as a warning to other bakers and competitors that Magnolia will aggressively enforce its confidentiality agreements and protect its business interests through litigation.

If your company has its own signature recipes or product looks that are associated with your brand image, implementing an intellectual property program is an investment that will provide excellent ROI. An aggressive program of employee, consultant and vendor agreements that protect proprietary information is likely to cost $1,000-$2,000 for a non-franchised small- or mid-sized business. For that investment, you will have created a solid foundation for preventing misappropriation, unfair competition and preventing copycats from impinging on your hard earned market share.

Trade secret protection requires affirmative steps to be taken by the business to protect the alleged proprietary information. If you allege these are important trade secrets, the courts will look at what steps you took to protect them. Having new employees sign agreements upon employment is not enough. The company must diligently and consistently enforce these agreements with continued education of staff and enforcement activity against those who fall short of meeting obligations. Failure to take any steps against misappropriation or unfair competition could arguably be construed as an (unintended) waiver of a trade secret. At the very least, employees will be more likely to transgress if they don’t believe they will be held accountable.

If you would like to implement an intellectual property protection program, Tracy Jong Law Firm can help you protect your proprietary information and preserve your market share and brand image in the marketplace.