CHICAGO (STMW)— Vienna Beef, the Chicago hot dog maker that has been around for more than a century, has a beef with a grandson of one of the company’s founders, who the company says is trying to make consumers think his hot dogs are the same as theirs.

In a suit filed Monday in federal court in Chicago, Vienna Beef says that Scott Ladany, a grandson of one of Vienna Beef’s founders, “has embarked upon a deliberate, multi-faceted campaign to promote [his hot dog company’s] products” by either trying to convince Vienna hot hog vendors to sell his hot dogs by misrepresenting them as Vienna hot dogs, or telling vendors that his company’s hot dogs are made with Vienna’s original 118-year-old recipes, which are trade secrets.

Ladany was a Vienna Beef employee and shareholder, the suit notes, until 1983. At that point he sold his entire 10 percent interest in Vienna, resigned his position as a salesman and left the company. He signed employment and severance agreements that acknowledged, among other things, that Vienna’s recipes were trade secrets that he would never use or divulge.

In 1986, after the termination of his non-competition agreement with Vienna, Ladany established a company called Red Hot Chicago (RHC), headquartered at 4649 W. Armitage Ave., to sell hot dogs and other products in competition with Vienna.

Vienna Beef says “for more than 25 years, Ladany and RHC made few inroads into Vienna’s position of dominance of the hot dog stand market. Vienna’s reputation among consumers was simply too strong … Accordingly, Ladany and RHC recently decided to take a different tack: they decided they would avoid the enormous long-term expense associated with building their own brand. Instead they would lay claim to Vienna’s recipes, pretend to be Vienna, and sell their products by misappropriating the enormous power of the Vienna name and reputation among consumers and vendors.”

Vienna says Ladany, of Highland Park, and RHC have “made numerous false and misleading statements in their print and Internet advertisements and marketing materials,” that intend to mislead the public into thinking that RHC and its products are affiliated with Vienna and its products, the suit says. “Among other things, Defendants state in these advertisements that RHC’s products are made with Vienna’s family recipes. If these statements in their advertisements are true, then Defendants are admitting that they have stolen and are using Vienna’s trade secrets. If RHC is not in fact using the Vienna family recipes, as stated in their advertisements, then Defendants’ advertisements are false.”

To illustrate just how sseriously Vienna beef takes the matter of its secret recipe, according to the suit, “up until 20 years ago, Vienna blended the spice formula internally. It implemented company procedures to maintain the confidentiality of the Vienna Recipes, including keeping hard copies of the Vienna Recipes in a vault, limiting the employees and officers with access to the Vienna Recipes, instituting company confidentiality policies and maintaining the confidentiality of Vienna’s files.

“Since that time, Vienna has used three outside vendors to blend spices and oils, and does so in a manner to preserve the confidentiality of the Vienna Recipes.” The suit explains that, “Currently, one outside vendor blends the various oils used in and that are the foundation for Vienna’s hot dogs, sausages and salamis. The oils are then shipped to a second outside vendor that mixes the oil blend with Vienna’s blend of dry spices. Further, because both vendors only handle a portion of the blending process, neither vendor knows the entire process, blend and formulation of the Vienna Recipes.”

These recipes, the company says, “are not owned by any current or former shareholders, but rather are owned by the entity itself.”

“Ladany has no more claim to such Vienna property than the descendants of Dr. Johnh Pemberton — who developed “Coca-Cola” syrup but later sold all of the rights to it — have the right to promote a competing cola by claiming that their ancestor founded Coke, that they have a 125-year ‘family history’ of making great soft drinks, and that their cola uses the 125-year-old ‘family recipe.'”

Though his own company is less than 30 years old, Ladany has, according to exhibits in the suit, such as advertisements and his company’s website, tried to establish a link between RHC and the 118-year-old Vienna Beef by spotlighting his family’s history of hot dog making.

Vienna says “monetary damages are inadequate to compensate (it) for the injuries caused by Defendants. Vienna’s injuries include without limitation loss of sales and future sales, diminished goodwill, brand erosion and irreparable injury to Vienna’s market position and reputation as the preferred provider in Vienna’s market area of Chicago-style hot dog stand hot dogs.”

Representatives of Vienna beef and Red Hot Chicago were unavailable for comment Tuesday afternoon.

© Sun-Times Media Wire Chicago Sun-Times 2011. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed

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