D.P. Dough Franchising, LLC v. Southworth
2:15-cv-02635
S.D. OhioSep 26, 2017Background
- D.P. Dough Franchising, LLC (Plaintiff) sues former franchisee Edward Southworth and his company (Defendants) after Southworth opened Eddie's Calzones in Columbia, SC and later Athens, GA. Plaintiff alleges breach of franchise agreement, trade-secret misappropriation, copyright and trademark infringement, unfair competition, tortious interference, and unjust enrichment.
- Southworth worked at/owned the Cortland D.P. Dough (2007–2013). He signed a franchise agreement with D.P. Dough in September 2013 that contained noncompetition, non‑diversion, and nondisclosure provisions. He transferred the Cortland franchise to his mother in December 2013 and opened Eddie’s Calzones in March 2014.
- Plaintiff owns registered copyrights (including a Raleigh D.P. Dough menu) and trademarks, and created an operating manual and intranet after acquiring the brand in 2011. Some recipes/operational practices were publicly posted or shared orally prior to formal documentation.
- Southworth used a Raleigh D.P. Dough menu template (received from another franchisee, Lounsberry) to create Eddie’s initial menu; he later changed the menu and removed allegedly infringing photographs and text after this lawsuit began.
- At a consolidated final hearing under Rule 65(a)(2), the court found: (1) Southworth copied the Raleigh menu (copyright ownership established), but (2) Plaintiff failed to prove trade‑secret misappropriation, breach of the restrictive covenants as applied to the Columbia/Athens stores, or irreparable harm warranting injunctive relief. Plaintiff’s motion for (permanent) preliminary injunction was denied and judgment entered for Defendants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of franchise restrictive covenants (non‑compete / non‑diversion / nondisclosure) | Southworth opened competing restaurants and diverted customers, breaching the Agreement and confidentiality obligations | Covenants are unreasonable as applied beyond existing D.P. Dough locations; Southworth did not access confidential materials or divert business from any existing D.P. Dough | Covenants are construed under Ohio reasonableness tests; no breach shown for Columbia/Athens because no preexisting D.P. Dough within the geographic scope and no proof Southworth used confidential development info |
| Trade‑secret misappropriation (recipes, operating manual) | Recipes, vendor lists, manual and marketing strategies are trade secrets; Southworth used them to replicate D.P. Dough | Recipes/general ingredients were publicly known/posted and conveyed orally; operating manual not shown to have been acquired or used by Southworth | Plaintiff failed to prove the information was secret and that Southworth acquired/used trade secrets; misappropriation not established |
| Copyright infringement (Raleigh menu and website text) | Defendants copied the Raleigh menu and website text; Plaintiff owns valid copyrights | Lounsberry (original menu author) gave template; any license limited to franchise use; Defendants ceased using infringing material after notice | Court found Plaintiff owns the Raleigh menu copyright and Southworth copied it, but defendants removed the infringing materials; no ongoing irreparable harm shown |
| Irreparable harm & injunctive relief | Continued use of D.P. Dough intellectual property dilutes brand and causes unrecoverable goodwill loss | Defendants ceased infringing uses; delay in suing and absence of present confusion mean no likely irreparable harm; injunction would impose heavy hardship | No likelihood of irreparable harm; balance of harms and public interest disfavors injunction; motion denied |
Key Cases Cited
- Friendship Materials, Inc. v. Michigan Brick, Inc., 679 F.2d 100 (6th Cir. 1982) (district court discretion on preliminary injunctions)
- Raimonde v. Van Vlerah, 42 Ohio St.2d 21 (Ohio 1975) (restrictive covenants enforceable only to protect legitimate interests and be reasonable)
- Extine v. Williamson Midwest, Inc., 200 N.E.2d 297 (Ohio 1964) (upholding non‑diversion clause without geographic limit in context)
- Rogers v. Runfola & Associates, Inc., 565 N.E.2d 540 (Ohio 1991) (court may tailor unreasonable restrictive covenants)
- Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340 (1991) (copyright ownership and originality standard)
- Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7 (2008) (irreparable injury must be likely for injunctive relief)