Plasti Dip of Blaine accuses Rust-Oleum of stealing trade secrets

We got "dip" trouble in River City.

Not dip for chips and nachos. But the booming business of "dipping" or coating, tools, vehicles and even household items in rubberized coatings that has become as much a fashion statement as corrosion inhibitor.

Plasti Dip International, the Blaine-based maker of tool coatings that has grown quickly since 2010 and built a global social media ­following, is suing the maker of Rust-Oleum over its spray-on rubberized coating that came out last year.

Plasti Dip says Rust-Oleum, owned by huge RPM International, an Ohio-based coatings firm, made its rival "FlexiDip" product based on trade secrets it obtained from Plasti Dip when the two firms discussed a joint venture in 2013.

They say Rust-Oleum's FlexiDip product violates patents Plasti Dip founder Robert Haasl registered in the 1970s and 1980s. Plasti Dip started in 1972 by making rubberized, protective coating that people could apply to hand tools for improved grip.

Plasti Dip struggled for decades as a so-so performer of a product used largely by professional and back yard mechanics to coat tools to give them a better grip. But in 2010, sales climbed 30 percent as new groups of customers, including auto customizers and craft do-it-yourselfers, latched on to Plasti Dip in the spray can.

Customers started as coating chrome car wheels and then covering entire vehicles. The product could be peeled off with no damage to the wheel or car body. Plasti Dip responded by cranking out more colors, going from six to 34 since 2009 and creating a way for people to mix their own colors.

As the market exploded for Plasti Dip, Rust-Oleum, whose cornerstone coating protects against rust, approached the company in 2013.

"We discussed a wide range of positive business relationships," Scott Haasl, Plasti Dip's president and son of the founder, said last week. "We have a history."

The two had battled for shelf space for protective coatings among hardware retailers and distributors going back 20 years.

RPM is far larger, with about $4 billion in annual sales, compared with Plasti Dip's $40 ­million last year.

According to the Plasti Dip lawsuit, the companies entered into nondisclosure and ­confidentiality agreements in mid-2013 under which they shared trade-secret information and worked on a "joint-label" product that would include Plasti Dip's "proprietary chemical manufacturing process."

Haasl said Plasti Dip shared with Rust-Oleum how to take the coating from a concentrate to a state that can be used in an aerosol can. But Haasl didn't give up the "secret source," the actual chemical ingredients.

"Divulging our complete product formulation never occurred," he said.

Plasti Dip wants a federal judge to find Rust-Oleum in violation of a nondisclosure agreement, guilty of stealing trade secrets, violating its trademark and using Plasti Dip's proprietary ­process in FlexiDip and Peel Coat.

Moreover, Plasti Dip asserts that Rust-Oleum earlier this year interfered with Plasti Dip's contract with a big distributor, Florida-based DipYourCar.com, by trying to get the owner to also peddle Rust-Oleum's competitive products. Plasti Dip also seeks more than $75,000 in damages on each of the six counts it alleges, including unjust enrichment, or profiting from stolen proprietary information.

Rust-Oleum has yet to respond to the April lawsuit before U.S. ­District Judge John Tunheim, though it is expected to later this month. RPM and its lawyers declined to comment last week.

Meanwhile, consumers are comparing Plasti Dip and FlexiDip on YouTube videos and enthusiast websites.

In the interview, Haasl said business is good despite what he considers unfair competition from Rust-Oleum.

Plasti Dip employs 55 people at its Blaine plant and through a Milwaukee distributor. However, several temporary workers in Blaine were let go this year as sales growth slowed.

Sales have been growing at a double-digit pace for more than five years. The Blaine plant turns out more than 100,000 gallons of dip a month.