Metricolor LLC v. L'Oreal SA

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: Metricolor LLC (California)
  • Defendant: L'Oreal USA, Inc.; L'Oréal USA Products, Inc.; L'ORÉAL USA S/D, INC.; Redken 5th Avenue NYC, LLC (Delaware/New York)
  • Plaintiff’s Counsel: Martorell Law APC
• Case Identification: 2:18-cv-00364, C.D. Cal., 03/06/2020
• Venue Allegations: Venue is based on Defendants having regular and established places of business in the district, transacting business in the district, and committing alleged acts of misappropriation affecting the Plaintiff, which is headquartered in the district.
• Core Dispute: Plaintiff alleges that Defendants breached a Non-Disclosure Agreement and misappropriated trade secrets related to a novel hair product dispensing system, subsequently using the confidential information to launch their own competing products.
• Technical Context: The technology concerns systems for precisely measuring and dispensing professional hair color products, aiming to reduce waste, improve accuracy, and increase efficiency in salon environments.
• Key Procedural History: The complaint alleges that from August 2014 to June 2016, the parties engaged in confidential discussions under a Non-Disclosure Agreement (NDA) for a potential partnership. Plaintiff claims that after it disclosed its proprietary technology and business information, Defendants terminated negotiations and, three months later, launched competing products incorporating the allegedly misappropriated trade secrets. The complaint references two of Plaintiff's U.S. patents not to allege infringement, but to distinguish the patented, publicly-disclosed aspects of its system from the non-public trade secrets at issue in the litigation.

Case Timeline

II. The Accused Instrumentality

• Product Identification: The accused instrumentalities are two product lines launched by L'Oréal: the Matrix Brand's "Matrixcolor Bond Ultim8" product and the Redken Brand's "pH-Bonder" product (Compl. ¶51).
• Functionality and Market Context:
  • The complaint alleges that both product lines are hair treatment systems sold as kits that include components for mixing and dispensing liquids (Compl. ¶53, ¶55, ¶59). The central accused feature is a dispensing system that allegedly incorporates Plaintiff's trade secrets. This system is described as using a graduated, needle-less syringe to withdraw precise amounts of liquid from containers, which may feature a specific orifice reducer or be packaged in a flexible pouch (Compl. ¶55, ¶57-59, ¶62).
  • The complaint includes an image from a marketing webpage for the Bond Ultim8 product, which displays a kit containing multiple bottles and a graduated syringe (Compl. p. 17, ¶55). Another image from a YouTube tutorial shows a stylist using the syringe to draw liquid from a bottle, with the stylist quoted as saying, "I love using this syringe because it really gives me precise measurements" (Compl. p. 18, ¶57).
  • Plaintiff alleges these products were launched just three months after L'Oréal terminated partnership negotiations, directly competing with Plaintiff's "Metricolor System" by using its confidential and trade secret information (Compl. ¶51). The complaint further alleges that the design of the syringe and pouch used in L'Oréal's products is "strikingly similar" or "seemingly identical" to confidential samples and information Plaintiff provided under the NDA (Compl. ¶32, ¶58-59). A side-by-side photograph in the complaint compares a syringe from what it identifies as its "Metricolor Supplier" with the syringe from the "L'Oréal-Redken pH Bonder" product to illustrate this alleged similarity (Compl. p. 11, ¶32).

III. Summary of Legal Claims

• Note: The complaint does not contain a cause of action for patent infringement. The primary claims are for breach of contract and trade secret misappropriation.
• Breach of Contract: Plaintiff alleges that Defendants breached the terms of a Mutual Non-Disclosure Agreement (NDA) by using disclosed "Confidential Information" for purposes other than the "Purpose" defined in the agreement, which was to "collaborate regarding Stephen D'Amico's METRICOLOR System" (Compl. ¶38, ¶67). The alleged breaches include using the information to design, develop, and sell competing products, disclosing it to unauthorized third-party vendors, and failing to return the information upon request (Compl. ¶67-68).
• Misappropriation of Trade Secrets (Federal & State): The complaint brings claims under both the federal Defend Trade Secrets Act (DTSA) and the California Uniform Trade Secrets Act (CUTSA) (Compl. ¶75, ¶113). Plaintiff defines its trade secrets to include non-public information such as "manufacturing methods, short-cuts, and cost-saving measures," the identities of and pricing negotiated with component suppliers (for syringes, pouches, etc.), and optimal design specifications for system components based on product characteristics like viscosity (Compl. ¶76, ¶114). The complaint alleges Defendants misappropriated these secrets by acquiring them under the NDA (a confidential relationship) and then using them without authorization to launch the accused products (Compl. ¶79, ¶116). The complaint alleges the misappropriation was "willful and malicious," seeking exemplary damages (Compl. ¶89, ¶119).
• Other State Law Claims: The complaint also includes causes of action for Breach of the Covenant of Good Faith and Fair Dealing, Violation of California's Unfair Competition Law, and Common Law Breach of Confidence, all based on the same core factual allegations of misusing confidential information obtained under false pretenses (Compl. ¶92, ¶101, ¶106).

IV. Analyst’s Conclusion: Key Questions for the Case

• A central issue will be one of trade secret definition: The court will need to determine whether the information Plaintiff disclosed—such as supplier identities, component dimensions, and manufacturing methods—constitutes legally protectable trade secrets. A key question is whether this information derived independent economic value from not being generally known, or if it was discoverable through ordinary reverse engineering or independent development, particularly in light of the technology publicly disclosed in Plaintiff’s own patents.
• A second core issue is one of contractual scope and breach: The case will likely turn on the interpretation of the NDA. The court will examine whether Defendants' development and launch of the Bond Ultim8 and pH-Bonder products constituted an improper "use" of "Confidential Information" for a purpose outside the contractually defined "collaboration," or if Defendants' actions were part of a legitimate, independent development effort.
• A final key question will be one of evidentiary causation: Can Plaintiff prove that the specific features of Defendants' commercial products were in fact derived from the allegedly misappropriated information? The visual comparisons of syringes and product designs presented in the complaint will be central to Plaintiff's attempt to establish a causal link between its confidential disclosures and Defendants' subsequent commercial products.