Kate Hudson Gets Sued for Stealing Product Information. Does She Have a Case?

From Reuters:

“Fool’s Gold” star Kate Hudson has been sued by a firm that says hair care products she developed with hair stylist-to-the-stars David Babaii are based on ideas for using volcanic ash that the firm developed.

In the lawsuit, which was filed on Friday in Los Angeles Superior Court, 220 Laboratories said it entered into an “oral contract” with Babaii to develop and manufacture hair care products in 2006. The idea for the product was to use volcanic ash from the Vanuatu Islands of the South Pacific.

But Babaii went on to use a company called Universal Packaging Systems Inc to develop the products — using the volcanic ash component. Hudson promoted the product in a 2007 interview with Vogue magazine and said she was one of the developers, the lawsuit states.

220 Laboratories’ allegations against Hudson, Babaii and Universal included misappropriation of trade secrets, fraud and breach of contract. The company is seeking an injunction to block David Babaii for WildAid from using its “trade secrets” in the sale of hair care products.

According to the legal documents, 220 Labs had researched and developed a product for Babaii over a period of about nine months, based on an oral contract. During this time, 220 Labs developed at least 10 custom products for Babaii, for which they sent him samples. They also sent Babaii ingredients lists, ingredients stories, pricing information, marketing ideas, and promotional footage.

Almost a year after Babaii and 220 Labs had entered into their relationship, a 220 Labs competitor called Universal requested volcanic ash samples from the company, purportedly for a hair care line. 220 Labs sent them the samples.

Babaii then released the product, called David Babaii for WildAid–featuring pictures of an earthy-looking Kate Hudson cavorting with baby wildcats—without giving 220 Labs the kickback it felt it deserved.

Thus, the lawsuit.

I had a couple of thoughts on this case. First, can you sue someone based on an oral contract? It turns out that oral contracts are legally just as valid as written agreements. The problem is proving that they exist, or proving the terms. Lawyers use plaintiff or defendant action following the contract to prove its existence.

After you enter an oral contract in California, you only have two years to sue someone for breaching it. No wonder 220 Labs jumped on the case.

Secondly, why would you send your competitor a sample of your proprietary ingredient (in this case, volcanic ash)? According to the Economic Espionage Act of 1996,

Effective enforcement of laws governing unauthorized disclosure of proprietary or trade secret information generally requires that the owner of this information must have taken reasonable measures to safeguard it from unauthorized disclosure.

Sending a proprietary ingredient to your competitor doesn’t sound like a reasonable protective measure to me. Nor does handling a large account for nine months without a written contract.

Does 220 Labs have a case? Yes. So does Kate Hudson. I think both parties had it coming.

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