Genzyme Corp. v. Bishop
2006 WL 3087106, 460 F. Supp. 2d 939, 2006 U.S. Dist. LEXIS 80139 (2006)
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Rule of Law:
The Wisconsin Uniform Trade Secrets Act (WUTSA) preempts common law tort claims for misappropriation of a trade secret, but it does not preempt tort claims based on the misappropriation of confidential information that does not meet the statutory definition of a trade secret.
Facts:
- Charles Bishop, Keith Crawford, and Eric Messner were high-level employees at Bone Care International, a company specializing in Vitamin D products.
- Each employee signed an agreement containing clauses regarding intellectual property, return of company property, and a covenant not to compete.
- In July 2005, Genzyme Corporation acquired Bone Care and became the successor to the employment agreements.
- Shortly after the acquisition, in July and August 2005, Bishop, Crawford, and Messner resigned from their positions at Genzyme.
- In September 2005, the three former employees formed Proventiv Therapeutics LLC, a company intended to compete with Genzyme in the Vitamin D market.
- Genzyme alleged that the former employees used confidential business plans, marketing plans, and other proprietary information taken from Bone Care to form and operate Proventiv.
- In June 2006, the former employees sold Proventiv to Cytochroma, Inc., in part for its patent applications covering new Vitamin D uses.
Procedural Posture:
- Genzyme Corporation filed a civil action against Charles Bishop, Keith Crawford, Eric Messner, and their companies in the U.S. District Court for the Western District of Wisconsin.
- The complaint alleged multiple counts, including breach of contract, breach of the duty of loyalty, usurpation of corporate opportunity, and conspiracy.
- The individual defendants filed a motion to dismiss several counts of the complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).
- Genzyme then filed an amended complaint, and the court considered the defendants' motion as applied to the new complaint.
- The court is now ruling on the defendants' motion to dismiss counts three through eight of the amended complaint.
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Issue:
Does the Wisconsin Uniform Trade Secrets Act preempt common law tort claims, such as breach of the duty of loyalty, that are based on the alleged misappropriation of confidential, non-trade secret information?
Opinions:
Majority - Shabaz, District Judge
No. The Wisconsin Uniform Trade Secrets Act (WUTSA) does not preempt civil tort claims alleging the misuse of confidential information that does not qualify as a statutorily-defined trade secret. The court reasoned that WUTSA, specifically Wis. Stat. § 134.90(6)(a), displaces conflicting tort law providing civil remedies for the 'misappropriation of a trade secret.' However, the statute expressly excludes from its preemptive scope any civil remedy 'not based upon misappropriation of a trade secret.' Citing the Wisconsin Supreme Court's decision in Burbank Grease Servs., LLC v. Sokolowski, the court affirmed that tort claims based on the misuse of non-trade secret confidential information remain available. Because Genzyme's complaint explicitly alleged that the defendants misappropriated 'confidential or proprietary non-trade secret information,' the claims fall outside WUTSA's preemptive reach. The determination of whether the information in question actually constitutes a trade secret is a fact-intensive inquiry that cannot be resolved on a motion to dismiss.
Analysis:
This decision clarifies the scope of statutory preemption under the Wisconsin Uniform Trade Secrets Act, preserving important common law remedies for employers. It establishes that WUTSA does not create an all-or-nothing system for protecting proprietary information. By allowing claims for misuse of 'confidential, non-trade secret information' to proceed, the court ensures that employers can seek remedies for breaches of loyalty and other torts even if the information taken does not meet the high bar of a statutory trade secret. This ruling prevents former employees from misappropriating valuable company information with impunity simply because it falls short of trade secret status, thereby closing a potential loophole in intellectual property protection.
