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Pizza dough trade secrets case pits Schwan against Conagra

Court documents state that The Schwan Company alleges that from the time Rongxuan Cai accepted the job at Conagra until he was escorted from Schwan property, he accessed files containing Schwan confidential and proprietary information and trade secrets on several projects related to pizza crust and other projects.

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This story has been corrected to clarify that The Schwan Company and Schwan's Home Delivery are separate businesses.

MINNEAPOLIS — The Schwan Company is taking on food conglomerate Conagra in court, accusing Conagra of swiping trade secrets on the making of frozen pizza dough after Conagra hired away one of its employees.

A federal judge in Minneapolis recently ruled against Conagra, as it sought to have the claims by Schwan’s dismissed.

The Schwan Company is also known as CJ Schwan's is based in South Korea after the frozen food portion of the Schwan's business was purchased by South Korea’s CJ CheilJedang in 2018. Its pizza brands include Red Baron, Tony’s and Freschetta.

It is a separate company from the business now known as Schwan's Home Delivery, which known in the upper Midwest for its home delivery of frozen foods from its iconic yellow trucks.

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Schwan's Home Delivery has its headquarters in Bloomington and Marshall, Minnesota. The Schwan brand evolved from a family dairy in Marshall.

The Schwan Company originally filed suit against the employee in October 2020. But during evidence discovery in that case, Schwan concluded it also had a case against Conagra.

In April 2021, Schwan filed an amended complaint, accusing Conagra of violating the federal Defend Trade Secrets Act, the Minnesota Uniform Trade Secrets Act, interfering with a contract and “unjust enrichment” from hiring the employee.

Conagra sought to dismiss the case, but on Dec. 2, Judge John Tunheim in U.S. District Court in Minnesota said Schwan’s can proceed with its claims.

According to court documents, the case started in November 2017 when Rongxuan Cai, the principal research scientist for Schwan’s, accepted a job from Conagra. At Schwan, Cai had done research on yeast and flour for dough for use in pizza crusts and frozen pies.

It was not until Friday, Dec. 15, 2017, that Cai resigned from Schwan’s. The following Monday, Schwan’s learned that Cai was leaving to work for Chicago-based Conagra, a competitor to Schwan in the frozen food business. Schwan’s immediately fired Cai, and escorted him from the building.

Court documents state that “Schwan’s alleges that from the time Cai accepted the job at Conagra until he was escorted from Schwan’s property, he accessed files containing Schwan’s confidential and proprietary information and trade secrets on several projects related to grain, pizza crust, and encapsulated sugar, among other projects.”

Schwan’s also says Cai took devices and notebooks with research information.

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Nine days after Schwan fired him, Cai filed two United States patent applications: “Method of Making Frozen Dough and Products Made Using the Method” and “Microwaveable Frozen Breads and Method of Making the Same.” He also filed for a patent in China on the first patent.

Beginning from his hiring in 2003, Cai had signed agreements saying his Schwan’s work would be confidential and could not use that information to help another company or use it to get another job. It also specified that any patents from his work at Schwan’s would belong to the company.

A noncompete clause barred Cai from working for “any business which competes with [Schwan’s] in the geographic or job function areas assigned to” Cai for one year after leaving Schwan’s.

Cai began working for Conagra on Jan. 8, 2018. Three days before that, Schwan sent Conagra a letter notifying Conagra that Cai was a former Schwan’s employee and was in possession of confidential and proprietary information from Schwan’s and asked Conagra to ensure that Cai did not use this information for Conagra’s benefit.

Court documents also say Cai himself informed Conagra of the noncompete clause.

In his ruling in favor of Schwan’s, Judge Tunheim writes that “Conagra does not dispute that Schwan’s properly alleged that Conagra misappropriated trade secrets from Schwan’s. Instead, Conagra seeks dismissal based on the running of the statute of limitations.”

The state and federal trade secrets laws both have a three-year statute of limitations. Tunheim concluded that Schwan’s did not have evidence of trade secret violations more than three years before it added Conagra to the suit against Cai.

Tunheim also rejected arguments from Conagra that it was not aware of a noncompete contract when it allegedly interfered with it.

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The company is seeking Cai to return all information he took from Schwan, to have patent applications switched to Schwan and for damages incurred in the case.

The case is set to go to trial next year.

Reach Jeff Beach at jbeach@agweek.com or call 701-451-5651 (work) or 859-420-1177.
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