Mallet & Co. v. Lacayo

• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
• Citation: 16 F.4th 364
• Docket Number: Nos. 20-3584,21-1028, 21-1029,s. 20-3584
• Parties: MALLET AND COMPANY INC. v. Ada LACAYO; Russell T. Bundy Associates, Inc. d/b/a Bundy Baking Solutions ; Synova LLC; William Chick Bowers Russell T. Bundy Associates, Inc. d/b/a Bundy Baking Solutions ; Synova LLC, Appellants in No. 20-3584 William Chick Bowers, Appellant in No. 21-1028 Ada Lacayo, Appellant in No. 21-1029
• Decision Date: 24 September 2021

16 F.4th 364

MALLET AND COMPANY INC.
v.
Ada LACAYO; Russell T. Bundy Associates, Inc. d/b/a Bundy Baking Solutions ; Synova LLC; William Chick Bowers

Russell T. Bundy Associates, Inc. d/b/a Bundy Baking Solutions ; Synova LLC, Appellants in No. 20-3584

William Chick Bowers, Appellant in No. 21-1028

Ada Lacayo, Appellant in No. 21-1029

Nos. 20-3584
21-1028, 21-1029

United States Court of Appeals, Third Circuit.

Argued April 16, 2021
Filed: September 24, 2021

Laura C. Bunting, Marla N. Presley [ARGUED], Jackson Lewis, 1001 Liberty Avenue – Suite 1000, Pittsburgh, PA 15222, Allison G. Folk, Jackson Lewis, 6100 Oak Tree Boulevard, Suite 400, Cleveland, OH 44131, Counsel for Mallet and Company Inc.

Ada Lacayo, 328 Michigan Avenue, Lower Burrell, PA 15068, Pro Se

Ronald L. Hicks, Jr. [ARGUED], Carolyn B. McGee, Porter Wright Morris & Arthur, 6 PPG Place – Third Floor, Pittsburgh, PA 15222, Counsel for Russell T. Bundy Associates, Inc., d/b/a Bundy Baking Solutions; Synova LLC

Nicholas J. Bell, Kathleen J. Goldman, Buchanan Ingersoll & Rooney, 501 Grant Street – Suite 200, Pittsburgh, PA 15219, Counsel for William Chick Bowers

Before: JORDAN, GREENAWAY, JR., and SCIRICA, Circuit Judges.

OPINION OF THE COURT

JORDAN, Circuit Judge.

Behind the breads, cakes, and other treats on our grocery store shelves, there is a ferociously competitive market for baking supplies, and that is the setting for this trade secret and unfair competition case.

16 F.4th 369

In 2019, Mallet and Company Inc. ("Mallet") learned that Russell T. Bundy Associates, Inc., doing business as Bundy Baking Solutions ("Bundy"), was becoming its newest competitor in the sale of baking release agents. Release agents are lubricants that allow baked goods to readily separate from the containers in which they are made. Bundy was already well-known for other products it offered to the commercial baking industry when it decided to launch a new subsidiary, Synova LLC ("Synova"), to sell baking release agents. Synova hired two of Mallet's employees, both of whom had substantial access to Mallet's proprietary information. Taking some of that information with them from Mallet to Synova, they helped Synova rapidly develop, market, and sell release agents to Mallet's customers. Mallet sued, saying such progress would have taken years to accomplish but for the misappropriation of its trade secrets. Agreeing with Mallet, the District Court issued the preliminary injunction now challenged on appeal, restraining Bundy, Synova, and those employees (collectively, "the Defendants") from competing with Mallet.

While we appreciate the challenges inherent in disputes involving trade secrets and requests for preliminary relief, the injunction at issue is flawed and must be vacated. For the reasons that follow, we will remand for further consideration of what, if any, equitable relief is warranted and what sum Mallet should be required to post in a bond as "security ... proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained." Fed. R. Civ. P. 65(c).

I. BACKGROUND

A. Factual Background

1. Mallet and the Defendant Employees

For over eighty years, Mallet has been in the business of developing, manufacturing, and selling baking release agents as well as the equipment used to apply such agents.¹ Release agents are applied to commercial baking pans to ensure the consistent release of baked goods over hundreds of uses. They thus play a crucial role in large-scale baking operations. While the ingredients used to create them – mineral oils, vegetable oils, and lecithin – are commonly known, developing a successful release agent is not as simple as knowing a few of its components. There are "a wide range of factors that have to be considered when formulating a release agent," including product performance, stability, application, cost, availability, and packaging. (J.A. at 10984-85 (Mallet² Depo.).) And the efficacy of a release agent can greatly depend on the customer's product, pan condition, storage conditions, and machinery used to apply the agent. As a result, there are different kinds of release agents, each with unique properties that may be further tailored to maximize performance when used in the production of certain goods. Still, competitors in the release agent market often manufacture and sell identical or similar products.

Mallet proclaims itself "a service business delivering value through the combination of high quality, consistent products and the equipment to apply them." (J.A. at 2232 (Mallet Website).) Prior to 2018, it manufactured about fifty different release agents, including its "Vegalube Super P"

16 F.4th 370

("Super P"), which it calls "the premier and best-performing baking release agent product in the market." (J.A. at 2008 (Porzio³ Decl.), 11006 (Mallet Depo.).) Mallet contends that it has "take[n] substantial time, research, and effort" to formulate and perfect its release agents, including Super P. (J.A. at 4332 (Ergun⁴ Decl.); see also J.A. at 2008 (Porzio Decl.).) After developing a product in the laboratory, additional work is needed to bring that product to scale and optimize its performance at a customer's facility. Mallet says that its "competitive advantage ... derive[s] from a unique ability to solve customer problems by cohesively integrating research and development, technical service, custom packaging and manufacturing, and efficient distribution." (J.A. at 2220 (Mallet Website).) To safeguard that competitive advantage, Mallet has put in place several measures to protect its information, including nondisclosure and noncompetition agreements with its employees, restricted access to its lab and formulas, and password protection for its computer network.

Along with its release agent "formulas and [the] processes used to make them[,]" Mallet considers the following information to be its "confidential, proprietary, trade secret information":

specific products sold to customers or purchased from suppliers; all information pertaining to Mallet's business with its customers and its suppliers; Mallet's sales data and cost data; the body of knowledge about the development, production, and application of Mallet's release agents and equipment, including the tailoring of release agents and equipment for specific customer challenges; information about the internal business affairs of any customers, suppliers, distributors, agents and contractors doing business with Mallet; pricing information; strategies; marketing information; and exclusive relationships with certain suppliers of release agent ingredients.

(J.A. at 1638 (Mallet's Proposed Findings of Fact), 1937-38 (Topercer⁵ Decl.).) According to Mallet, "the trade secret in question here is the overall body of knowledge that connects ... the development, production, application and implementation of the release agent ... coupled with Mallet's proprietary equipment, which go hand in hand with [a] formulated solution." (J.A. at 11000-01 (Mallet Depo.).)

As sweeping as that statement is, Mallet does recognize some limits on what it can claim as a trade secret. For example, it does not consider its "product data sheets" to be trade secret information, since those specification sheets are "produced and provided to consumers of its products[.]"⁶ (J.A. at 10993 (Mallet Depo.).) It also agrees that some ingredients in baking release agents – again, mineral oils, vegetable oils, and lecithin – have been common knowledge in the industry for more

16 F.4th 371

than thirty years, and that the components for release agents are published in product data sheets, articles, and company websites, and are therefore public knowledge, though the precise ratios and processes for combining them are not. In addition, Mallet acknowledges that "there are numerous patents ... that have been published ... since at least the early 1900s that talk about the manufacturing and processes and formulations that can be used to create bakery release agents[.]" (J.A. at 10982 (Mallet Depo.).) It thus admits that the contents of patents and other information generally known in the industry about "various ingredients for use in bak[ing] release agents" cannot be considered proprietary. (J.A. at 10990, 11000-01 (Mallet Depo.).)

Mallet further recognizes that its own patents disclose "various formulas for the creation of the lubricants[,]" "examples of blends and blend ratios[,]" and a "series of different formulated release agents[.]" (J.A. at 10995-96, 10999-11000 (Mallet Depo.).) Those patents publicize some properties of each formulated release agent "based on various tests that Mallet ... had conducted," including "viscosity, stability, texture and other releasing characteristics." (J.A. at 10999-11000 (Mallet Depo.).) While seeming to concede that information in patents cannot – at least by itself – constitute trade secrets, Mallet contends that even formulas in its patents can be part of its trade secrets. It says that such formulas may "form a part of the examples of the patent" and still be "part of a trade secret."⁷ (J.A. at 11001-02 (Mallet Depo.).) In addition, it...