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Current Developments in the Commercial Divisions of the
New York State Courts
Posted: December 1, 2014

Court Refuses to Dismiss Unfair Competition Claim

On November 17, 2014, Justice Bransten of the New York County Commercial Division issued a decision in Darcher LLC v. Dhar, 2014 NY Slip Op. 32975(U), refusing to dismiss an unfair competition claim.

In Darcher LLC, the defendants moved to dismiss, among other claims, a claim for unfair competition. The court refused to dismiss the claim, explaining:

New York law has long recognized two theories of common-law unfair competition: “palming off,” which is not at issue here, and misappropriation. An unfair competition claim involving misappropriation usually concerns the taking and use of the plaintiffs property to compete against the plaintiffs own use of the same property. . . .

[T]he existence of a trade secret is not a prerequisite to an unfair competition claim. Instead, to state such a claim a plaintiff must demonstrate that it had compiled information used in its business that provided an opportunity to obtain a competitive advantage and that a competitor misappropriated it. While a trade secret is an example of the type of misappropriated property that could give rise to an unfair competition claim, the existence of a trade secret is not an essential element of the claim.

. . .

To plead an unfair competition claim, Plaintiffs must allege the bad faith misappropriation of a commercial advantage which belonged exclusively to them.

(Internal quotations and citation omitted) (emphasis added). The court went on to hold that the plaintiff adequately had alleged unfair competition under these standards.

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