Give a Man Cupcake Sushi, and He’ll Have Dessert for a Day; Teach a Man to Make Cupcake Sushi, and He’ll Rip You Off

Lori Shubert and her company Cupcake Sushi, LLC filed an interesting lawsuit against Santiago and his associates doing business as Sushi Sweets, for patent infringement, trademark infringement, misappropriation of trade secrets, common law trademark infringement, federal and state unfair competition, and trade dress infringement. Shubert claims to have invented a unique confectionery dessert cake: cupcake sushi. Shubert has apparently built a thriving business in Key West Florida.  According to the complaint, Santiago, a former licensee and employee of Cupcake Sushi, absconded with product, equipment and Cupcake Sushi’s trade secrets.

Shubert clearly had an interesting and appealing idea, and while she took some steps to protect it, she probably should have formed a more comprehensive plan at the outset.  As she pleads in her lawsuit she applied for a utility patent (14/487364), she allowed the application to abandon.  She also applied for and obtained a design patent (D789,025) but filed the application several years after she claims to have developed her product.  Even if this patent validly protects a later design, she left her earlier designs exposed. While she did register her CUPCAKE SUSHI name and logo (Reg. Nos. 4471750 and 4770652), she might have also tried to protect her products names and appearances.

Resources are always tight in start-ups, and it is easy to second guess the allocation (or lack thereof) to lawyers, as entrepreneurs always seem to have other fish to fry. Shubert probably could have done more and done it sooner.  Shubert did take a number of appropriate steps to protect herself, and if those rights have been violated, then hopefully she will be able to enforce them and this won’t represent the fish that got away.  However, a more comprehensive approach might have made enforcement like shooting fish in a barrel:

Shubert may have learned another important lesson about protecting confidential information.  A confidentiality agreement does not make a dishonest person honest. The most important steps in protecting confidential information is limiting disclosures to people who can be trusted.

Shubert may have to also have to face the fact that no matter how comprehensive your intellectual property protection, there will always be some way for other to compete.  Good luck to Ms. Shubert, but if things don’t work out, there are always other fish in the sea.

An Implied Contract Can Turn You “Inside Out” — Remember the Non-Confidential Disclosure Agreement

Denise Daniels has sued the Walt Disney Company in the Central District of California for breach of an implied-in-fact contract to compensate her for using her ideas in the movie Inside Out.  Daniels alleges that she relied on the custom in the entertainment industry “to provide ideas and materials to produces and studios in exchange for compensation and credit if such ideas or materials are later used.” She further alleges that “Disney-Pixar accepted the disclosure of the ideas in The Moodsters with an expectation that it would have to compensate Daniels if Disney-Pixar used this idea in any television, motion picture, merchandise, or otherwise.”

This case is a reminder that receiving information from a third party is risky business.  Even where there is no violation of any traditional intellectual property right such as a patent, copyright, trademark or trade secret, one can still find oneself in a lawsuit alleging an implied-in-fact contract to pay for the “idea.”

While an implied-in-fact contract — a contract where none really existed —  is well recognized legal doctrine, this case appears to present a new doctrine — implied-in-fact consideration.  While most cases enforcing rights in ideas require that the idea be both concrete and confidential, many of the aspects of Daniels’ idea appear to have been publicly available.   Her company, Moodsters Company, obtained a copyright registration (PA0001394057) on a pilot The Moodsters: Amoodsment Park Mixup, claiming a date of first publication of June 1, 2007.  There have been Moodsters websites, and Daniels and her company have of and on been trying to register various Moodsters trademarks for more than a decade.

If the Moodsters are as publicly available as it appears, what did Daniels bring to Disney-Pixar that wasn’t already available to anyone?  Is it possible that Disney-Pixar is in a worse position for talking to Daniels, than someone who just referenced her public domain materials.  The answer is clearly yes.  Not because Daniels is certain to win, but rather because even if Disney-Pixar is in the right, they now have to defend themselves.

Daniels reminds us that even in the absence of a confidentiality agreement, there is a risk receiving information from a third party.  Rather than expose oneself to the vagaries of an after-the-fact contract, you may be better served with an explicit contract spelling out your obligations (or lack of obligations) to the disclosing party.