In the early 2000s, New York City experienced a surging bedbug epidemic. In response, the company FabriClear created a spray to treat bedbug infestations, which it called “FabriClear” (“the FabriClear Product”). In 2013, FabriClear approached Harvest Direct, a company that markets and sells “As Seen on TV” products, to discuss bringing the FabriClear Product to market. The two companies executed a confidentiality agreement, which specified that Harvest Direct could not reproduce, use, alter, or modify the FabriClear Product formula without FabriClear’s written permission. The parties later negotiated a licensing agreement, giving Harvest Direct the right to the exclusive license to market and sell the FabriClear Product and to use FabriClear’s “trademarks, trade names, copyrights, trade secrets, technical data, information, know-how, formulas, and other intellectual property rights.” The FabriClear Product sold very well for approximately five years, but toward the end of 2018, sales started to decline. It turned out that Harvest Direct had started marketing its own competing bedbug product (the “X-Out Product”). Harvest Direct started working on its product in 2015, and its product was indistinguishable from the FabriClear Product, including very similar packaging. Indeed, there was evidence presented that, at some point, Harvest Direct just repackaged existing bottles of the FabriClear Product. One of the bottles investigated by the FBI revealed a FabriClear Product label under the X-Out Product label. FabriClear then filed suit against Harvest Direct for misappropriation of trade secrets, among other claims.
In May 2020, Harvest Direct moved to dismiss all of FabriClear’s claims, asserting in relevant part that FabriClear did not show that the information it disclosed qualified as a trade secret. The court rejected this argument, finding that FabriClear had alleged sufficient information to show that the information was confidential and derived significant economic value from its secrecy. The court found it particularly important that the two companies signed agreements that referenced FabriClear’s trade secret information. The court rejected Harvest Direct’s argument that FabriClear disclosed its trade secrets when it disclosed the FabriClear Product’s ingredients trademark protection. Importantly, FabriClear did not disclose the composition of the FabriClear Product’s ingredients, so the formula was not public knowledge. Like a chocolate chip cookie recipe that qualifies for trade secret protection despite having well-known ingredients, a product’s core ingredients may be known, but the combination of those ingredients is what actually constitutes the formula that the proprietor can protect from infringement.
The case is FabriClear, LLC v. Harvest Direct, LLC, ___F. Supp. 3d ___, No. 20-10580-TSH, 2020 WL 4938340 (D. Mass. Aug. 24, 2020).