Watchmaker May Sue Former Execs for Breach

(CN) - A Michigan watchmaker may sue two former employees who allegedly gave a competitor the company's NFL and MLB licensing rights, a federal judge ruled.

Advance Watch Co., which does business as Geneva Watch Group, bought the assets of Game Time, a financially troubled New York company that sold watches with National Football League and Major League Baseball sports team logos, in 2009.

As part of the deal, Game Time's founder, Adam Pennington, became the head of Geneva's new Game Time division, managing the company's licenses with the NFL and MLB. In January 2011, Neil Martin was hired to serve as the division's vice president of sales.

As recounted by U.S. District Judge Jesse Furman, both men received an employee handbook which included confidentiality/non-disclosure provision. The provision states, in part, that no Geneva employee can discuss its confidential information with without the company's permission..

But Geneva claimed in its lawsuit that Pennington and Martin "suddenly and without warning" resigned in February 2013, and started working with one of its suppliers, Rico Industries.

The watchmaker said that shortly thereafter the two men used their inside knowledge to make sure that the exclusive licensing contracts with the NFL and MLB were not renewed after they expired in March and December 2013, respectively.

Geneva claims Pennington and Martin then conspired to ensure that Rico scored the licensing rights instead.

Rico now sells at least ten sports watches with designs "virtually identical to the unique designs of Geneva's Game Time watches," Geneva claimed.

Given the time it takes to develop such watches, Rico allegedly "would not have [had] time to offer sports watches for sale in late 2013 or early 2014," unless it began creating them while Pennington and Martin still worked at Geneva, the complaint said.

The company asserted claims for unfair competition and false designation of origin under the Lanham Act, violation of the Computer Fraud and Abuse Act, breach of contract and the duty of loyalty, misappropriation of trade secrets, and tortious interference with contracts and prospective business relations.

Pennington, Martin, and Rico moved to dismiss all but the loyalty count.

Judge Furman partially granted the motion Wednesday.

The complaint "alleges that defendants 'interfered' with the MLB and NFL agreements, but elsewhere it explains that those exclusive license agreements were set to expire in March and December 2013 and were simply not renewed," Furman wrote. "Defendants may well have had something to do with that fact, but not renewing a contract is not the same thing as breaching a contract."

The judge elsewhere noted that the complaint "does allege that Martin 'help[ed] Rico develop customers and licensors for a new sports watches group while employed by Geneva.' But it does not necessarily - or even plausibly - follow that Martin breached his duty to sell Game Time watches while he was still employed at Geneva."

But the claims for unfair competition and tortious interference with prospective business relations against all three defendants, as well as the misappropriation claim against Pennington and Martin alone, survived, the ruling states.

Furman also upheld the breach of contract claim against Pennington, but not Martin.

"Plaintiffs allege that defendants engaged in unfair competition and misappropriated trade secrets from Geneva, and then used the misappropriated trade secrets to induce the MLB and NFL to refuse to renew their exclusive licensing agreements with Geneva," Furman wrote. "In light of those allegations, 'the "wrongful means" element is clearly present here, given that the alleged interference occurred by means of separate torts, here trade secret misappropriation and unfair competition.'"

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