Two tall wine glasses sitting on top of a wooden bar counter in front of a row of alcoholic beverage bottles.

Lesson of the day: When employees leave, they can take your proprietary property with them.

The owner of six Italian restaurants and wine bars in New York City known as Passon & Passon sued two former employees alleging they opened a “copycat” wine bar in Chicago, infringing its trademarks on design (trade dress) and menu by replicating “virtually every single design detail and element” from Passon & Passon’s restaurant aesthetic including exposed brick, subway tile, wine bottle decorations, hanging dried prosciutto, dining room layout, bathroom design and even napkins. The infringement claims also allege that the former employees offer “virtually the same exact menu items” including its “signature dishes.” The Chicago establishment allegedly has copied 12 of the 15 pasta dishes and 61 of 73 menu of regular offerings and special occasion menu items. In fact, online reviews for the Chicago business reference Passon & Passon specifically and a media article mistakenly related the two businesses when it wrote “So here’s Lago Wine Bar, now open in Lakeview from the team behind the West Village’s Aria Wine Bar. … Like its New York City sister, it takes a classic approach to the Italian feast.”

It appears this is a text book case of confusing similarity but legal issue is whether the menu and restaurant design elements can be protected as trade dress. It will also center on whether the failure to take steps to protect trade secrets can be saved with a claim of breached fiduciary duty. Lastly, the limits of what intellectual property can be licensed via vague oral agreements rather than a written agreement.

Passon & Passon’s complaint argues that “due to Defendant’s willfully deceptive and misleading representations, consumers are confused as to the source of Defendant’s services, as consumers have been falsely led to believe that Defendants are affiliated, connected, or associated with Plaintiff and/or that Plaintiff is the source of Defendant’s services.” Important to the trade dress claims are the fact that the claimed design elements are implemented consistently in all of Passon & Passon’s six restaurants. The claimed design elements include “white Subway Tile walls and wall panels, a red door, small hexagonal floor tiles, black wall paint and a red mechanical hand dryer” in the bathrooms.

One of the Chicago owners worked in a management position while serving as a sous chef for Passon & Passon and “had access to Plaintiff’s confidential and proprietary information regarding recipes, operations, business model, books and records, budgets, staff, vendors, suppliers and clients.” However, the allegations argue that the former employee breached a fiduciary duty because he “was in a position of trust and confidence.” Apparently, Passon & Passon did not take the simple step of having its key employees sign a confidentiality and non-compete agreement. Trade secret protection requires affirmative steps to protect the allegedly proprietary and confidential information. Without a simple employee agreement or policy, it may be hard to convince a judge that commercially reasonable steps to protect the alleged trade secrets had been taken, defeating any asserted claim for trade secret misappropriation.

The former employees are defending on the basis of an 2 year old oral agreement, arguing that “there was a conversation that it would be good to try this model somewhere else, and [Passon & Passon] said yes.” If there was any such agreement, in my opinion it needed to be in writing, especially since it involved intellectual property subject matter. Taking that small step could have clarified what and what would not be acceptable to do, avoiding the surprise lawsuit.

The case is Passon & Passon Corp. v. 3207 N. Sheffield Ave. LLC et al., case number 1:18-cv-02106, in the U.S. District Court for the Northern District of Illinois.