Cases from 10th Circuit

United States District Court of the District of Colorado
Colorado Hospital Sues WebMD for Missappropriating Trade Secrets Related to "Tobacco Cessation and Weight Management" Software Programs

On October 25, 2012, National Jewish Health (“NJH”) brought suit against WebMD Health Services Group, Inc. and WebMD Health Corp.(collectively “WebMD”) in the United States District Court of the District of Colorado. The suit claims copyright infringement and contributory copyright infringement, misappropriation of trade secrets, tortious interference with prospective business relations, conversion, and unjust enrichment under Colorado law, and breach of contract under New York law.

NJH is a Colorado-based nonprofit hospital; U.S. News & World Report has ranked NJH the #1 respiratory hospital in the nation for fifteen consecutive years. According to the Complaint, between 2002 and 2008, NJH developed “a set of software implemented wellness programs, including its FITLogix® and QuitLogix® programs.” (collectively “Programs”) The Programs help assist users with obesity and tobacco addiction, respectively. On February 4, 2010, NJH entered into a non-disclosure agreement (“NDA”) with WebMD related to “Tobacco Cessation and Weight Management programs.” (“T&W programs”) Pursuant to the NDA, NJH presented WebMD with “Confidential Information” related to the Programs, including “operations, finances, plans and trade secrets . . . .” – all of which were proprietary information not known to the public.

In May 2010, NJH began negotiations with Lowes, Inc. (“Lowes”) to implement one or both of the Programs. After a “trial period,” during which NJH satisfied all of Lowes “approval criteria,” Lowes opted not to implement the Programs. NJH later learned that Lowes contracted with WebMD to implement WebMD’s program “My Lifetrack,” which “highly resemble(s)” the Programs. NJH alleges “My Lifetrack” uses “substantial portions of the [Programs’] sequencing, screen displays, textual material, and other content." Prior to its agreement with NJH, WebMD did not “offer either stand-alone obesity or smoking cessation programs.”

In its NDA with NJH, WebMD was only permitted to use the Confidential Information related to the Programs for an “Authorized Purpose” – this was loosely defined in the Complaint as relating to “a potential business relationship or transaction [between NJH and WebMD] related to [T&W programs].” NJH’s misappropriation of trade secrets claim is based on WebMD’s alleged use of NJH’s Confidential Information (including its trade secrets) for unauthorized purposes, including “enter[ing] into the market for [T&W programs] . . . .” NJH seeks to enjoin WebMD from further implementing “My Lifetrack,” and also seeks damages (including punitive), and reasonable attorney’s fees.

This is the second trade secret misappropriation suit that WebMD is currently litigating. The first, WebMD Health Corp. v. Anthony T. Dale, is pending trial in the Eastern District of Pennsylvania. It features WebMD in a reversed role - suing a former employee for alleged misappropriation of WebMD's trade secrets.

Court of Appeals for the Tenth Circuit
Tenth Circuit Upholds Reasonable Royalty Award Regardless of Defendant's Motivation

On March 11, 2014, The Tenth Circuit held that a plaintiff may recover damages under a reasonable royalty theory, even in cases where the defendant had not profited financially from the misappropriation.

StorageCraft Technology Corp. (StorageCraft), a developer of data storage and recovery software, brought suit against James Kirby, a former officer and director who was also one of the company’s original founders. The complaint alleged that Kirby had misappropriated StorageCraft’s trade secrets, and had subsequently shared this information with NetJapan, one of StorageCraft’s main competitors. The complaint did not allege that Kirby had profited financially from the misappropriation. A jury awarded StorageCraft $2.92 million in damages based on the estimate of what would constitute a reasonable royalty for use of the misappropriated trade secrets. Kirby appealed, arguing that the award was excessive because he had not profited from the misappropriation.

The Tenth Circuit rejected Kirby’s argument and affirmed the award, noting that the Utah Uniform Trade Secrets Act “doesn’t distinguish between a misappropriator’s venial motives.” While reasonable royalty damages are commonly sought in cases where the defendant has profited financially from the misappropriation of the plaintiff’s trade secrets, this decision makes clear that, at least in Utah, such damages are available regardless of the defendant’s motive in the misappropriation.

United States District Court for the District of Colorado
Colorado District Court Holds that Nightclub Owner's MySpace Profile May Constitute a Trade Secret

In Christou v. Beatport, LLC, the United States District Court for the District of Colorado held that log-in information to a MySpace account may constitute a trade secret. Notably, the Court denied Defendant’s motion to dismiss the trade secret misappropriation claim. The Court relied on the factors laid out by the Tenth Circuit Hertz v. Luzenac Group, 576 F.3d 1103, 1115 (10th Cir. 2009), and held that whether MySpace login information including profiles, “friends”, confidential lists of personal cell phone numbers and email addresses for DJs, agents, and promoters, and customer lists in the present circumstance constitute a trade secret is a question of fact, and that Christou had alleged sufficient facts to survive the motion to dismiss.

United States District Court for the Northern District of Oklahoma
ND Okla. Orders Reasonable Royalties under UTSA

On September 27, 2012, the Northern District of Oklahoma found that “exceptional circumstances” existed in a dispute between competing aerial broadcast camera makers, warranting the imposition of reasonable royalties in place of a prohibitory injunction under Section 87(B) of the Oklahoma UTSA.

A jury found misappropriation of trade secrets belonging to plaintiff Skycam, LLC in September, 2011. On Skycam’s Application for Injunction, the court held that forward-looking relief in the form of a permanent injunction was warranted, finding (inter alia) that “the threatened injury outweighs the harm that the injunction may cause” and that the injunction would not “adversely affect the public interest” as required by Tenth Circuit law.

The court found, however, that because these conditions were not met with respect to a prohibitory injunction, but only with respect to the imposition of a reasonable royalty, the case presented a set of “exceptional circumstances” under the meaning of the UTSA.
First, the court agreed with defendant Actioncam, LLC that a prohibitory injuction would “put [it] out of business,” also noting that the existence of direct competition between the parties, and thus the benefit to Skycam of a prohibitory injunction, was in question. The court further held that a prohibitive injunction would be in derogation of the public interest because it would “eliminate competition and technologal innovation” in the market for aerial cameras.

Damages in the case had been based on a flat and per-event royalty through the date of the judgment. The court therefore ordered further per-event royalties lasting from the date of the judgment and ending 42 months after the defendant’s system had entered the for-profit market. The amount and duration of these royalties were determined on the basis of the plaintiff's expert testimony.