Monday, August 02, 2010, 8/02/2010 09:51:00 AM

Chico's-Cache Trade Secret Spat Back to New York State Court

By Todd

As most of our readers know, trade secret law is primarily a creature of state law and this makes it different from other types of intellectual property (patent, copyright, trademark). As such, many trade secret theft cases are litigated in this country's state courts, and not the federal courts, when the parties are located or headquartered in the same states. No diversity of citizenship, no federal question - thus, you're in state court.


Well, sometimes a trade secret claim can look like a federal claim, such as when the secrets relate to things like designs or schemata. Why? Because there might actually be a copyright claim behind the allegations. And that is apparently what Cache was trying to argue when it removed Chico's trade secrets case to federal court. But Chico's wanted to be in state court and made a motion to remand that case back. And the federal court agreed with Chico's, as Forbes is reporting.


The rival retailer's assertions that misappropriation of clothing designs qualified as a copyright issue, and not a trade secrets issue, were arguments best left to the motion to dismiss phase of litigation and were not appropriate for determining whether to remand a lawsuit, Unites States District Court Judge Paul Gardephe said.

“Defendants cite no legal authority suggesting that this court is required to consider the merits of plaintiffs’ state law claim in resolving a motion to remand, however, nor do they explain why plaintiffs' alleged failure to state a claim dictates that their claims is preempted,” the order said.

Earlier in July, the judge refrained from issuing a remand order from the bench, saying that he would need to consider Cache’s arguments a bit more thoroughly.

"The whole issue of design and its copyrightability is a difficult one," the judge said at the time, referring to references by Chico's to similar-looking clothing items as indications that Cache pilfered concepts and development plans for 2010 seasonal lines.


Back to state court. We'll continue to watch this case for you.

1 Comments:

OpenID charlesjung said...

Nice post. A similar argument was made recently in Markey v. Verimatrix, Inc., 2010 WL 2976164 (S.D. Cal. July 22, 2010) (slip op.). Judge James Lorenz of the Southern District of California concluded that Plaintiff’s mere reference to the fact his intellectual property is patented does not convert a state law UTSA claim into a federal question that can impart original jurisdiction in the federal courts. I write about in my humble new California trade secrets blog: http://caltradesecrets.com/2010/08/02/mere-reference-to-patent-does-not-confer-federal-jurisdiction-over-utsa-claim/

Best,
Charles

1:43 AM, August 03, 2010  

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