Alpha Pro Tech, Inc. v. VWR Int'l LLC

• Decision Date: 26 November 2013
• Docket Number: Civil Action No. 12–1615.
• Citation: Alpha Pro Tech, Inc. v. VWR Int'l LLC, 984 F. Supp. 2d 425 (E.D. Pa. 2013)
• Parties: ALPHA PRO TECH, INC., Plaintiff, v. VWR INTERNATIONAL LLC, Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

984 F.Supp.2d 425

ALPHA PRO TECH, INC., Plaintiff,

v.VWR INTERNATIONAL LLC, Defendant.

Civil Action No. 12–1615.

United States District Court, E.D. Pennsylvania.

Nov. 26, 2013.

James J. Rodgers, Kristen Lee Repyneck, Dilworth Paxson LLP, Philadelphia, PA, David B. Anderson, Deanna L. Weidner, Anderson Weidner LLC, Birmingham, AL, for Plaintiff.

Michael W. McTigue, Jr., Daniel E. Brewer, Drinker Biddle & Reath LLP, Philadelphia, PA, for Defendant.

MEMORANDUM

PRATTER, District Judge.

VWR International LLC(“VWR”) moves to dismiss (DocketNo. 29)Alpha Pro Tech, Inc.'s (“APT”) Second Amended Complaint (“SAC,” DocketNo. 28).For the reasons that follow, the Court will grant the motion in part and deny it in part.

I.FACTUAL AND PROCEDURAL BACKGROUND¹

As APT alleges in its Second Amended Complaint, “this action is about two things: VWR improperly obtained [APT's] trade secrets while in a position of trust and confidence with [APT]; and VWR falsely and misleadingly advertised its products to [APT's] customers.”SAC ¶ 7.APT manufactures disposable protective apparel for use in scientific laboratories and medical settings and sells its products through distributors such as VWR.APT has branded one of its product lines with its CRITICAL COVER® registered trademark, to which it owns all the rights.The manufacture of these products involves a method of covering spun bond polypropylene (“SBP”) fabric with a combination of synthetic polymers; at issue here is APT's proprietary “coated SBP method,” which produces a coating superior to that found in products available elsewhere on the market.Whereas environmental stress (e.g., from wear or friction) would often cause competitors' SBP coatings to delaminate and flake off—an unwelcome result in the manufacturing, scientific, and medical environments in which such protective garments are worn—APT's proprietary SBP coating method is more durable and produces fewer particulate flakes.APT developed its particular coating method in or around 1995 after about a year and a half of, and significant sums expended on, testing multiple polymer and SBP combinations until it “successfully determined a particular combination not previously used in the protective apparel industry that provided a superior Coated SBP product.”SAC ¶ 17.

Because APT's method was superior, its process gave it a competitive business advantage over competitors whose products had less effective coatings.Its products have been successful and consumers accordingly afford the CRITICAL COVER® “brand substantial goodwill.”SAC ¶ 23.The value of a brand's goodwill is substantial in this market because many customers of such protective apparel require a qualification process in their clean environments that, for some larger customers, can be time—and resource-intensive.Further, to maintain the high quality of its CRITICAL COVER® line, APT guaranteed its products' performance on the products themselves and in their accompanying literature, and also maintained quality control teams at its production site.

APT's method and formula were not generally known to the public and APT took steps to protect the formula, which, it contends, is a trade secret.APT “required its employees and independent contractors working directly with the formula and method to maintain their secrecy pursuant to written and oral agreements,”SAC ¶ 20; it also included confidentiality clauses in its contracts with distributors.²

In 1996, APT and VWR entered into an agreement, created by two documents, a Distribution Contract and an Operations Document (SAC, Exs. B & C, respectively), pursuant to which VWR would serve as APT's exclusive distributor of APT's CRITICAL COVER®—branded products.Pursuant to this agreement, APT granted VWR an exclusive license to use the CRITICAL COVER® trademark and prepared promotion literature for VWR to use.The agreement also bound VWR to identify APT as the manufacturer and warrantor of the CRITICAL COVER® products in its product labeling and online and printed literature.Also pursuant to their agreement, APT referred CRITICAL COVER® purchase orders to VWR.And, as discussed in greater detail below, the parties' agreement bound the parties not to use, publish, or disclose information conferred, pursuant to the agreement, by one upon the other, or by a third party with a confidentiality agreement with one of the parties.³VWR was APT's sole CRITICAL COVER® distributor in the United States and thus depended wholly upon VWR for its sales.Both parties profited from the arrangement for over a decade.

In 2000, APT decided to move its CRITICAL COVER® manufacturing from the state of Georgia overseas to China, where it entered into a relationship with Xiantao Xinfa Plastics Company, Ltd.(“XXPC”), which was to become APT's new CRITICAL COVER® manufacturer.At the outset of the APT–XXPC relationship, only APT possessed the information necessary to utilize APT's coated SBP method.Before teaching XXPC employees its method, APT extracted an oral confidentiality agreement with XXPC and its owner, Mr. Fu Lixin(“Mr. Fu”), to maintain the confidentiality of APT's formula and not use it for other customers.And although APT shared its method and formula with XXPC, APT remained CRITICAL COVER®'s manufacturer, albeit in XXPC's plant and with its personnel, by continuing to provide all the raw materials (including the necessary polymers embodying the clandestine method—at first, APT simply provided the polymers without giving XXPC their names) and monitoring the use of raw materials and polymers with a gravimetric blender (APT kept a supervisory and quality-control team on site).Pursuant to the APT–XXPC oral agreement, the relationship was at-will but the parties understood that the formula, raw materials, and certain equipment remained APT's property and that Mr. Fu and XXPC could not use APT's method outside of XXPC's manufacturing relationship with APT even after the parties' relationship might come to an end.

Sometime in 2009 or thereafter, VWR recognized that it could capture some of APT's profitability for itself if it could compete with APT.But instead of developing its own products or attempting to reverse engineer the CRITICAL COVER® coated SBP method—and then qualifying its new products with demanding customers already using CRITICAL COVER® products they had put through the paces—VWR “sought to obtain from [APT] the composition and identity of materials used in [APT's] Coated SBP and the identity of [APT's] Chinese manufacturing plant.”SAC ¶ 50.After APT communicated to VWR that the majority of this information was confidential and proprietary, VWR unleashed its own efforts to locate APT's Chinese manufacturer, and it eventually found XXPC and met with Mr. Fu in or around August 2009 to discuss XXPC's possible manufacturing of the equivalent of APT's CRITICAL COVER® products for VWR.And despite knowing that XXPC and APT had an agreement respecting confidentiality, APT alleges, “VWR induced XXPC and Mr. Fu to violate those confidentiality restrictions by manufacturing Coated SBP and Coated SBP-containing apparel for VWR using [APT's] proprietary formulae and methods.”SAC ¶ 55.At the same time, VWR kept APT in the dark by pretending to renegotiate its contract with APT while in actuality making preparations to release its competing products embodying APT's method and formula.VWR then notified APT that it would not continue the parties' relationship.

Then, APT alleges, VWR set out to market its new product lines as replacements for, but nonetheless continuations of, APT's CRITICAL COVER® products.Through its marketing and promotional materials, VWR was able to induce its customers, who had brand loyalty to APT's CRITICAL COVER® products, which these customers had qualified as meeting the requirements of their environments, to believe CRITICAL COVER® products no longer existed and that they were simply being transitioned into the same or similar products by another name—supposedly VWR's knock-offs produced by XXPC.Through a number of statements, VWR was able to convince consumers that the change in products was in name only.Some statements, APT contends, were false, while others were technically true but misleading nonetheless.For instance, APT contends that VWR's statements in one of its marketing materials that, for example, “VWR Advanced and Maximum Protection apparel (the products formerly known under the VWR Critical Cover ComforTecht and Microbreathet brands) will experience a change in raw materials,”SAC Ex. F, at 1 para. 4;SAC¶ 70, are misleading because “VWR's statements ... were ‘not formerly known under’[APT's] trademark,” and/or they“lead[ ] consumers to believe that the source of the VWR products is the same as that of [APT's] CRITICAL COVER® products.”SAC ¶ 70.Further examples are provided where relevant in the discussion below.

* * *

APT sued VWR on March 30, 2012.It brought claims of false designation of origin and false advertising under the Lanham Act,15 U.S.C. § 1125(a); trade dress infringement in violation of section 43(a) the Lanham Act, § 1125(a); willful misappropriation of trade secrets in violation of the Pennsylvania Uniform Trade Secrets Act (“PUTSA”), 12 Pa. Cons.Stat. Ann. §§ 5301–5308; and tortious interference with APT's existing contractual relationship with XXPC.After VWR moved to dismiss, APT filed its first amended complaint, thereby mooting VWR's motion to dismiss.VWR then moved to dismiss APT's amended complaint, and following the parties' briefing, the Court heard oral argument.APT then sought leave to file its Second Amended Complaint, which is currently before the Court as the target of VWR's subsequent Motion to Dismiss.

In its Second Amended Complaint (DocketNo. 28), APT brings claims under five counts: Count I, for VWR's alleged willful misappropriation of trade secrets under PUTSA for what APT avers was VWR's acquisition and use in...