What is Unfair Competition?
The essence of an unfair competition claim under New York law is that the defendant misappropriated the fruit of plaintiff’s labors and expenditures by obtaining access to plaintiff’s business idea either through fraud or deception, or an abuse of a fiduciary or confidential relationship. Recovery for unfair competition requires pleading the misappropriation of a commercial advantage which belonged exclusively to the plaintiff.
Two Types of Common Law Unfair Competition
New York only recognizes two theories of common-law unfair competition, palming-off and misappropriation. “Palming off” is the sale of the goods of one manufacturer as those of another and liability “has been extended … to situations where the parties are not even in competition”. The “misappropriation” aspect of an unfair competition claim must concern a specified trade secret (or other proprietary information) and correspond with the bad faith misappropriation of a commercial advantage belonging to another by infringement or dilution of a trademark or trade name or by exploitation of proprietary information or trade secrets. Therefore, the party bringing the claim must own a trademark, trade name, trade secret or other proprietary information to misappropriate.
What is a Trade Secret?
A trade secret is “‘any formula, pattern, device or compilation of information which is used in one’s business, and which gives [the owner] an opportunity to obtain an advantage over competitors who do not know or use it.”
How Courts Determine Whether Information Constitutes a Trade Secret
In determining whether information constitutes a trade secret, New York courts have considered the following factors:
- the extent to which the information is known outside of [the] business;
- the extent to which it is known by employees and others involved in [the] business;
- the extent of measures taken by [the business] and [its] competitors;
- the amount of effort or money expended by [the business] in developing information;
- the ease or difficulty with which the information could be properly acquired or duplicated by others.
If you need help determining whether an unfair competition exists, call us. We can discuss whether to discuss the factors which courts use utilize to determine whether the information or processes are entitled to trade secret status, and therefore protection from competition.
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