When a business severs ties with one of its affiliates, it can be difficult to retrieve and erase all the trade secret information provided to the affiliate. That problem was on display in the franchise context in Stockade Companies, LLC v. Kelly Restaurant Group., LLC, No. 1:17-CV-143-RP, 2017 WL 4640443 (W.D. Tex. Oct. 16, 2017), which involved a franchisor accusing its former franchisee of misappropriating its “buffet system” in its restaurants. The franchisor, however, never could define buffet system in a way that specified how the system was a trade secret. The franchisee further put on evidence that it had returned its manuals and recipes to the franchisor. Finally, the court noted that the franchisor had thrown away its alleged trade secret information—including recipes—in an unlocked dumpster. Given this evidence, the franchisor’s request for injunctive relief was denied.
The case is a good reminder that trade secrets needed to be defined and protected. When discarding trade secrets, the owner should take care to shred the documents or incinerate them. Leaving trade secrets in an unprotected dumpster for anyone to retrieve may be a factor in losing trade secret protection.
