Courts amend decision over Arch and Active Concepts

By Simon Pitman

- Last updated on GMT

Related tags: Arch, Jury

The New Jersey Superior Court has refined part of its decision
against Arch Personal Care, conceding that product formulas
purchased on a specific date from Active Concepts are not a part of
the original court ruling.

The supreme court judge, Travis Francis, ruled that the motion was limited to product formulas acquired from Brook Formulas on December 1, 2000, in response to a Motion for Reconsideration filed by Arch PCP in July 2006. An earlier decision had granted that Arch PCP had no trade secrets to protect. Arch has claimed that since August, 2001 all information acquired from Brooks was trade secret, including names, prices charged, products purchased and amounts paid by customers, together with sales and profits information. However, Judge Francis ruled on June 26, 2006, that none of the trade secret claims made by Arch could be supported - a judgement that was based on evidence from some of its employees and largest customers, including Avon, Estee Lauder and Revlon. In the latest ruling, made in January 26, Judge Frances refined his decision, stating that the decision over trade secrets now refers to all product formulas not disclosed by Arch during the Federal Court trial, or by Brooks, before November 30, 2000. Formulas previously disclosed by Brooks include Amultifruit, ASMEC and Brooksome A. In 2000 Arch PCP bought the personal care intermediary business belonging to Brooks Industries that was co-owned by the then company president Ivar Malmstrom. After the sale Malmstrom went on to help establish Active Concepts, and in doing so it is alleged that he breached the non-compete obligations in the contract he had signed with Arch Chemicals. Malmstrom assisted in the creation of Active Concepts by providing funding and participating in the running of the company's business activities. In the latest court decision, Arch is arguing that Malstrum was mistaken in his initial answer to the courts over company secrets. Added to this the courts said that scope of application of its primary decision granting summary decision was too broad, and needs further consideration. Arch PCP's allegations led to a $7m pay out following the New Jersey federal Courts March 2004 ruling, which found Malmstrom had breached his contractual obligations, thus infringing on the Arch's registered trademark. In the ruling against Arch, dated June 27, a NJ Superior Court Judge declared that Arch did not possess trade secrets, in turn dismissing the earlier ruling against Active Concepts, which was directed at the company's chief visionary officer and six other former Arch employees. The court heard that when Arch first brought the allegations against Active Concepts in August 2001, subsequent hearings that used testimony from Arch during the course of 2003 did not allow the defendants to attend the hearings. Further testimonies in 2004 revealed that all information acquired from Brooks had been full disclosed and left unprotected before the Asset transfer from Brooks to Arch. In fact, during the course of the hearings, Arch employees and representatives of its largest customers, including Revlon, Avon and Estee Lauder, had testified before a jury, at a trial open to the public, disclosing every trade secret it claimed against Active Concepts, except for Brook's product formulas. In the previous ruling against Arch the New Jersey judge described the testimony for Arch in the previous two lawsuits at being 'divergent', and finally ruled that Arch did not acquire trade secrets from Brooks and had no trade secrets to protect against Active Concepts, Scholz and the other defendants. Citing evidence by Arch's trade secrets expert David Steinberg as not being based on true facts, the court then dismissed all claims that trade secrets had been misappropriated or that Arch had suffered any damages as a result.

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