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Federal court in Michigan dismisses state law claims in trade secrets suit

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EpsteinBeckerGreen
USA
March 2 2010

On February 24, 2010, in a pending lawsuit filed by polypropylene compound manufacturer RheTech, Inc., alleging that former employee Robert Joyce and his new company stole trade secrets and filed an unauthorized application for a patent on a wood-plastic composite on which Joyce had worked while at RheTech, the United States District Court for the Eastern District of Michigan issued an order dismissing all state law claims as against the defendants for lack of diversity jurisdiction.    

Joyce, already the owner of a previous, undisputed patent on a wood composite compound, joined RheTech in September 2007 to develop and implement projects and applications for his patented compound. While at RheTech, Joyce was involved in the development of a new wood composite compound and the preparation of utility patent application for that new compound. Disputes arose between RheTech and Joyce regarding the ownership rights to the compound and language for the utility patent application, and on July 16, 2009, Joyce terminated his employment with RheTech. RheTech’s October 13, 2009 complaint alleges that Joyce and his new company, Innovative Plastics & Molding Company (“IPMC”), used RheTech’s draft utility patent application to file Joyce’s own unauthorized application claiming the new wood composite compound as his own, disclosing RheTech’s confidential information and trade secrets in the process. RheTech alleged a federal claim for false advertising in violation of 15 U.S.C. §1125(a)(1)(A) and (B), and state law claims for misappropriation of trade secrets, breach of contract, and quiet title to invention.

Three and a half months after filing the complaint, on January 28, 2010, RheTech sought a preliminary injunction enjoining Joyce and IPMC from misappropriating or using RheTech’s confidential information, soliciting RheTech’s customers, and advertising an image of RheTech’s proprietary wood composite material, and also sought an order compelling the parties to arbitrate their dispute pursuant to an arbitration agreement between RheTech and Joyce. Joyce and IPMC opposed RheTech’s motion and argued that the entire dispute should be heard in arbitration.

Prior to the scheduled oral argument on RheTech’s motion, the Court issued its February 24, 2010 order, declining to exercise pendent jurisdiction over, and dismissing, RheTech’s state law claims for misappropriation of trade secrets, breach of contract and quiet title to invention. Joyce is a Michigan resident and the other parties to the lawsuit are Michigan entities.

The Court’s order effectively splinters the dispute, retaining the false advertising claim in federal court but leaving the parties to pursue the other claims elsewhere, presumably in arbitration.

This document has been provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please consult your attorneys in connection with any fact-specific situation under federal law and the applicable state or local laws that may impose additional obligations on you and your company. © 2009 Epstein Becker & Green, P.C.

David Clark

David Clark

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