Unfair Competition Law in Minnesota

Unfair competition is a general category of torts recognized by Minnesota courts to protect commercial interests. n Unfair competition can include tortious interference with contract, improper use of trade secrets, and an employee’s breach of a duty of loyalty to his or her employer. Unfair competition can also be infringement of a trade name.

These torts establish the boundary between fair and unfair business competition. The principal business torts are commercial disparagement. Minnesota statutes prohibit certain types of business torts, particularly trade secret theft. Other torts are well established by both State and Federal case law. The business torts are at the intersection where competitive incentive collides with social values favoring fair play and equality of opportunity.

Case law vividly reflects the debate between public policy favoring competition and ethical principles requiring loyalty and fair play in the marketplace.  Judicial opinions, frequently, embed legal propositions imposing tort law constraints on competition in the midst of countervailing rhetoric extolling competition. Thus, case law can be quarried by both plaintiff and defendant lawyers for language in support of both sides of most unfair competition issues.

Because unfair competition law is such a broad and subjective topic, it is yet to be clearly defined. J. Thomas McCarthy, Senior Professor at the University of San Francisco School of Law, notes that “One has only to read a few judicial opinions to recognize the semantic quagmire that awaits the lawyer or judge who attempts to give a precise definition to that evasive concept called ‘unfair competition’.”  

Relevant Cases

Improper Use of Trade Secrets:

Jostens Inc. v. Nat’l Computer Sys. Inc., 318 N.W.2d 691, 701 (Minn. 1982).

Even without an employment agreement, employees have a common-law duty not to wrongfully use confidential information or trade secrets obtained from an employer.

Eutectic Welding Alloys Corp. v. West, 160 N.W.2d 566, 570 (Minn. 1968).

In any action for appropriation of trade secrets, it is necessary for the plaintiff to prove that trade secrets in fact existed; that such trade secrets had been acquired by the defendant as a result of a confidential relationship; and that defendant had used and disclosed such secrets.

Tortious Interference with a Contract:

Furlev Sales & Assoc., Inc. v. N. Am. Auto. Warehouse, Inc., 325 N.W.2d 20, 25 (Minn. 1982).

To establish a prima facie case of tortious interference with contract, a plaintiff must show:

(1) the existence of a contract;

(2) knowledge of the contract by the alleged wrongdoer;

(3) intentional procurement of the contract’s breach;

(4) absence of justification; and

(5) damages caused by the breach.

Bebo v. Delander, 632 N.W.2d 732, 738 (Minn. Ct. App. 2001)

“A successful claim requires proof of all five elements.”

Employee’s Breach of Duty of Loyalty:

Sanitary Farm Dairies Inc. v. Wolf, 112 N.W.2d 42, 43 (Minn. 1961).

Absent a restrictive covenant, and subject to equitable protection against unfair competition, after terminating his employment a driver-salesman may not be enjoined by his employer from soliciting the patronage of former customers on a milk route if he has enhanced the goodwill of the business or added new customers.  If a driver-salesman on a milk route, while still an employee, has solicited customers in contemplation of commencing his own business, his employer is entitled to enjoin him from further soliciting or selling to such customers for a sufficient length of time to permit the employer to compete on even terms.

Cenveo Corp. v. S. Graphic Sys. Inc., 784 F. Supp.2d 1130, 1136 (D. Minn. 2011).

There is no precise line between acts by an employee which constitute prohibited ‘solicitation’ and acts which constitute permissible ‘preparation.’ Because of the competing interests, the actionable wrong is a matter of degree. Whether an employee’s actions constituted a breach of [the] duty of loyalty is a question of fact to be determined based on all the circumstances of the case.

Commercial Disparagement:

Advanced Training Sys. Inc. v. Caswell Equip. Co., Inc., 352 N.W.2d 1, 7-8 (Minn. 1984).

A plaintiff may not recover for product disparagement unless plaintiff is able to prove special damages in the form of pecuniary loss or a general decline in business directly attributable to defendant’s false statements.

Infringement of a Trade Name:

Howards Clothes, Inc. v. Howard Clothes Corp., 52 N.W.2d 753, 757-58 (Minn. 1952).

In order to obtain relief in an action for unfair competition and infringement of tradename, plaintiff has the burden of proof in establishing three requisites:

(a) Plaintiff’s name has a special significance for secondary meaning in the trade;

(b) Plaintiff has an exclusive right to, or a protectable interest in, the tradename with reference to his goods, services, or business and with reference to the territorial or special group market in which his tradename is used; and

(c) Defendant has unfairly used plaintiff’s tradename, or a confusing simulation thereof (although not necessarily with a fraudulent intent), whereby the ordinary purchaser, to plaintiff’s or the public’s detriment, has been, or is reasonably likely to be, deceived as to the true identity of the goods, services, or business, and is misled into believing that he is getting plaintiff’s product when he is in fact getting that of defendant.

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