For some great lessons about using the law to protect a food or beverage business, check out this HuffPo piece about a lawsuit between Boston Beer Company (The Sam Adams guys) and one of my favorite beers of all time, Anchor Steam. In sum: Key employee is raised from a pup by the Sam Adams Machine. Key employee signs employment contract containing superbly drafted confidentiality and non-compete clauses. Key employee leaves Machine for arch-rival. Machine ruins everybody’s day with (successful?) lawsuit.
You can never ever have too much IP in the food business. The only way to keep something like a recipe secret is through confidentiality clauses in employment contracts with employees. Non-compete clauses will also ensure that the employees you trained will not pull-stakes to work for your mortal enemy, or start up a competing endeavor on their own. Boston Beer seemed to understand this perfectly well. Either they learned the hard way by getting burned or they had the foresight to make this part of their long term human resources strategy. Brilliant. This kind of strategic planning, using just a few simple legal documents, puts Sam Adams in a great position going into the fight. It also gives them huge bargaining power in the settlement negotiations that are sure to come. All it cost them was a few hundred bucks they spent on having the right legal documents drafted ahead of time.
Incidentally, I can understand why Boston Beer sued the former employee – because the employee violated a contract into which he voluntarily entered. That is what lawyers call privity, the binding relationship between parties created by mutual promises. But Anchor Steam has no such privity with Boston Beer. Their complaint must be based in some other cause of action under state law, such as unfair competition perhaps. If so, that part of the suit sounds like a loser for Sam Adams. Confidentiality and non-compete clauses may help you smash your wayward former employees, but there is not much they can do against your competitors.