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August 15, 2022

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Part of Cupcakery lawsuit over trade secrets dismissed

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A judge on Wednesday dismissed part of a lawsuit filed by Las Vegas cupcake company The Cupcakery claiming a former worker stole trade secrets and infringed on Cupcakery trademarks by opening gourmet cupcake shops in California.

The Cupcakery, launched by Pamela Jenkins in 2005 and now with multiple shops, filed suit in U.S. District Court in Las Vegas in May 2009 against former employee Andrea Ballus, who has opened cupcake shops in Napa, Cotati and Santa Rosa, Calif., called Sift: A Cupcakery.

The suit charged Ballus has been profiting from The Cupcakery's trademarks and other intellectual property assets.

Jenkins' company alleged Ballus applied for and was hired for a part-time position at The Cupcakery in January 2008 and that while working there, she registered the trade name Sift: A Cupcakery with the California Secretary of State.

"Ballus used plaintiff’s trade secrets and confidential information obtained during the course and scope of her employment at The Cupcakery to develop a competing cupcake business," the suit charged. "Ballus procured her employment with The Cupcakery under false pretenses and in order to obtain such confidential information and other trade secrets regarding plaintiff’s business model to aid in the development of her own gourmet cupcake business."

Ballus was represented in the case by attorneys James Olson, Michael Stoberski and Jeffrey Allen of the Las Vegas law firm Olson, Cannon, Gormley & Desruisseaux.

Her attorneys argued in court papers that "the term 'Cupcakery' is a generic term and therefore is not protectable or enforceable as a trademark under federal or Nevada state law."

They also said that with Nevada being an at-will employment state -- in which employment relationships can be terminated by either party at any time for any reason -- there is no "special relationship" between employers and employees that would have required Ballus to disclose her plans.

U.S. District Judge Kent Dawson didn't address the trademark claim, but ruled Wednesday that: "Plaintiff has failed to demonstrate that the relationship between Ballus and plaintiff, her employer, was such that Ballus’s failure to disclose gives rise to a misrepresentation or fraud claim."

"While plaintiff avers that (Ballus) signed a confidentiality agreement which may give rise to the creation of a special relationship, plaintiff has failed to include the language of said agreement, or how this alleged agreement imposed upon (Ballus) a duty to disclose that she intended to move to California, that she had any intention to open a cupcake business, or that she had registered Sift as a limited liability company with the California Secretary of State," Dawson wrote in his ruling.

But the legal battle may not be over. Dawson gave attorneys for The Cupcakery 30 days to file an amended lawsuit with proof of a special relationship between Ballus and The Cupcakery that would have required Ballus to disclose her plans.

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