System for Producing Hot Pizzas Not a Trade Secret

A federal court in South Dakota dismissed claims brought by restaurant franchisor Little Caesars seeking an injunction against a franchisee from offering “all day, every day ready-for-pick-up pizzas”. According to Little Ceasars, the franchisee was allegedly misappropriating the franchisor’s trade secret for “Hot-N-Ready” pizza for use in a non-franchised pizza parlor.

While the franchisor argued that its system for producing “Hot-N-Ready” pizzas constituted a trade secret under the South Dakota Trade Secrets Act, the court found that Little Ceasars had failed to demonstrate that information within the system was not “generally known” to the public. The “Hot-N-Ready” system, the court held, was too generic to amount to a trade secret, in part because there was evidence that numerous other proprietors of pizza restaurants utilized similar methods for preparing pizza. Furthermore, while the franchisor had required its franchisees to sign confidentiality agreements, this confidentiality did not extend to all of the franchisee’s employees. Thus, the court ruled that Little Ceasars had failed to show that they had taken reasonable efforts, under the circumstances, to maintain the secrecy of their “Hot-N-Ready” system.

Little Caesar Enterprises, Inc. v. Sioux Falls Pizza Company, Dist. Court, D. S.D., 4:12-cv-04111-KES, August 3, 2012.

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