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The Gluten Free Baking Company LLC v. Canyon Bakehouse Holdings, LLC

United States District Court, D. Oregon, Portland Division

May 7, 2018

THE GLUTEN FREE BAKING COMPANY LLC, an Oregon limited liability company, and UNITED STATES BAKERY, an Oregon corporation, Plaintiffs/Counterclaim Defendants,
v.
CANYON BAKEHOUSE HOLDINGS, LLC, a Missouri limited liability company, and CANYON BAKEHOUSE, LLC, a Colorado limited liability company, Defendants/Counterclaim Plaintiffs.

          OPINION AND ORDER

          MICHAEL W. MOSMAN Chief United States District Judge

         This matter comes before me on Plaintiffs' Motion for Full or Partial Summary Judgment [30]. After oral argument, I denied the Motion as to Counterclaim #1 and granted the motion as to Counterclaim #2. Minutes [44]. I took the Motion under advisement as to Counterclaims #3 and #4 and asked the parties to submit by email supplemental evidence on the circumstances under which Plaintiffs allegedly acquired the alleged trade secrets at the start of the joint venture. Minutes [44]. The Court received those emails. For reasons stated below, I DENY Plaintiffs' Motion for Summary Judgment on Counterclaims #3 and #4.

         BACKGROUND

         Plaintiffs Gluten Free Baking Company LLC ("GFBC") and United States Bakery ("USB") and Defendants Canyon Bakehouse Holdings, LLC ("CBH") and Canyon Bakehouse, LLC ("CB") produce baked goods. In October 2012, USB and CBH jointly formed and owned Northwest Canyon Bakehouse ("NWCB"). After about a year, the parties decided to unwind the relationship, but the unwinding process took another year. At the end of that process, USB acquired NWCB entirely, and renamed it GFBC. The parties signed a License Agreement that was dated March 25, 2015 but with an effective date of January 1, 2015. Complaint [1] Ex. 1 [hereinafter "License Agreement"] at 1. In that agreement, CBH gave USB a limited license to produce and distribute gluten-free products made or derived from CBH's gluten-free formulas, in exchange for quarterly royalty payments for a set period of time. See License Agreement.

         Today, USB makes gluten-free baked goods using derivatives from the CBH formulas. It continues to make royalty payments under the License Agreement. USB makes gluten-free baked goods for its brand name (Franz) and also for private labels (e.g., Sam's Choice for Walmart). For private-label customers, USB packages the bread in the customer's label at USB's baking facility, and then delivers bread to the customer's warehouse. The customer then delivers the bread from the warehouse to its retail stores.

         At issue in this case is the information that USB disclosed to its private-label customers. CBH alleges that USB violated the License Agreement when it disclosed, at various times and to various customers, the final weights and/or percentages of some of the ingredients in the bread. CBH does not dispute that USB may disclose a list of the ingredients, which is required for the FDA nutrition panels. CBH also asserts that disclosure of the final weights and percentages of some ingredients violates state and federal trade secrets laws (Counterclaim #3 & #4). USB moved for summary judgment against CBH's trade secret counterclaims.

         LEGAL STANDARD

         Summary judgment is appropriate if there is no genuine dispute of material fact, viewing the evidence in the light most favorable to the nonmoving party. Fed.R.Civ.P. 56(a). A genuine dispute of a material fact is "one that could reasonably be resolved in favor of either party." Ellison v. Robertson, 357 F.3d 1072, 1075 (9th Cir. 2004).

         DISCUSSION

         CBH's third counterclaim alleges that USB violated the federal Defend Trade Secrets Act, 18 U.S.C. §§ 1836-39. Enacted in May 2016, the Act provides a federal cause of action to owners of trade secrets that are misappropriated where the trade secrets are related to products used in interstate commerce. 18 U.S.C. § 1836(b).

         CBH's fourth counterclaim alleges that USB violated the Colorado Uniform Trade Secrets Act. The federal Defend Trade Secrets Act's misappropriation was modelled in part after the Uniform Trade Secrets Act; the provisions relevant to this case are quite similar. See H. Rep. No. 114-529, at 4-5, 12-14 (2016), as reprinted in 2016 U.S.C.C.A.N. 195-211.

         Under the federal Act, a trade secret is information that the owner has taken reasonable measures to keep secret and that derives independent value from not being generally known to others. § 1839(3). Under the Colorado Act, a trade secret is information which is secret and of value. Colo. Rev. Stat. § 7-74-102(4).

         Under both Acts, "misappropriation" includes "disclosure ... of a trade secret of another without express or implied consent by a person who ... at the time of disclosure ... knew . . . that the knowledge of the trade secret was . .. acquired under circumstances giving rise to a duty to maintain the secrecy." § 1839(5); Colo. Rev. Stat. § 7-74-102.

         I. Whether CBH failed to sufficiently identify ...


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