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Inventor dodges summary judgment in misappropriation suit vs. Hasbro.

Byline: Correy E. Stephenson

The inventor of an arts and crafts play system can pursue claims of misappropriation and breach of contract against toymaker Hasbro given the factual disputes between the parties, a U.S. magistrate judge has recommended.

Judge Lincoln D. Almond did side with the defendant toymaker on several other counts, however, dismissing a claim under the federal Defend Trade Secrets Act as well as claims of unjust enrichment, unfair competition, breach of implied-in-faith contract, and breach of the covenant of good faith and fair dealing.

"[T]his is a factually complex case, and Hasbro has moved for summary judgment on fact-intensive issues," Almond wrote. "Although Hasbro makes several strong arguments about the limited nature of Plaintiff's 'concept' submission, the presence of similar techniques in the public domain, and its own independent product development activities, those arguments are not strong enough to support the grant of summary judgment and must be presented to the finder of fact at trial."

Joseph Avanzato of Providence represented Hasbro and did not respond to a request for comment on the case.

Boston lawyer Jonathan W. Fitch, who represented the plaintiff, said his client was pleased with the decision and looked forward to presenting the case to a jury, but he declined to comment further given the continuing litigation.

The 15-page decision is Pawelko v. Hasbro, Inc., Lawyers Weekly No. 54-088-18. The full text of the ruling can be found here.

Arts and crafts

Marisa Pawelko executed Hasbro's standard non-disclosure agreement on Nov. 15, 2010, and pitched her idea for a new toy she called "Liquid Mosaic." The proposed product utilized a "unique craft gun" with interchangeable tips to draw different line patterns and create textures; it also contained pre-filled cartridges with a compound that would stick to different surfaces.

Pawelko's presentation to Hasbro included participation in a conference call, a five-page slide deck sent by email, and three sample craft projects (a hat, a purse and a light switch cover) made with a prototype of the product.

Hasbro passed on the idea in December 2010, telling Pawelko that Liquid Mosaic was "a great concept that we'll keep in mind for the future." Hasbro returned the samples to Pawelko in May 2011.

Pawelko filed suit against Hasbro in May 2016, alleging that the toymaker misappropriated her Liquid Mosaic submission and used it to develop two new product lines: Play Doh Plus and DohVinci, both of which incorporated elements and features of Liquid Mosaic.

Hasbro moved for summary judgment, denying the misappropriation and disputing that Pawelko's Liquid Mosaic submission even qualified as a legally protectable trade secret.

Facts in dispute

Almond had little difficulty granting the defendant's motion with regard to the plaintiff's unfair competition, unjust enrichment, breach of implied-in-fact contract, and breach of good faith and fair dealing claims, leaving Pawelko's breach of the non-disclosure agreement claim and both state and federal trade secret misappropriation counts.

Hasbro argued that those claims should also be dismissed because the plaintiff's submission did not qualify as a trade secret worthy of protection under either federal or state law, or the non-disclosure agreement.

Adopting a "broader lens" through which to view the dispute than the perspective offered by Hasbro, the judge noted that the parties had submitted "a mountain of evidence in connection with their respective positions."

After summiting, "it is apparent that the facts provide Hasbro with several strong arguments but not ones that entitle it to prevail as a matter of law," Almond wrote.

For example, Hasbro told the court that known crafting techniques (such as DecoDen and Puffy Paint) already incorporated all the elements of Liquid Mosaic prior to Pawelko's presentation in November 2010.

However, Hasbro's expert witness was unable to identify in his report any example of DecoDen that did so, and when asked if he knew of a product that had all of the Liquid Mosaic elements prior to November 2010, he responded: "I know that all the elements existed. There was no product."

"At a minimum, the totality of the evidence presented on this issue presents a factual dispute as to whether a product or technique existed in the public domain prior to November 2010 which incorporated all of the Liquid Mosaic elements," the judge said.

The judge also was not swayed by Hasbro's contention that it was aware of and had already been developing products with the same elements, ideas and concepts as Liquid Mosaic prior to Pawelko's presentation.

The plaintiff pointed out that Hasbro rejected her submission with a "soft pass," writing in an internal email that indicated "[w]e will likely be considering it down the road but no immediate application."

"If Hasbro had already been developing this concept in-house, a reasonable juror may question why these internal emails did not identify that as a reason for the 'pass' even if they chose not to share that internal product development with Plaintiff," Almond wrote.

The plaintiff also presented evidence that the three developers of Play Doh Plus and DohVinci had at least some level of prior exposure to her submission, and that there were substantial similarities between her Liquid Mosaic and the new Hasbro products.

"There is ample circumstantial evidence upon which a finding of misappropriation might reasonably be based, and a finding of misappropriation could reasonably support an inference that the misappropriated idea was novel and valuable," the judge wrote.

With so many facts in dispute, Almond concluded "it would be impossible to rule in Hasbro's favor on this Rule 56 Motion without impermissibly viewing facts or drawing inferences in a manner more favorable to Hasbro than plaintiff."

Hasbro did score a victory on the plaintiff's federal DTSA claim, however. Although Pawelko asserted the defendant's illegal activity began prior to the enactment of the statute on May 11, 2016, she presented a "continuing use" theory resting on the claim that the sales of Play Doh Plus and DohVinci occurring after that date constituted misappropriation of her trade secrets.

Acknowledging that such a theory "is contemplated by the plain language of the DTSA," the judge explained that no trade secrets were misappropriated under the statute after Hasbro disclosed them via patent applications and product sales prior to May 2016.

"Because Plaintiff is claiming the very same 'trade secrets' that were used and disclosed pre-DTSA enactment have been used and disclosed post-DTSA enactment, [the DTSA claim] fails as a matter of law, and I recommend that summary judgment enter in favor of Hasbro," Almond said.

CASE: Pawelko v. Hasbro, Inc., Lawyers Weekly No. 54-088-18

COURT: U.S. District Court

ISSUE: Is summary judgment appropriate on claims of misappropriation and breach of a non-disclosure agreement where the parties dispute the nature of the trade secret at issue, the presence of similar techniques in the public domain, and the defendant's independent product development activities?


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Title Annotation:Pawelko v. Hasbro, Inc.
Author:Stephenson, Correy E.
Publication:Rhode Island Lawyers Weekly
Date:Nov 29, 2018
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