Cases from Michigan

United States District Court for the Eastern District of Michigan, Southern Division
Energy drink maker alleges former manager, now subject of criminal probe, misappropriated trade secrets by divulging to direct competitor

Innovation Ventures, L.L.C., d/b/a Living Essentials (“Living Essentials”) filed a complaint in the United States District Court for the Eastern District of Michigan, Southern Division on August 12, 2011 asserting that Aspen Fitness Products, Inc. (“Aspen”), along with Derrick George (“George”) and his family of companies (“On Go”) misappropriated its trade secrets related to its popular “5 Hour Energy” beverage. The drink comes in a small bottle and is taken as a “shot” containing caffeine and B vitamins. George and On Go directly compete with Living Essentials with their own drink, On Go Energy Shot.

Kevin Zwierzchowski (a non-defendant), who worked at Living Essentials as controller and operations manager from March 2006 until September 2007, allegedly was in possession of the trade secrets in question. Living Essentials discovered that Mr. Zwierzchowski had retained information such as product formulae, pricing information, and supplier and vendor contact lists and shared that information with third parties including George and On Go.

Living Essentials maintains that Mr. Zwierzchowski had no authorization to possess or reveal these trade secrets, particularly as he was in a position “charged with the highest level of responsibility” and “having a duty of loyalty to Living Essentials.” Thus, Living Essentials asserts that the only way Living Essentials’ competitors could have gained this information is by wrongfully obtaining it from Zwierzchowski.

These allegations about Zwierzchowski, George, and On Go additionally are the subject of a current criminal investigation by the FBI.

Additional claims include both direct and contributory copyright infringement (of its caution label), trademark infringement (of its allegedly well-known “Running Man” logo), unfair competition and dilution under the Lanham Act, common law unfair competition, and common law unjust enrichment.

Living Essentials seeks injunctive relief as well as the greater of actual damages or statutory damages caused by the improper use of its proprietary information, copyrighted material and trademark, including attorneys’ fees.

Eastern District of Michigan
Dantec alleges that a direct competitor received stolen information about existing and prospective customers from a former employee

Dantec alleges defendant and direct competitor LaVision received confidential information about existing and prospective customers from a former Dantec salesperson, Michael Kotas who began work for LaVision after he was terminated. Kotas allegedly accessed Dantec's computer systems in order to obtain the information about Dantec’s customers then subsequently deleted electronic information to cover his tracks. Dantec claims that LaVision used the information to solicit business from its customers.

A scheduling/settlement conference is set for April 20, 2011.

United States District Court for the Eastern District of Michigan, Southern Division
Couple indicted in Michigan District Court faces trial for theft of General Motors trade secrets

Over the last several years, the United States government has increased its criminal enforcement efforts to protect American trade secrets from foreign nations. In a prime example, a July 2010 Grand Jury in the US District Court for the Eastern District Michigan handed down an indictment against a Michigan couple Yu Qin (Chin) and Shanshan (Shannon) Du for Unlawful Possession of Trade Secrets in violation of the Economic Espionage Act (EEA) [18 U.S.C. §1832(a)(3), (a)(5)]. In this matter, the federal government accused the defendant couple of theft and conspiracy to gain economically from the theft of thousands of General Motors electronic documents pertaining to proprietary electric engine components.

The 2010 indictment outlines a detailed and calculated business tactic wherein former GM employee Shannon Du allegedly requested at one time to be repositioned to work within the hybrid motor control systems division of GM, gaining access to secret GM documents and information. Simultaneously, Du’s husband and co-defendant Yu Chin worked for an electrical power equipment manufacturing company, while also establishing several international and domestic joint ventures, including “Millenium Technology International, Inc. (MTI) that aimed to engage in the business of power electronics. Yu Chin allegedly utilized information gained from thousands of proprietary and trade secret GM documents stolen by his wife and co-defendant Du on portable electronic storage device, in order to “seek employment in the hybrid vehicle area promote himself by referencing capabilities directly related to the GM trade secret information.” (Complaint).

Importantly, the text of 18 U.S.C. §1832 makes criminal any attempt or conspiracy to knowingly engage in the theft of trade secrets. Furthermore, this section of the EEA is underscored by its economic justifications, requiring that any misappropriated trade secret be produced for or placed in interstate commerce to garner protection. The July 2010 indictment indicates that Yu Chin utilized an electronic storage devices and email to upload and transfer particular GM confidential documents, including a “ GM trade secret computerized model that simulates and assesses hybrid motor control.” The co-conspiracy is highlighted in the alleged venture between the co-defendants MTI business in a new venture to provide hybrid vehicle technology to “Chery Automobile,” a Chinese automotive company and GM competitor.

Also outlined in the July 2012 Indictment were claims against both defendants under 18 U.S.C. §1512(c)(1) for obstruction of justice, for allegedly unloaded large garbage bags full of shredded proprietary GM documents into a dumpster behind a grocery store, after preliminary investigative interviews by the FBI.

In September 2011 both parties entered into a stipulated protective order pursuant to 18 U.S.C. §1835 (orders to preserve confidentiality), outlining a particularized format for viewing confidential GM materials during discovery. This is a common and important practice utilized by government in EEA prosecutions, aligning the US government's socioeconomic policy concerns with GM's objectives in protecting proprietary GM information at the heart of their stake in the international automobile industry.

After the exchange of several pretrial motions and replies, the trial of co-defendants Qin and Du commenced on October 30 under Honorable Marianne O. Battani, and is expected to last for several weeks.

In its most recent motion, the prosecution on Nov. 1 requested an order precluding the defense from cross-examining Robert Gragg, a US Attorney’s Office computer forensic examiner. This request comes after the defense informed the prosecution via email of their knowledge of Gragg’s purported destroying of computer evidence in a separate civil matter involving GM. While not uncommon and likely granted, if said application is denied, cross-examination of Gragg could potentially call into question some digital evidence relied upon by the United States here.