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Synthes, Inc., Synthes Usa Hq, Inc., Synthes Usa, LLC, Synthes Usa v. Emerge Medical

August 15, 2012

SYNTHES, INC., SYNTHES USA HQ, INC., SYNTHES USA, LLC, SYNTHES USA SALES, LLC, AND SYNTHES USA PRODUCTS, LLC, PLAINTIFFS,
v.
EMERGE MEDICAL, INC., JOHN P. MAROTTA, ZACHARY W. STASSEN, ERIC BROWN, AND CHARLES Q. POWELL DEFENDANTS.



The opinion of the court was delivered by: Ronald L. Buckwalter, S.J.

MEMORANDUM

Currently pending before the Court is the Motion to Dismiss of Defendant Zachary W. Stassen. For the following reasons, the Motion is denied

I. FACTUAL AND PROCEDURAL HISTORY*fn1

A. General Information About Synthes and Its Efforts to Protect Confidential Information

Plaintiff Synthes, Inc. ("Synthes")*fn2 is a worldwide leader in the medical device industry, marketing and selling medical implant devices, including plates, screws, rods, biomaterials, instrumentation, and other devices for orthopedic surgery. (Am. Compl. ¶ 24.) Its customers include hospitals, hospital employees and directors, and physicians together with their employees and staff nurses. (Id. ¶ 25.)

Synthes markets and sells its products through a sales force comprised of Regional Sales Consultants and Associate Sales Consultants. (Id. ¶ 27.) These individuals report to Regional Managers, are assigned to specific territories within regions, and are generally paid on a commission basis. (Id.) The Regional Managers are responsible for the maintenance and growth of sales in the territories within their regions, and are also responsible for hiring, training, and management of Sales Consultants. (Id. ¶ 28.) They are often compensated based on sales within their regions and may also receive base compensation in addition to commissions. (Id.) Synthes Area Vice Presidents, in turn, are responsible for the maintenance and growth of sales in their regions and areas, and are responsible to hire and manage Regional Managers. (Id. ¶ 29.) Their compensation structure is similar to that of the Regional Managers. (Id.) Finally, the Vice President of Sales for Synthes's Trauma Division oversees all of the divisions' sales employees and sales activities. (Id. ¶ 30.)

Because Synthes invests millions of dollars annually to develop its technology, systems, products, and strategies, and to educate and train its employees, it requires all employees to sign an Employee Innovation and Non-Disclosure Agreement ("Non-Disclosure Agreement"). (Id. ¶ 31.) In addition, employees hired in sales, marketing, and product development capacities must sign a Confidentiality, Non-Solicitation, and Non-Competition Agreement ("Non-Competition Agreement"). (Id. ¶ 32.) These Agreements, in part, protect against the disclosure of confidential information, prohibit solicitation of Synthes's employees and Synthes's existing or prospective customers, and prohibit activities during and after employment with or on behalf of any individual or entity that competes or intends to compete with Synthes, subject to geographic and temporal limitations. (Id. ¶¶ 31, 32.) In exchange for the employees' execution of these Agreements, Synthes provides them with proprietary information, customer relationships, and valuable training programs. (Id. ¶ 33.) Synthes takes other measures to protect these interests by requiring the return of various information upon the employees' separation from Synthes's employment. (Id. ¶¶ 34--36.)

B. Defendant John Marotta's Employment With Synthes

Defendant John P. Marotta applied to Synthes on April 1, 2004, without any background in the orthopedic medical device industry. (Id. ¶ 38.) On June 21, 2004, he accepted a position as a Sales Consultant in Synthes's Trauma division, working in the Desert Valley region. (Id. ¶ 39.) Prior to commencing work, Marotta signed both the Non-Competition Agreement and Non-Disclosure Agreement, each dated June 25, 2004. (Id. ¶¶ 40--41.) At the same time, Marotta was given Synthes's Employee Policy Manual and, later, the amended Employee Policy Manual. (Id. ¶42.)

At the start of Marotta's employment, Synthes provided him with extensive training and access to customer and other confidential information. (Id. ¶¶ 43--44.) He was highly successful and highly compensated and, as a result, Synthes offered him a promotion to Regional Manager in 2007. (Id. ¶¶ 44--45.) On February 1, 2008, Marotta began his tenure as a Regional Manager, prior to which time he reviewed and executed a second Non-Competition Agreement. (Id. ¶¶ 47--48.) Upon becoming a Regional Manager in Colorado, Marotta's responsibilities substantially increased, and he was responsible for identifying, developing, and implementing strategic territory expansion opportunities; evaluating and developing Sales Consultants' individual business plans; and leading sales strategies and activities for all of Synthes's new product introductions. (Id. ¶ 49.) Due to his good service, Marotta's compensation increased progressively. (Id. ¶ 50.) In addition, he was enrolled in an MBA program, at Synthes's expense, subject to his agreement to repay Synthes for those tuition costs in the event he left the company. (Id.) Throughout his employment, Synthes entrusted Marotta with substantial confidential and proprietary information. (Id. ¶¶ 51--52.) Finally, Synthes provided Marotta with specialized training on the technical aspects of Synthes's products. (Id. ¶ 53.)

Under the Non-Competition and Non-Disclosure Agreements between Marotta and Synthes, Marotta agreed not to "disclose or communicate" Synthes's confidential and proprietary information "to any competitor or other third party" at any time during or after leaving Synthes's employ or to "use or refer to" such information "for any purpose . . . except as necessary for [him] to properly perform services for Synthes during [his] employment." (Id. ¶ 55.) Further, Marotta agreed that any inventions, innovations, or technical or business ideas conceived or developed during his employment were the exclusive property of Synthes. (Id. ¶ 56.) In addition, Marotta's Sales Consultant Non-Competition Agreement specifically prohibited him from competing with Synthes, for a period of one year following the termination of his employment with Synthes, in the territories for which he was responsible either at that time or one year prior. (Id. ¶ 57.) It also contained a non-solicitation covenant prohibiting him, for a period of one year, from soliciting business from Synthes's customers within his territory in Arizona. (Id. ¶ 59.) His Regional Manager Non-Competition Agreement contained similar prohibitions. (Id. ¶¶ 58, 60.) Aside from the foregoing covenants, both Non-Competition Agreements had choice of law provisions requiring the application of Pennsylvania law. (Id. ¶ 62.)

C. Defendant Eric Brown's Employment With Synthes

Defendant Eric Brown applied to Synthes on November 2, 1995, with no related background in the orthopedic medical device industry, and was offered a position as a Consultant in Synthes's Trauma division, initially based in Cincinnati, Ohio. (Id. ¶ 67--68.) Brown accepted the offer, effective November 9, 1995, and as a pre-condition to commencing employment, he signed a Non-Disclosure Agreement on November 22, 1995.*fn3 (Id. ¶ 69.) Brown also received and reviewed Synthes's Employee Policy Manual and Sales Policy Manual, and later received and reviewed the amended Employee Policy Manuals, as well as Synthes's Global Code of Business Ethics and IT Security Policy. (Id. ¶ 70.) Synthes thereafter provided extensive training to Brown in pertinent areas of the industry. (Id. ¶ 71.)

In September 1997, Brown transferred to a Consultant position in Austin, Texas, was subsequently promoted to Regional Manager of the Rocky Mountain Region, effective January 1, 2006, and ultimately promoted to Area Vice President of the Rocky Mountain Region, effective January 1, 2008. (Id. ¶ 72.) Defendant Marotta replaced Brown as Regional Manager of the Rocky Mountain Region and reported directly to Brown. (Id. ¶¶ 72, 75.) With each promotion, Brown executed separate Non-Competition Agreements, with the latest signed on January 1, 2008. (Id. ¶ 73.) During his fifteen-year employment with Synthes, Brown had direct contact with Synthes's customers, became intimately familiar with Synthes's customers' preferences, and had access to proprietary, sensitive, and confidential information within Synthes. (Id. ¶¶ 74, 77--78.) In exchange for his continued success, Brown received million of dollars in compensation and bonuses over the course of his tenure. (Id. ¶ 76.)

As set forth in the Area Vice President Non-Competition Agreement between Brown and Synthes, Brown agreed not to "disclose or communicate" Synthes's confidential and proprietary information "to any competitor or other third party" at any time during or after leaving Synthes's employ or to "use or refer to" such information "for any purpose . . . except as necessary for [him] to properly perform services for Synthes during [his] employment." (Id. ¶ 81.) Also under this Non-Competition Agreement, as well as his Non-Disclosure Agreement, Brown further agreed that any inventions, innovations, or technical or business ideas conceived or developed during his employment were the exclusive property of Synthes. (Id. ¶ 82.) The Non-Competition Agreement also (1) specifically prohibited Brown from competing with Synthes during his employment and for a period of one year following the termination of his employment with Synthes; (2) prohibited him from soliciting customers and employees during his employment and for a period of one year following the termination of his employment with Synthes; and (3) contained a choice of law provision, under which Pennsylvania law was to govern the agreement. (Id. ¶¶ 83--86.)

D. Defendant Charles Q. Powell's Employment With Synthes

Defendant Charles Q. Powell applied to Synthes on March 11, 2004, without any background in the orthopedic medical industry. (Id. ¶ 91.) On March 18, 2004, Powell accepted Synthes's offer of a position as a Territory Assistant in its Trauma division based in the Great Lakes West Territory in the area of Chicago, Illinois. (Id. ¶ 92.) Like the other Defendants, prior to commencing employment, Powell executed a Non-Competition Agreement on March 18, 2004, and a Non-Disclosure Agreement on March 14, 2004. (Id. ¶¶ 93--94.) Powell also reviewed Synthes's Employee Policy Manual, Sales Policy Manual, Global Code of Business Ethics, IT Security Policy, and, subsequently, the amended Policy Manual. (Id. ¶ 95.) Synthes provided Powell with extensive

training in the trauma aspects of the orthopedic industry, and continued to provide such training on an ongoing basis. (Id. ¶ 96.) Over time, his responsibilities increased and he was promoted to Associate Sales Consultant in September 2004, and ultimately to Sales Consultant in June 2006. (Id. ¶ 97.) With each promotion, Powell executed additional Confidentiality, Non-Solicitation, and ...


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