A small California company, Balmuccino, LLC, was provided an excellent opportunity to pitch its coffee-flavored lip balm to the Seattle coffee giant Starbucks. Who made the connection? According to the complaint, none other than Pennsylvania Senate Candidate Mehmet Oz. Unfortunately, Balmuccino has alleged in a complaint filed in the Western District of Washington that Starbucks stole their idea after the meeting and independently developed a “S’mores Frappuccino”-themed lip gloss. Balmuccino’s complaint alleges claims of trade secret misappropriation and breach of an implied Non-Disclosure Agreement.
One of Balmuccino’s managing members, Samantha Lemole, reached out to Dr. Oz, her brother-in-law, to connect with Starbucks’ former CEO Howard Shultz. Lemole and other executives from Balmuccino eventually met with Starbucks for a pitch meeting. They asked Starbucks to sign a Non-Disclosure Agreement (NDA) at that meeting. Starbucks allegedly deflected any attempt, stating that the relationship between Dr. Oz and Shultz was enough to trust one another.
Balmuccino says they later regretted that decision.
Balmuccino provided names of their manufacturers, concepts, product line information, the creation process for their lip balms, and the identity of material suppliers. They also claim that Starbucks kept the pitch deck used by Balmuccino.
According to Balmuccino’s pleading, about a year after the meeting, they discovered that Starbucks had reached out to one of the Balmuccino suppliers and asked to create prototypes of Starbucks lip balm. Allegedly, the specification sent to the supplier was identical to those provided by Balmuccino at the previous meeting. As a result, in 2019, Starbucks launched its “S’mores Frappuccino Sip Kit,” including four liquid lipsticks and glosses.
This is a potentially cautionary tale about the importance of executed NDAs for any start-up company making pitches to potential partners and investors. Moreover, the Defend Trade Secret Act (DTSA) requires that an alleged trade secret be a secret. Thus, courts have found that plaintiffs bringing such a claim must have taken reasonable steps to maintain the secrecy of their alleged trade secrets. An NDA is a valuable tool in setting forth proof of the information being a secret.
If you’re starting a business or planning on pitching to investors or partners for your business, contact the attorneys at Houston Harbaugh today to adequately protect yourself.
The IP and Trade Secret attorneys at Houston Harbaugh, P.C., have extensive courtroom, jury and non-jury trial and tribunal experience representing industrial, financial, individual and business clients in IP counseling, infringement litigation, trade secret protection and misappropriation litigation, and the overall creation and protection of intellectual property rights. From our law office in Pittsburgh, we serve clients in Pennsylvania and other states. Our Trade Secret Law Practice is federally trademark identified by DTSALaw®. We practice before the United States Patent and Trademark Office (USPTO) and we and our partners and affiliates apply for and prosecute applications for patents, trademarks and copyrights. IP section chair Henry Sneath, in addition to his litigation practice, is currently serving as a Special Master in the United States District Court for the Western District of Pennsylvania in complex patent litigation by appointment of the court. Pittsburgh, Pennsylvania Intellectual Property Lawyers | Infringement Litigation | Attorneys | Patent, Trademark, Copyright, DTSALaw®
Henry M. Sneath
Co-Chair of Houston Harbaugh’s Litigation Practice, and Chair of its Intellectual Property Practice, Henry Sneath is a trial attorney, mediator, arbitrator and Federal Court Approved Mediation Neutral and Special Master with extensive federal and state court trial experience in cases involving commercial disputes, breach of contract litigation, intellectual property matters, patent, trademark and copyright infringement, trade secret misappropriation, DTSA claims, cyber security and data breach prevention, mitigation and litigation, probate trusts and estates litigation, construction claims, eminent domain, professional negligence lawsuits, pharmaceutical, products liability and catastrophic injury litigation, insurance coverage, and insurance bad faith claims. He is currently serving as both lead trial counsel and local co-trial counsel in complex business and breach of contract litigation, patent infringement, trademark infringement and Lanham Act claims, products liability and catastrophic injury matters, and in matters related to cybersecurity, probate trusts and estates, employment, trade secrets, federal Defend Trade Secrets Act (DTSA) and restrictive covenant claims. Pittsburgh, Pennsylvania Business Litigation and Intellectual Property Lawyer. DTSALaw® PSMNLaw®