Half-Baked Case: No Misappropriation or False Advertising Given Over-Broad Allegations

By on March 31, 2022

The US Court of Appeals for the Tenth Circuit affirmed a district court’s grant of summary judgment in favor of a defendant baker on a trade dress infringement claim and reversed the district court’s denial of the defendant baker’s motions for judgment as a matter of law on trade secrets misappropriation and false advertising claims. Bimbo Bakeries USA, Inc. v. Sycamore, Case Nos. 18-4062; -4031; -4040 (10th Cir. Mar. 18, 2022) (Hartz, Phillips, Eid, JJ.)

Bimbo Bakeries (and its predecessor, EarthGrains Baking Companies) owns, bakes and sells Grandma Sycamore’s Home-Maid Bread, a popular bread in Utah. U.S. Bakery is a competitor, and Leland Sycamore is the baker who developed the Grandma Sycamore’s recipe. Sycamore parted with his interest in Grandma Sycamore’s and opened his own bakery, Wild Grains Bakery. U.S. Bakery hired Wild Grains Bakery to produce another homemade bread product, Grandma Emilie’s. The relationship soured, and U.S. Bakery moved its Grandma Emilie’s operations in-house. U.S. Bakery developed a new formula for Grandma Emilie’s and enlisted a former Wild Grain employee to help. U.S. Bakery also created packaging for the bread based on Grandma Sycamore’s packaging. U.S. Bakery used several taglines to help sell its products, including “Fresh. Local. Quality.”

Bimbo Bakeries (then EarthGrains) sued Leland Sycamore, Tyler Sycamore (Leland’s son and co-baker), Wild Grains Bakery and U.S. Bakery, alleging multiple claims related to the Grandma Emilie’s operations, including trade secret misappropriation under the Utah Uniform Trade Secrets Act and trade dress infringement, trade dress dilution, false designation of origin, false advertising and unfair competition under the Lanham Act. Bimbo Bakeries alleged that U.S. Bakery’s use of the word “local” in the tagline “Fresh. Local. Quality.” constituted false or misleading advertising because U.S. Bakery did not actually bake all its bread products within the state of sale. The district court granted summary judgment in favor of U.S. Bakery on the trade dress infringement claim. The parties went to trial on the trade secrets misappropriation and false advertising claims. The jury ruled in Bimbo Bakeries’ favor on both and awarded more than $2 million in damages. The district court increased the damages owed by U.S. Bakery by almost $800,000 because U.S. Bakery was found to have willfully and maliciously misappropriated Bimbo Bakeries’ trade secret. The district court remitted the jury’s damages for the false advertising claim to around $83,000. The district court also permanently enjoined U.S. Bakery and Sycamore from using Bimbo Bakeries’ trade secret and denied renewed motions by U.S. Bakery and Sycamore for judgment as a matter of law for the trade secrets misappropriation and false advertising claims.

Bimbo Bakeries, U.S. Bakery and Sycamore appealed. Bimbo Bakeries argued that the district court should not have granted U.S. Bakery summary judgment on its trade dress infringement claim and should not have remitted damages for the false advertising claim. U.S. Bakery and Sycamore argued that the district court should have granted their renewed motions for judgment as a matter of law for the trade secrets misappropriation and false advertising claims.

On the trade dress infringement claim, the Tenth Circuit affirmed the district court’s summary judgment grant in favor of U.S. Bakery. Grandma Sycamore’s trade dress included the following elements:

  • A horizontally oriented label
  • A design placed at the top center of the end
  • The word ‘White’ in red letters
  • The use of a red, yellow and white color scheme
  • Stylized font below the design outlined in white.

Bimbo Bakeries argued that its trade dress was protectable because consumers associated it with Grandma Sycamore’s, it spent millions of dollars advertising its product and U.S. Bakery intentionally copied the Grandma Sycamore’s packaging. The Tenth Circuit, like the district court, concluded that the purported trade dress for Grandma Sycamore’s was generic and unprotectable because of its customary nature for homemade bread products.

On the trade secrets misappropriation claim against U.S. Bakery and Sycamore, the Tenth Circuit reversed the district court’s denial of U.S. Bakery’s and Sycamore’s renewed motions for judgment as a matter of law. Considering the individual elements of Bimbo Bakeries’ compilation, the Court found that no reasonable jury could conclude that Bimbo Bakeries’ purported trade secret was not “generally known or readily ascertainable” to U.S. Bakery.

The Tenth Circuit also reversed the denial of U.S. Bakery’s renewed motion for judgment as a matter of law on the false advertising claim. The Court concluded that U.S. Bakery’s use of the word “local” in its tagline “Fresh. Local. Quality.” was not actionable under the Lanham Act because it was not a factual claim that could be deemed false or misleading. Instead, “local” was a statement of opinion subject to agreement or disagreement. The Court reasoned that locality is fundamentally subjective and thus not subject to verification. For example, Bimbo Bakeries offered definitions of “local” focusing on a relationship to a particular area or place but failed to demarcate how large that area or place could be. The Court contrasted its conclusion with a different conclusion that could be reached regarding another U.S. Bakery tagline, “Freshly Baked in Utah,” which contained an objectively verifiable statement of fact (that the products were baked in Utah). Although some consumers might understand from U.S. Baker’s tagline that locally baked meant baked within the state of sale, not every subjective interpretation of ambiguous language is actionable false advertising. The Court also rejected Bimbo Bakeries’ attempt to use consumer surveys about the meaning of “local” to transform non-actionable statements into Lanham Act claims of fact and reiterated that consumer surveys in Lanham Act cases are limited to proving that a factual claim that is not literally false nonetheless misleads consumers.

The Tenth Circuit noted that while Bimbo Bakeries may have protectable trade secret and trade dress claims in connection with its bread products, “the versions it tried to claim in this litigation are far too broad to be protectable.”

Practice Note: When formulating trade secret misappropriation and trade dress infringement claims, care should be exercised to cover the acts in issue but not so broadly as to cause the claims to be thrown out. Broad advertising claims that cannot be verified may fail for similar reasons.

Hala Mourad
Hala Mourad focuses her practice on intellectual property litigation matters in federal district court and the US International Trade Commission. She works with clients to litigate patent cases spanning various technologies including consumer electronics, telecommunications, medical and surgical devices, materials engineering, and biotechnology. She has experience in all phases of litigation from pre-litigation investigations through trial and appeal. Read Hala Mourad's full bio.

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