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June 08, 2011

Maker of Woodchuck Hard Cider Sues Ex-Employee for Stealing Trade Secrets

When Leonard J. Ciolek, a national accounts manager for Middlebury-based Green Mountain Beverage (makers of Woodchuck Hard Cider), resigned this March, he wrote that "incredible opportunities" had lured him away from a position he had only held for seven months.

WoodchuckHardCider Why would Ciolek walk away from a six-figure salary, a $6,900 annual car allowance, a possible $25,000 bonus and the chance to keep living in his upstate New York home? To start his own cider company. At least that's what GMB alleges in a 24-page lawsuit filed in U.S. District Court in Burlington today.

GMB hired Lenny Ciolek for the plum position in July 2010, tapping his 25 years of experience as an exec with Mike's Hard Lemonade to grow accounts in New England. And of course, they had Ciolek sign a non-disclosure agreement. By December, however, they allege that Ciolek's plans for McKenzie's Hard Cider were in full swing. Based on a forensic examination of his company laptop, he sent an email that month to a friend to "sample some McKenzies," worked on a business plan, and honed labels with a New York design firm.

By February 1, 2011, when McKenzie's Beverages became a New York corporation — with a home address at Mayer Bros., an apple cider producer in West Seneca — Ciolek had labels and packaging planned and ready, GMB alleges. And if their allegations are true, Ciolek brazenly stole ingredients and nutritional information from Woodchuck bottles for his new cider, as well as promoted his launch to GMB's customers.

The lawsuit alleges that although Ciolek did his best to cover his tracks — deleting his profile from a company laptop after he left — his former employer was able to pinpoint the dates on which Ciolek accessed pricing reports, margins, and presentations, then copied these to external drives. And they've confirmed that the nutritional information on the side of McKenzie's three flavors of cider — Original, Green Apple and Black Cherry — is identical to that of Woodchuck Cider. 

Most damning, however, is one fact: that the U.S. trademark for McKenzie's — filed on February 4, a full month before Ciolek's resignation — is owned by Julie Ann Ciolek, his wife.

Mckznies The firm that designed the vintagey-looking McKenzies packaging, NYCO Design Agency, features the package prominently on their website, and the cider is for sale, at least in New York. Green Mountain Beverage, in the meantime, is seeking an injunction and monetary damages against Ciolek, and accusing him of breach of contract, among other things.

Should GMB be flattered that someone tried to pull an Arthur Slugworth on them? Hardly.

 

 

 

No copyright or patents on recipes. And trade secrets are only enforceable by contract, not criminal law, unless given to a foreign government.

Yeah, but if he was working on it on company time or equipment, the company may be able to claim some of it as their intellectual property. Guess their next CEO will have to sign a non-compete. :)

Totally incorrect "Ward 2 Resident" - it's frustrating how little people understand about intellectual property law.

The claims by Wood Chuck Hard Cider are completely within the bounds of the Vermont Trade Secrets Act:
http://www.leg.state.vt.us/statutes/sections.cfm?Title=09&Chapter=143

In fact, based on the information that was alleged to have been taken, they have a very strong case and a good chance of winning a preliminary injunction preventing McKenzie's from operating until the case is decided in trial.

By the way "Ward 2 Resident", published recipes are in fact subject to copyright law.

@ Caitlin,

According to the Complaint, this guy WAS subject to non-competition obligations.

The evidence supports he violated his non-compete contract, but I don't think from what's written he stole any trade secret. Not sure if there is more too this, or if that is a poor headline.

The Complaint certainly details that he allegedly stole Woodchuck's trade secrets in his new competing business.

@Facts can you provide a link to, or quote from, the complaint? I see this re: trade secrets:

"Ciolek brazenly stole ingredients and nutritional information from Woodchuck bottles for his new cider"

I don't think information that's on a label is a trade secret, and NDAs are notoriously difficult to enforce. Reading sales figures when you're a salesman, for example, is pretty much expected. They'll need to prove that he kept all of the internal documentation after he quit.

Starting a competing company while you're employed is far from illegal. As Caitlin points out, what they really needed is a non-compete. Maybe there was one in the NDA, it's not mentioned in the article either way.

Good luck Woodchuck - sounds like an uphill battle.

And trade secrets are only enforceable by contract, not criminal law, unless given to a foreign government.

I can't believe there are no updates. Heck plenty of news. With more mismanagment out of City Hall, a new teachers contract and Jeanne Collins taking the next step towards total social engineering you would have thought a new post would have been more forthcoming. Must be everyone is on summer vacation.

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