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: Indiana Civil & Business Lawyer

Trade Secrets: Entrepeneur Magazine Sues Over Ranking Formula

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Another week, more departing employees, another trade secrets suit. Having spent most of the past month fending off the effects of our local and national economic problems, I think we will see more of this as time passes. Why? Too few dollars means sharper competition. Sharper competition means someone will cut a corner (or three) to make a profit. True gamblers will balance the risk of loss against profit by trying to reckon the possibility of successful by their former employers. Some former employers may not have the money to fight the theft.

Read on. Consider whether your business has the money to sustain a court case. Think about what your business does to protect its trade secrets. Ask yourself if you prefer prevention or litigation. Prevention means having a lawyer evaluate how well you have protected your trade secrets. Prevention costs a whole lot less.

Entrepreneur(R) Magazine's Coveted Annual Ranking of Top Franchises at the Center of Trade Secret Dispute Lawsuit Alleges Former VP and Editorial Director Stole Company's Confidential Information
IRVINE, Calif., Sept 24, 2008 /PRNewswire via COMTEX/ -- To protect the integrity of one of the most recognized and relied upon sources of business information for entrepreneurs and franchisors, Entrepreneur Media, Inc. (EMI) today filed a lawsuit against former employees who it alleges stole its franchise ranking concept, known as the Franchise 500(R).

The dispute centers on the behavior of Rieva Lesonsky, the former Editorial Director for the consumer publisher. Shortly after voluntarily ending her 26-year employment with EMI in April 2008, Lesonsky created a company, SMB Connects, and is performing freelance editorial work for AllBusiness.com that duplicates EMI's signature rankings.

EMI claims that Lesonsky began contacting its customers and soliciting them to complete an application for an "Annual Franchise 300 Ranking" with AllBusiness.com. The application was substantially similar to the one EMI has used for its Franchise 500(R) rankings for the last thirty years.

The information EMI collects from its list of over 1,800 franchisors nationwide is highly valued by EMI's audience. In addition, EMI considers that information and the exclusive formula it uses to calculate its rankings to be trade secrets. Further, EMI claims that the use of "Franchise 300" violates its own federally-registered trademarks for "FRANCHISE 500(R)".
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The lawsuit claims that the plaintiffs' use of EMI's secret formula, databases, and contact list, as well as use of the "Franchise 300" name, violates federal and state law. The causes of action named in the complaint include false designation of origin, breach of contract, misappropriation of trade secrets, and unfair competition.

"We are in the business of supporting entrepreneurs, and we wish Rieva well with her new venture," says Peter Shea, Chairman and CEO of EMI. "But it saddens and disappoints me that someone whom we trusted with our most valuable assets would take our confidential information and attempt to market it as her own."