Court Denies Beverage Company’s Preliminary Injunction in Trade Secrets Case, Citing Conflicting Evidence

On June 4, the US District Court for the Eastern District of Wisconsin denied a motion for a preliminary injunction in a case where the plaintiff, Slate Craft Goods, Inc., alleged that its manufacturer, Horseshoe Beverage Company, LLC, and Horseshoe’s parent company, Trilliant Food and Nutrition, LLC, and together with Horseshoe, used its confidential and trade secret information to launch their own product and usurp a business opportunity.

Slate alleged that the defendants used its formulas, recipes, and product specifications to develop their own competing protein-packed, lactose-free, ultrafiltered milkshake beverage. Slate had signed an NDA with Horseshoe, but the NDA did not identify with specificity the scope of Slate’s trade secrets, nor did Slate obtain any restrictions on Horseshoe’s right to develop at the same time similar and directly competitive products. The court denied Slate’s preliminary injunction motion because both sides offered conflicting evidence concerning whether the information at issue was indeed secret or confidential. Slate missed its opportunity at the beginning of its work with Horseshoe to insist on robust protections, and it lost its business opportunity to Horseshoe as a result.

Background

Slate alleges that it had proprietary formulas, recipes, and product specifications for a protein-packed, lactose-free, ultrafiltered milkshake beverage. It entered a manufacturing agreement with Horseshoe in early 2023 that contained a confidentiality provision. At the request of Costco United States, Slate created a prototype for a beverage containing 30 grams of protein. Around the same time, the defendants met with Costco Canada about developing its own milk-based protein beverage.

Slate then met with the defendants and alleged that it disclosed details about the Costco United States business opportunity and provided information about its new product, together with a sample of the prototype. The defendants acknowledged the meeting and the receipt of the sample, but disputed that Slate shared any information about selling the 30g protein milkshake to Costco United States or Slate’s product ideas.

Shortly thereafter, the defendants developed their own milk beverage with 30g of protein and connected with Costco United States about bringing their beverage to market. Costco United States and the defendants launched a beverage formulation branded as “Nurri” in September 2024.

Slate ultimately terminated its relationship with Horseshoe and found a different manufacturer that was able to commercialize its 30g protein milk beverage. Costco allegedly opted not to engage with Slate, however, because it was already selling Nurri.

The Court’s Decision

Slate sued the defendants, alleging, among other things, misappropriation of trade secrets under federal and Wisconsin law and breach of contract, and moved for a preliminary injunction. Slate asked the court to bar the defendants from using its confidential and trade secret information, and to halt their manufacturing and sale of Nurri. The defendants argued, however, that Slate’s information was either obvious, generally known in the beverage industry, or already available to the defendants on a nonconfidential basis prior to any disclosure by Slate.

The court denied Slate’s motion, finding that Slate had not demonstrated that it had a likelihood of success on the merits. The court reasoned that there was contradictory evidence concerning whether the information the defendants relied upon was generally known or based on Slate’s purported confidential information or trade secrets. Ultimately, because the competing narratives created significant factual disputes and credibility issues, the court refused to grant Slate any relief.

Takeaways for the Beverage and Food Industry

This case highlights the importance of negotiating a strong NDA and maintaining a clear record of when and how trade secrets are disclosed under the NDA. Without these protections, the disclosing party may be unable to win a case in court.

Below, we specify how this case offers both disclosers and recipients of proprietary information an opportunity to engage in proactive measures to protect such information and mitigate the risk of prolonged litigation.

• Drafting contracts that are clear about the scope of trade secrets and proprietary information being disclosed is necessary to establish the scope of each party’s obligations with respect to proprietary information.

• Documenting meetings with contemporaneous (ideally shared) notes can help avoid factual disputes about what information was disclosed and when it was disclosed.

• Documenting the development of proprietary information can help support (or defend against) claims of misappropriation.

• Selectively deploying proprietary information can help ensure that only proprietary information that is needed in connection with the business relationship is shared, and avoiding the receipt of proprietary information can help avert unwanted claims.

• Incorporating choice-of-law provisions in contracts that identify a favorable forum as some states have more robust protections for trade secrets than others. 

The ArentFox Schiff Beverage and Food and Trade Secrets groups can help clients navigate how to deal with confidential and trade secret information in their relationships with potential business partners. If clients face the prospect of litigation, our attorneys have experience representing companies seeking to protect and enforce their trade secret rights, as well as defending those who are accused of misappropriation.

The case is titled Slate Craft Goods, Inc. v. Horseshoe Beverage Company, LLC, No. 24-C-1292 (E.D. Wis.).