El Dorado Stone, LLC, et al. v. Renaissance Stone, Inc., et al.

Holding:

In this case for trademark and copyright infringement involving proprietary technologies in manufacturing “customized stone profiles designed to look like natural stone,” the jury after trial rendered a plaintiff’s verdict, awarding plaintiffs the total sum of $22,034,775.00, broken down as follows: the amount of $15,000,000.00, later reduced to $2,488,750 by remittitur, as compensatory damages for misappropriation of trade secrets; $1,000,000.00 as exemplary damages for misappropriation of trade secret found against defendant Renaissance Stone; $100,000.00 as exemplary damages for misappropriation of trade secret found against defendant Alvarez; the amount of $50,000.00, later reduced by the district court on remittitur to $25,000.00, as exemplary damages for misappropriation of trade secret against defendant Hager; $75,000.00 as compensatory damages for copyright infringement; another $100,000.00 as statutory award for willful copyright infringement; compensatory award of $1,859,775.00 for interference with economic relationship; punitive damages award of $3,500,000.00 for interference with economic relationship found against defendant Renaissance; another punitive damages award of $225,000.00 for interference with economic relationship found against defendant Alvarez; and another punitive damages award of $125,000.00 likewise for interference with economic relationship found against defendant Hager. Further, the U.S. District Court for the Southern District of California ordered defendants to cease and desist from making any manufactured stone products created or based on Eldorado’s trade secrets in its custom colors.

Detailed Summary:

Plaintiff Eldorado is a specialty building materials siding company and a leading manufacturer of architectural stone veneer, also known as manufactured stone, for residential and commercial use. Eldorado uses proprietary technologies in manufacturing “customized stone profiles designed to look like natural stone.” Plaintiff Eldorado Stone Operations, LLC is a wholly owned subsidiary of plaintiff Eldorado Stone, LLC and holds all rights to the trademarks, trade dress rights and copyrights of Eldorado.

On the other hand, defendant Alfonso Alvarez was a hiree of StoneCraft Industries, Eldorado’s predecessor in interest, to work as a process engineer on January 14, 2002. Alvarez was responsible for documenting the precise formulas and methodologies used to manufacture Eldorado’s stone veneer products. Alvarez was also responsible for establishing procedures and mechanisms to keep Eldorado’s trade secret information secure.  Alvarez left Eldorado’s employ in or around July 2004.

According to plaintiffs, Alvarez, while still an employee of Eldorado, established a business entity to compete with Eldorado and misappropriated its trade secrets and intellectual property. The third amended complaint further alleged that all defendants knowingly conspired to misappropriate and did misappropriate Eldorado’s trade secrets consisting of its proprietary formulas and manufacturing technologies for their own use. In addition, defendants disclosed those trade secrets to third parties and violated its trademarks and copyrights.  The complaint alleged a total of 13 claims, consisting of the following:  (1) federal trademark infringement; (2) federal common law trademark infringement; (3) false designation of origin/federal unfair competition; (4) federal trademark dilution; (5) federal trade dress infringement; (6) misappropriation of trade secrets; (7) copyright infringement; (8) intentional interference with economic relationships; (9) negligent interference with economic relationships; (10) unfair competition; (11) conversion; (12) constructive trust; and (13) civil conspiracy.

Specifically, plaintiffs alleged that Plaintiff alleged that defendant Alvarez downloaded significant amounts of plaintiffs’ trade secret information and burned it onto a CD. Plaintiffs also claimed that defendants Alvarez and Martinez took trade secret information and used it in defendant Renaissance Stone’s new products.  Defendants allegedly infringed on plaintiff’s trademarks and copyrights in its designs and colors and interfered with plaintiff’s economic advantage.

Defendants denied the accusations, and filed a counterclaim, alleging the following claims against plaintiffs: (1) declaration of trademark invalidity as to Eldorado’s FIELDLEGE, CLIFFSTONE, RUSTIC LEDGE, CREEK COBBLE, and HILLSTONE marks; (2) declaration of non-infringement and invalidity of Eldorado’s trade dress claim; (3) intentional interference with prospective economic advantage; (4) negligent interference with prospective economic advantage; and (5) libel.

The jury after trial rendered a plaintiff’s verdict, awarding plaintiffs the total sum of $22,034,775.00, broken down as follows: the amount of $15,000,000.00, later reduced to $2,488,750 by remittitur, as compensatory damages for misappropriation of trade secrets; $1,000,000.00 as exemplary damages for misappropriation of trade secret found against defendant Renaissance Stone; $100,000.00 as exemplary damages for misappropriation of trade secret found against defendant Alvarez; the amount of $50,000.00, later reduced by the district court on remittitur to $25,000.00, as exemplary damages for misappropriation of trade secret against defendant Hager; $75,000.00 as compensatory damages for copyright infringement; another $100,000.00 as statutory award for willful copyright infringement; compensatory award of $1,859,775.00 for interference with economic relationship; punitive damages award of $3,500,000.00 for interference with economic relationship found against defendant Renaissance; another punitive damages award of $225,000.00 for interference with economic relationship found against defendant Alvarez; and another punitive damages award of $125,000.00 likewise for interference with economic relationship found against defendant Hager. Further, the district court ordered defendants to cease and desist from making any manufactured stone products created or based on Eldorado’s trade secrets in its custom colors.

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