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Sixth Circuit Endorses Sealing of Filings to Protect Confidentiality of Alleged Trade Secrets

On appeal from a dismissal based on a failure to state a claim for misappropriation of trade secrets, the US Court of Appeals for the Sixth Circuit granted the litigants’ motion to seal their briefs and file publicly available redacted versions in order to protect the confidentiality of the appellant’s alleged trade secrets. Magnesium Machine, LLC v. Terves, LLC, Case No. 20-3998 (6th Cir. Jan. 14, 2022) (Donald, J.)

The Sixth Circuit reasoned that the case had been brought under the Defend Trade Secrets Act, which requires courts to take “action as may be necessary and appropriate to preserve the confidentiality of trade secrets.” The Court also relied on precedent to the effect that trade secrets generally provide a justification (i.e., a “compelling reason”) for sealing. The Court left open the possibility of reconsidering its ruling if it later determines that any of the redacted information should be made available to the public.

Practice Note: Public disclosure—even in a court document—can destroy a trade secret. Litigants should be careful when disclosing information that is even alleged to be a trade secret, even if they are not certain whether the information qualifies as a trade secret since, if and when litigated, the information may later be held to qualify.




Sixth Circuit: It’s a Go on Plaintiff’s Claims Despite Arbitration Clause

The US Court of Appeals for the Sixth Circuit affirmed in part a district court’s grant of a stay pending arbitration, finding that as non-parties to the underlying arbitration agreement, defendants could not stay the plaintiff’s action against them by arguing that they were beneficiaries of the arbitration agreement. AtriCure, Inc. v. Meng, Case No. 19-4067 (6th Cir. Aug. 27, 2021) (Murphy, J.) (Guy, J., dissenting).

AtriCure invested millions into developing medical devices that treat a serious degenerative heart condition known as atrial fibrillation. The company sells these products to hospitals throughout the world. In the mid-2000s, AtriCure sought to enter the Chinese market. In order to do so, it needed a Chinese agent. Dr. Jian Meng approached AtriCure about partnering with one of his companies to serve as AtriCure’s Chinese distributor. AtriCure eventually entered into a relationship with Meng’s company, ZenoMed.

In 2015, AtriCure discovered that another of Meng’s companies, Med-Zenith, was attempting to market a knockoff version of one of AtriCure’s medical devices. AtriCure opted to continue the relationship with ZenoMed, and in 2016, AtriCure and ZenoMed entered into a distribution agreement. However, in 2017, AtriCure learned that Med-Zenith was attempting to develop more counterfeit versions of AtriCure’s devices. As a result, AtriCure allowed the distribution agreement to expire and demanded that ZenoMed return its inventory.

AtriCure then sued Meng and Med-Zenith in the Southern District of Ohio, alleging improper manufacturing and selling of dangerous counterfeit productions, as well as various state law claims. AtriCure also brought an arbitration demand under the distribution agreement against ZenoMed. Meng and Med-Zenith sought to stay the federal lawsuit, arguing that they were beneficiaries of the arbitration clause in the distribution agreement under equitable estoppel and agency theories. After the district court denied the motion, Meng appealed.

The Sixth Circuit explained that after the Supreme Court of the United States’ 2009 ruling in Arthur Andersen LLP v. Carlisle, circuit courts are obligated to look to relevant state common law to decide when nonparties may enforce or be bound by an arbitration agreement. As a result, the blanket federal presumption favoring arbitration even against nonparties was no longer applicable. Now, courts must examine state law to determine whether nonparties may enforce or be bound by an arbitration agreement. The Court examined Ohio contract law to determine that a nonparty cannot enforce an arbitration clause unless it is an intended third-party beneficiary. The Court rejected Meng and Med-Zenith’s equitable estoppel arguments, finding that under Ohio law, AtriCure’s state law claims did not seek to enforce the distribution agreement against Meng and Med-Zenith, or rely on any theory that they owed contractual duties to AtriCure notwithstanding their nonparty status. Finally, the Court remanded the question of whether Meng’s agency argument could prevail by determining if he was acting as an agent of ZenoMed when he engaged in the conduct AtriCure complained about in the separate arbitration.

In dissent, Judge Ralph B. Guy Jr. argued that Meng “unambiguously sought a ‘stay under Section 3 of the [...]

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Confused? How Do You Factor That?

Considering the eight-factor likelihood of confusion test, the US Court of Appeals for the Sixth Circuit affirmed the district court’s finding on all factors, concluding that two competing marks in the transportation logistics industry are overlapping to the extent that consumers would likely be confused. AWGI, LLC v. Atlas Trucking Co., LLC, Case No. 20-1726 (6th Cir. May 18, 2021) (Cook, J.)

Atlas Movers owns the “Atlas” mark and a federal registration for the mark for “freight forwarding services and transportation of household goods of others.” It first used the mark “Atlas Van Lines” in 1948 for transportation and logistics services. In 2007, it revised its name to Atlas Relocation Services and marketed its services under “Atlas Logistics.”

Atlas Trucking, a part of Eaton Steel, manufactured and distributed steel under its Atlas Trucking mark starting in 1999. Later, in 2003, Eaton expanded its services to ship other goods under the mark Atlas Logistics. Eaton admitted it knew of Atlas Van Lines for logistics before it began using the mark.

Atlas Movers sued Eaton for infringement of its “Atlas” mark and Eaton counterclaimed that it owned the Atlas Logistics mark.

The district court found that Eaton’s use of “Atlas” creates a likelihood of confusion with Atlas Movers. The court went through the eight-factor likelihood of confusion test, considering: (1) strength of the plaintiff’s mark; (2) relatedness of the goods or services; (3) similarity of the marks; (4) evidence of actual confusion; (5) marketing channels used; (6) likely degree of purchaser care; (7) defendant’s intent in selecting the mark and (8) likelihood of expansion of the product lines or services “Atlas” marks. The court ultimately found for Atlas Movers on its trademark infringement claim. Eaton appealed.

The Sixth Circuit agreed with the district court’s analysis. First, on commercial strength, the district court found Atlas Movers’ mark to be commercially strong because of its significant advertising expenditures, exposing consumers to its trademark with public recognition. Eaton tried to demonstrate weakness of the mark by presenting evidence of third parties’ use of similar marks, but the lower court rejected the argument, noting the other marks did not use “Atlas” for transportation and logistics. The court found this factor favored Atlas Movers.

The Sixth Circuit also agreed with the district court on the second factor, relatedness of goods and services, concluding buyers would be likely to believe the parties’ respective goods and services, which relate to the same industry and are directed to common consumers, come from the same source or are connected with a common company. The court found this factor also favored Atlas Movers.

Third, as to similarity of the marks, the lower court gave weight to pronunciation, appearance and verbal translation of the marks in their entirety, finding the dominant potion of the mark (“Atlas”) was identical. Again, this factor favored Atlas Movers.

Fourth, on the issue of actual confusion, the lower court considered evidence of five people experiencing actual confusion from Eaton’s use of its “Atlas” mark. There were also consumer [...]

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Mandamus Denied: Need to Show Abuse of Discretion in Addition to Prejudice from Delay

Addressing an emergency request for a writ of mandamus to compel discovery of electronically stored information, the US Court of Appeals for the Sixth Circuit declined to set aside a district court’s denial of a request to create forensic images of all the defendant’s business and personal computers and cell phones. In re FCA US LLC, Case No. 19-1923 (6th Cir. 2019) (per curiam).

FCA filed trade-secret misappropriation and other claims against Patrea Bullock, a lawyer who formerly served as outside counsel to FCA. According to FCA, while serving as defense counsel, Bullock had access to extensive confidential and proprietary information belonging to FCA, including its “defense playbook.” After she resigned from her law firm, but before returning her computer, Bullock downloaded her files from the laptop onto several USB drives. Thereafter, she opened her own law firm representing plaintiffs against automobile manufacturers, including FCA. During discovery, Bullock produced 1,345 documents in response to FCA’s requests for the documents she had taken FCA, however, moved to compel a forensic image of all of Bullock’s business and personal laptops and cell phones so an expert could investigate what documents Bullock took.

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