Arthur R. Lehman, L.L.C.

New York Business Litigation Blog

Macy's sues Burlington, former executive over trade secrets

New York-based Macy's Inc. has begun a lawsuit against its competitor, Burlington Stores, Inc., to prevent one of its former vice-presidents from working for Burlington. The complaint alleges that Burlington hired one of Macy's key executives to obtain access to its trade secrets and proprietary and confidential information. The executive has counter-sued Macy's to obtain a declaratory judgment that her employment contract with Macy's does not prevent her from working in her new position with Burlington.

The Macy's employee, who served as executive vice president and regional director of stores in Macy's north central region, resigned in April to accept a position at Burlington as senior vice president of stores. Macy's alleges that the former executive was bound by a contract that contained non-compete, non-solicitation and non-disclosure provisions and that the position at Burlington will require her to violate these clauses. The complaint also alleges that Macy's informed both Burlington and the vice-president that it would enforce the terms of these agreements.

The pros and cons of arbitration clauses

Many New York business have negotiated contracts in which one party has requested the exclusive use of arbitration to resolve disputes. Should such a clause be included? While some attorneys believe that arbitration is a poor substitute for the courtroom to solve business disputes, the more enlightened view holds that the answer depends on a number of factors.

In international business disputes, arbitration clauses allow the parties to choose the rules that will apply, the method of enforceability of an award, and the location of the proceeding. The parties can, for example, agree that the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards will apply to the case, making enforcement of the award more certain than a judgment in a civil case in a foreign country. Arbitration may also facilitate keeping a proceeding confidential. Most courtroom trials are open to the public, whereas an arbitration hearing can easily be held behind closed doors. If trade secrets will be discussed, arbitration may be a better choice.

Uber fires engineer in intellectual property dispute

A common cause of litigation involving intellectual property is the decision by a key employee to take his talent and knowledge to a competitor. Usually, the departing employee and his new employer remain allies in any litigation that ensues. This theme was given a new variation recently when Uber fired one of its star autonomous driving engineers in the midst of complex business litigation with a Google subsidiary involving the alleged theft of intellectual property and unfair competition.

The dispute was spawned when an engineer renowned for his expertise in the algorithms used by self-driving cars left a Google subsidiary and ultimately wound up working for Uber. After leaving Google, the engineer founded his own autonomous vehicle company Otto. Uber then purchased Otto and the ex-Google engineer became Uber's vice-president of technology. Shortly afterward, Uber was sued by Waymo, a subsidiary of Google's parent company, Alphabet, Inc. Waymo alleged that Uber and the former Google engineer were using Waymo's trade secrets and competing unfairly in developing self-driving cars.

Breweries fight over similar names and trademarks

With the proliferation of craft breweries in New York, and across the country, over the last decade, no one should be surprised by the recent dispute between two such breweries over their product names and trademarks. The case is unusual because the alleged trademark infringement involves several product names and product labels, rather than the usual one-to-one claim of infringement.

The lawsuit was commenced by Shipyard Brewing Co., located in Portland, Oregon, against Logboat Brewing Co. located in Columbia, Missouri. Shipyard alleges that one of Logboat's products, Shiphead beer, infringes on its intellectual property because Shiphead's trademark and product name are deceptively similar to Shipyard's products. Shipyard also points to several of its own product names, such as Pumpkinhead, Melonhead and Applehead, and argues that consumers could easily conclude that Shiphead's beers are part of Shipyard's product line.

Pink "Unicorn" drinks spark trademark lawsuit against Starbucks

Unicorns, especially pink unicorns, are thought to be entirely creatures of mythology, but the marketing ploy of a Brooklyn coffee shop has transformed the one-horned beast into a trademark that is at the heart of an intellectual property lawsuit involving pink drinks, both named "Unicorn." The suit involves the local coffee shop and Starbucks, the giant coffee chain.

The Brooklyn coffee shop, The End Brooklyn, began selling a blended drink it called "Unicorn Latte" in December 2015. More than a year later, Starbucks began selling its own pink drink, which it called "Unicorn Frappuccino." The Starbucks product was very successful. Even though the Unicorn Frappuccino was only sold during a five-day period, the coffee shop thought that Starbucks had damaged its business and misappropriated its trademark. The coffee shop and its parent company, Montauk Juice Factory, struck back by filing a trademark infringement lawsuit against Starbucks. According to the allegations of the complaint, Starbucks used its sophisticated social media marketing techniques to advertise its drink. The complaint alleges that the large number of Starbucks' coffee shops and its adroit use of social media caused customers to confuse the Unicorn Latte with the Unicorn Frappuccino.

Your non-compete agreement must hold up to challenges

With your business up and running, you were likely ecstatic about its success and the capital you invested in it. However, you have reached your goals, and your business is becoming profitable. In fact, you and your partner may be discussing expanding your staff. This introduces new cause for anxiety.

Trusting others with the operations of your business will not be easy, but by systematizing proper training and oversight, many business owners have grown their companies with the help of solid and trustworthy employees. Now think long-term: What happens when one of those trusted employees quits?

Tomato sauce maker abandons product name but learns to prosper

This blog has previously noted the steps that a trademark owner will take to protect the mark. But, what happens to the business that is forced to abandon a successful product name? A tomato sauce maker was recently compelled by a New York restaurant to pick another tradename for its products, but it has found a way to recover from this setback and continue to prosper.

The sauce manufacturer began making tomato sauces in 2010, basing their formulae on old family recipes. The owner of the company chose the name "Nello's" for its sauces because that was his personal nickname. The sauces became very popular, and the company was on the verge of financial success. Unfortunately, an upscale New York Italian restaurant had already registered its name, Nello, and its attorneys sent a letter to the tomato sauce maker demanding that he abandon the use of the name.

What causes most business partnership disputes?

When you are going into business, you may decide that pooling resources and talent with someone else or multiple other people is the best route. This may also feel less risky as you are not jumping into the venture by yourself.

In the excitement of starting the business venture, you may not consider what could happen if an internal dispute arises. Thinking about what could go wrong may be one of the best time investments you make in starting your own business and before you form that partnership.

Partner sues NYC doctor misuse of company funds

Doctors may be brilliant when practicing their medical specialties, but they can also be difficult business partners. A lawsuit filed this week in Manhattan Supreme Court accuses a prominent urologist of using funds belonging to a magazine that he and the plaintiff founded in 1996 for personal expenses. The lawsuit provides an example of how business partners, regardless of their professions, can engage in bitter business litigation.

The two physicians were life-long friends who, in 1996, founded a medical journal called MedReviews. The journal is headquartered in New York City. The complaint alleges that in 2005 one of the founders, who has his professional office in New York, began using the company's funds for personal expenses after he took over accounting duties from the wife of the other partners. The alleged misspending was discovered when the New York-based partner tried to buy out the 20% interest of the partner who lived in Seattle.

Trial involving "Rebecca" producers and publicist begins in NYC

Fans of Alfred Hitchcock are drawn to his complex plots and fascinating characters. Now one of his best known movies, "Rebecca," has ended up in court in New York City, as the producers of a musical based on the movie are suing the show's form publicist for a number of business torts, including tortious interference with contract and defamation.

In the mid-2000s, two New York theatrical producers acquired the rights to the story with the intention of producing a musical based on the mystery. The play was originally supposed to open in London in 2012. Unfortunately, the producers did not raise enough money to stage the musical, and it was canceled. The producers next announced that they had arranged $4.5 million in financing from the estate of a multimillionaire named Paul Abrams. Plans for the production then hit another barrier: Paul Abrams did not exist. An intermediary had persuaded the producers that Mr. Abrams' money would be forthcoming, but instead, the intermediary was convicted of fraud and is now serving a three-year sentence.