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Webmd Health Corp v. Anthony T. Dale

August 9, 2012


The opinion of the court was delivered by: Pratter, J.


Plaintiff WebMD Health Corporation ("WebMD") sued its former employee, Defendant Anthony Dale, after he left his job at WebMD to work at Health Grades, Inc. ("Health Grades") claiming that he has breached his Restrictive Covenants Agreement, violated Delaware's Uniform Trade Secrets Act, engaged in unfair competition, and converted WebMD's trade secrets and confidential information. Just a few days after filing its Complaint, WebMD also moved for a preliminary injunction, seeking specific enforcement of the Restrictive Covenants under the breach of contract count in the Complaint. Following several months of discovery that was marked by time-consuming acrimony, the Court held a preliminary injunction hearing on May 14, 15, 21 and 22, 2012,*fn1 received post-hearing submissions from the parties, and now makes the following findings of fact and conclusions of law.

I. Findings of Fact

A. WebMD's Business

1. Plaintiff WebMD, a Delaware corporation with a principal place of business in New York, New York, disseminates health information to consumers, healthcare professionals, employers, and health plans through public and private websites, mobile device applications, and other health-focused publications. 5/14/12 Tr., 40:17-41:7, 42:13-23.

2. In addition to other websites on similar topics, WebMD operates, which targets to consumers, and, which targets healthcare professionals. 5/14/12 Tr., 42:13-23.

3. WebMD charges for advertising, webpage sponsorships, and other online products and services on its websites. 5/14/12 Tr., 43:8-17. WebMD's consumer websites provide a broad range of health and wellness-related content directed to consumers interested in, for instance, learning about specific medical conditions or medications, or finding a physician. Id., 41:11-22; 44:2-13.

4. WebMD's consumer advertiser customers include pharmaceutical, biotechnical, medical device and consumer product companies, hospitals, and other similar entities. 5/14/12 Tr., 42:24-43:7. WebMD also sells advertising and sponsorships for its health professional-directed websites. Id., 43:19-23.

5. Prior to September 2011, WebMD had commenced the establishment of a hospital customer base. WebMD's revenues from hospitals were about $1 million in 2009, $3.5 million in 2010, and $5.5 million in 2011. 5/15/12 Tr., 212:24-213:5. WebMD hopes to increase revenues at a similar rate in 2012, to between $7-10 million. Id., 213:6-15. These revenues are from the sale of online advertising and sponsorships. Id., 212:1-6; 237:2-11.

6. In 2011, WebMD had about 140 hospital customers that purchased online advertising or promotion. Id., 236:25-237:1. At one time or another since 2004, WebMD has had more than 300 hospital customers from across the United States under contract. Ex. 125.*fn2

7. Hospitals, and the people who assist hospitals in making decisions about advertising, can choose from a wide variety of types of online advertising and non-online advertising. WebMD's contacts when attempting to establish or expand a hospital account are sometimes hospital employees and often ad agency employees. 5/15/12 Tr., 219:16-20; 238:20-239:10.

B. Mr. Dale's Work for WebMD

8. Defendant Anthony Dale began working for Medscape in December 2000. Medscape was acquired by WebMD in 2001. 5/21/12 Tr., 158:3-11.

9. Throughout his 10-year career at WebMD, Mr. Dale worked in sales, selling online advertising and sponsorships to pharmaceutical companies and medical device manufacturers, including two of WebMD's largest national pharmaceutical companies, Bristol-Myers Squibb and Johnson & Johnson. 5/14/12 Tr., 46:19-47:9; 51:10-17; 5/21/12 Tr., 161:5-162:2. In the last three or four years of his career at WebMD, Mr. Dale divided his time between selling advertising on WebMD's site focused on medical professionals and on WebMD's site focused on consumers. 5/21/12 Tr., 164:12-16; 165:3-166:22. While at WebMD, he personally did not sell any advertising to hospitals. 5/14/12 Tr., 144:17-20; 5/21/12 Tr., 178:23-179:15.

10. In June 2011, Mr. Dale was promoted to Group Vice President. As one of four Group Vice Presidents in the company, he was a senior member of the sales management team.

5/14/12 Tr., 46:17-47:24; 5/21/12 Tr., 158:6-8; 161: 22-162:2; 172:25-173:1.

11. In 2010, Mr. Dale's last full year of employment with WebMD, he earned more than $1 million in combined salary, commissions, variable management compensation and realized profits from the exercise of stock options. 5/14/12 Tr., 48:2-8; 5/21/12 Tr., 171:11-16.

12. As a senior member of the sales department, Mr. Dale was exposed to a wide variety of information that WebMD classifies as confidential. For instance, WebMD develops and commissions a large amount of confidential market research about its websites, audiences, and competitors. 5/14/12 Tr., 97:13-20. In particular, WebMD's market research reveals information about the habits, preferences, attitudes, and search terms used by consumers visiting WebMD's websites, as well as the strengths and weaknesses of WebMD. 5/14/12 Tr., 96:1-97:2; 99:23-100:9; 103:12-22; 108:9-109:9; 112:3-18; 5/15/12 Tr., 54:22-55:13. Some, but not all, of this information may be shared with WebMD's customers or prospective customers, and then only selectively. See, e.g., 5/14/12 Tr., 112:23-113:7. Some of this research is reported on a monthly basis. See, e.g., 5/15/12 Tr., 54:22-55:4.*fn3

13. Mr. Dale was also involved in developing strategies for sales, marketing, and product development at WebMD. 5/14/12 Tr., 48:9-22. For instance, Mr. Dale helped develop a new product that would help sponsors directly reach particular populations, as well as new mobile products targeted to physicians and patients. Id., 50:10-13; 132:22-135:17; 137:10-138:5; 139:2-21. At least some of these products had not been implemented as of the hearing in this matter. Id., 139:22-140:11. Just months before his resignation, Mr. Dale also learned the details of a new advertising guarantee program designed to help WebMD compete with other companies offering advertising guarantees, as well as a new product designed to allow advertisers to reach patients intending to see a doctor within a certain period of time. Id., 130:13-132:21; 142:1-17; 5/15/12 Tr., 45:13-16; 46:21-47:6; 50:1-5. As to marketing, Mr. Dale was intimately involved in WebMD's market positioning strategy. 5/14/12 Tr., 86:1-87:15; 117:20-120:25; 122:19-22.

14. As a sales executive, Mr. Dale was also exposed to WebMD's pricing strategies and practices. 5/14/12 Tr., 87:16-88:9; 94:24-95:23. WebMD considers its pricing information and rate cards to be confidential. Id., 91:6-13; 5/15/12 Tr., 8:12-14. WebMD customers, although aware of the final prices they pay, do not see WebMD's rate card, and WebMD's relationships with customers are usually governed by nondisclosure agreements. 5/15/12 Tr., 8:12-14; 59:4-8; 59:20-23; 60:12-61:1. WebMD drafts a new rate card each year. See id., 61:11-19. The WebMD rate card is used for sales to all types of customers. 5/14/12 Tr., 91:6-13.

15. The confidential information that Mr. Dale learned at WebMD could potentially be useful to a competitor selling online advertising on health and wellness websites. See 5/14/12 Tr., 64:8-18; 5/21/12 Tr., 52:9-53:22.

16. In the course of his employment with WebMD, Mr. Dale signed multiple agreements that contained covenants not to compete. Most recently, on July 9, 2011, he signed a Restricted Stock Agreement in exchange for shares of restricted stock, and that agreement contained provisions in which Mr. Dale agreed not to work for any competitive business anywhere in the world for a period of one year after termination of his employment at WebMD without WebMD's permission. The Agreement defines "Competitive Business" as:

(i) any enterprise engaged in developing, selling or providing (via the internet or other means) health or wellness information, decision support tools or services or application and/or communication services, directly or indirectly, to consumers, health and/or benefit plan members or employees or healthcare professionals, including but not limited to products or services that provide information on diseases, conditions or treatments, store health care information, assess personal health status, and/or assist in making informed benefit, provider or treatment choices; and (ii) any enterprise engaged in any other type of business in which the Company or one of its Affiliates is also engaged, or plans to be engaged, so long as I am directly involved in such business or planned business on behalf of the Company or one of its Affiliates.

Ex. I, ¶¶ 2(b), 2(c) of Restrictive Covenants Agreement (hereinafter "Agreement").*fn4

17. The Agreement signed by Mr. Dale also provides for the automatic extension of the one-year restrictive period for any period of time during which the Agreement is breached. Ex. I, ¶ 4 of the Agreement. In the Agreement, Mr. Dale also acknowledged that while working for WebMD he would have access to trade secrets and proprietary information and that WebMD "has a compelling business interest in preventing unfair competition stemming from the intentional or inadvertent use or disclosure of [WebMD's] Trade Secret and Proprietary Information." Id., ¶¶ 1(a), 1(d) of the Agreement. He also agreed that if the geographic, temporal, or scope restrictions were deemed unenforceable as stated, "said area, length or scope shall, for purposes of this Agreement, be deemed to be the maximum area, length of time or scope that such court would deem valid and enforceable, and that such court has the authority under this Agreement to rewrite (or 'blue-pencil') the restriction(s) at-issue to achieve this intent." Id., ¶ 5 of the Agreement.

18. Confidential information is defined in the Agreement as "valuable information relating to the business of the Company and its Affiliates that provides the Company and its Affiliates with a competitive advantage (or that could be used to the disadvantage of the Company and its Affiliates by a Competitive Business (as defined herein)[)], which is not generally known by, nor easily learned or determined by, persons outside the Company and its Affiliates." Ex. I, ¶ 1(a) of the Agreement. The Agreement also specifically includes such items as "sales plans and projections, product pricing information, acquisition, expansion, marketing, financial and other business information and existing and future products and business plans of the Company and its Affiliates;" "sales proposals, demonstrations systems, sales material;" and "research and development." Id., ¶¶ 1(a)(c), (a)(d), (a)(e) of the Agreement.

19. On August 26, 2011, Mr. Dale notified Dorothy Gemmell, his supervisor and WebMD's Senior Vice President of Sales and Sales Operations, that he planned to resign from WebMD. 5/14/12 Tr., 56:20-57:2. Mr. Dale's immediate description to Ms. Gemmell of his expected new position at Health Grades was not precise. He told her that he would be a senior vice president leading a large sales team, and that his job would involve sales, marketing, and product development. 5/14/12 Tr., 57:6-58:3. When Ms. Gemmell asked him what he would be selling, he explained only that his position was "evolving," and that his sales would be directed to hospital customers. 5/14/12 Tr., 58:4-11.

20. On September 9, 2011, Mr. Dale's last day of work at WebMD, he explained, in an exit interview, that he would be helping hospitals market themselves through online promotion. 5/14/12 Tr., 62:13-63:22. As an example, he stated that he would help hospitals use traditional and online media to reach targeted patient populations to get them to choose his hospital clients for their treatment. Id., 63:10-22.

21. On September 12, 2011, Mr. Dale began working at Health Grades. Ex. 4.

C. Health Grades's Business

22. Health Grades's website is designed to help consumers gather information about healthcare providers. Its website provides consumers with information ...

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