Hyung Seob Kim believed so strongly in the multi-grain snack cakes made in his native South Korea that he moved to the United States to sell them.
Kim said he spent four years designing a cake-making machine and five years building a business around it, convinced that their sweet aroma and the sharp pop emitted as they are created would be a hit with American consumers if stores made the cakes on the premises.
But two weeks ago, 11 years after he started his venture, Kim filed a suit claiming his business, Moonachie-based Delice Global Inc., had suffered a blow not uncommon among entrepreneurs: unfair competition.
The suit accuses a former employee of starting a rival company, Ridgefield-based Coco International Inc., that mimicked Delice Global’s model, and of creating a trade name, CocoPop, and logo similar to Delice’s Magic Pop.
“CocoPop has illicitly copied every aspect of Delice’s Magic Pop business,” Kim states in an affidavit filed with the court.
The claim reflects a key concern of any entrepreneur seeking to turn a vision into a moneymaking concern: how to prevent competitors from improperly taking bits, or all, of the idea or business model, and using them to seize a slice of the market.
Many, like Kim, turn to the legal system. Courts are filled with suits alleging that business rivals unfairly competed by infringing patents, stealing trade secrets or violating trademark or trade name copyrights, which collectively are considered violations of intellectual property rights.
Since the start of 2008, businesses have filed more than 80 patent suits and 240 trademark suits in federal court in New Jersey. In 2008, the court had the fifth-largest number of intellectual property suits filed in the nation, according to the Washington-based Intellectual Property Owners Association.
Attorneys say that although taking legal action is lengthy and expensive, and the outcome uncertain, it’s often the only way businesses can protect their intellectual property rights. And interest in protecting intellectual property interests has grown with the shift from a manufacturing to a service economy.
“Legal protection for inventions, patents and so on has become more important,” said Herbert Wamsley, executive director of the Washington-based Intellectual Property Owners Association. “Because in the information age, intangible assets such as technology are more important relative to the traditional kinds of wealth, such as land and labor and capital.”
David Jackson, a Hackensack attorney who specializes in intellectual property law, said litigation over brand identifiers, such as trademarks and designs is “part of the landscape” for businesses in a service-based economy.
“We are not selling products as much as we are selling appearances,” he said. “We are selling relationships. And with that has come a growing awareness of intellectual property.”
Attorneys say the best way to protect company secrets and ideas is to take measures early on to avoid their falling into the hands of competitors.
That includes filing for patents on inventions, registering trademarks and preventing leaks of sensitive information — either by restricting the number of people who know it, or requiring insiders to sign non-compete or confidentiality agreements.
The Turtle Co. Inc. of Paramus, N.J., took the patent route, and in June filed suit to protect its rights.
The company accused the National Football League and two related companies of selling a book cover made of stretchable material, using a design that Turtle executive Dennis Grande patented in 1995. The defendants also include Pittsburgh-based retailer Dick’s Sporting Goods Inc. and New York-based Henry Modell & Co. Inc., which owns Modell’s Sporting Goods.
Turtle wants the companies barred from using the design, and is demanding damages for its past use.
“The bottom line is it hurts my clients’ business,” said Scott H. Kaliko, an attorney who represents Turtle.
Grande, a former insurance salesman, started the book cover business by creating prototypes in his kitchen, Kaliko said. The case is typical of many he sees, with a small company waging battle against a far larger, wealthier business, he said.
“Some of these people spend tens of thousands of dollars” on an invention, said Kaliko. “They work hard and a lot of times they put their family life savings on the line. And then someone comes and takes their idea.”
Often, the intellectual property at stake is a name, as was the case in a battle over the use of “Greek Village” by two North Jersey restaurateurs — a case cited in Kim’s suit.
Greek Village of Northvale, N.J., filed suit in 2006 after businessman Peter Hadjiyerou opened a restaurant called Greek Village Taverna in Edgewater, N.J., with plans to open others in Glen Rock and Montclair.
“We warned him beforehand” not to use the name, but he went ahead, said Richard A. Joel, who represented the plaintiff.
The Northvale restaurant, which opened in 1998, claimed that the similarity of the names, and the fact that the restaurants are only about 10 miles apart, created confusion among suppliers and credit card issuers.
After a daylong trial, the court agreed, saying there was enough similarity in the two restaurants’ menus and marketing efforts to mislead customers. In addition, the court ruled that although the Northvale restaurant hadn’t filed to get a trademark for the name, the company had earned “common law” rights by using it for eight years.
While the Greek Village case centered on one aspect of a company’s business, Delice Global has made far broader claims.
The suit, filed July 17 in U.S. District Court in Newark, alleges that Coco International sells a “virtually identical” machine to Kim’s, and uses similar price structures, contract terms, recipes and cooking techniques.
The suit accuses CocoPop of theft of trade secrets, trademark and trade name misappropriation and interfering with the business relationship between Delice and its customers. The suit also accuses CocoPop of defamation for allegedly making false statements about Delice’s business to Elizabeth-based Wakefern, the buying cooperative for ShopRite stores, as Delice sought to become a favored customer of the chain.
Harlan L. Cohen, a Paramus attorney who represents Coco International, said it was too early to comment on the case.
Kim, in court papers, said he and his wife saw the potential of low-calorie multi-grain cakes when they worked in the Korean food industry for 10 years. The cakes are cooked in seconds by heating the grain under high pressure, and the finished cake is thrown out of the front of the machine — a noisy process that drew interest from passers-by.
“We realized that if the multi-grain snack cakes could be freshly made on the premises of the food vendors, they would attract a great deal of positive attention and help increase sales of snack cakes,” Kim said in his affidavit.
One drawback, however, was that the Korean cake-making machines were the size of a small refrigerator. So on arrival in the U.S., Kim used his engineering background to invent a tabletop version of the machine, filing for a patent in 2005, the suit says. The U.S. Patent and Trademark Office awarded Kim the patent last year.
The suit said he refined the mix of ingredients, and created a business model for selling, renting and leasing the machines and for selling the ingredients and finished cakes. Kim alleges that although he treated those details as “propriety trade secrets,” CocoPop got them from Don Lee — a former employee who joined Delice Global in mid-2006 after buying a machine.
Lee eventually became Delice Global’s managing director, but left in May 2008, saying he was going to open a grocery store, the suit says. Within days, Coco International was incorporated, and Lee became its chief executive officer, the suit says.
“Through Don Lee, defendants have illicitly gained access to and knowledge of Delice’s proprietary trade secret information,” the suit says.
(c) 2009, North Jersey Media Group Inc. Source: McClatchy-Tribune Information Services.