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Synthes, Inc. v. Emerge Medical, Inc.

United States District Court, E.D. Pennsylvania

June 5, 2014

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. EMERGE MEDICAL, INC., Counterclaim-Plaintiff,
v.
SYNTHES, INC., SYNTHES USA HQ, INC. SYNTHES USA, LLC, SYNTHES USA SALES, LLC, and SYNTHES USA PRODUCTS, LLC, Counterclaim-Defendants

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For SYNTHES, INC., SYNTHES USA PRODUCTS, LLC, SYNTHES USA SALES, LLC, SYNTHES USA, LLC, SYNTHES USA HQ, INC., Plaintiffs: ANTHONY B. HALLER, LEAD ATTORNEY, KEVIN M. PASSERINI, MICHAEL P. BROADHURST, ROSEMARY MCKENNA, BLANK ROME LLP, PHILADELPHIA, PA; EDWARD N. CAHN, BLANK ROME, LLP, ALLENTOWN, PA.

For JOHN P. MAROTTA, Defendant: ALEX G. ROMAIN, DANIEL DOCKERY, LEAD ATTORNEYS, WILLIAMS & CONNOLLY LLP, WASHINGTON, DC; ANDREW C.S. EFAW, LEAD ATTORNEY, WHEELER TRIGG & O'DONNELL LLP, DENVER, CO; ANNE R. MYERS, LEAD ATTORNEY, EILEEN MONAGHAN FICARO, GREGORY F. BROWN, KAUFMAN DOLOWICH & VOLUCK LLP, BLUE BELL, PA; DAVID P. HELWIG, LEAD ATTORNEY, MARKS O'NEILL O'BRIEN & COURTNEY, PITTSBURGH, PA; ENU MAINIGI, LEAD ATTORNEY, WILLIAMS & CONNOLLY, WASHINGTON, DC; JENNIFER WICHT, LEAD ATTORNEY, WILLIAMS & CONNOLLY, LLP, WASHINGTON, DC; SEAN G. SAXON, LEAD ATTORNEY, PRO HAC VICE, WHEELER TRIGG O'DONNELL LLP, DENVER, CO; BENJAMIN J. TURSI, MARKS O'NEILL O'BRIEN DOHERTY & KELLY PC, PHILADELPHIA, PA; IRINA VOLK RABOVETSKY, KAUFMAN DOLOWICH VOLUCK & GONZO LLP, BLUE BELL, PA; JOHN P. MCSHEA, MCSHEA LAW FIRM PC, PHILADELPHIA, PA.

For EMERGE MEDICAL, INC., formerly known as EMERGE SURGICAL, INC., Defendant: ALEX G. ROMAIN, DANIEL DOCKERY, LEAD ATTORNEYS, WILLIAMS & CONNOLLY LLP, WASHINGTON, DC; ANDREW C.S. EFAW, LEAD ATTORNEY, WHEELER TRIGG & O'DONNELL LLP, DENVER, CO; ENU MAINIGI, LEAD ATTORNEY, WILLIAMS & CONNOLLY, WASHINGTON, DC; JENNIFER WICHT, LEAD ATTORNEY, WILLIAMS & CONNOLLY, LLP, WASHINGTON, DC; ANNA M. DARPINO, ANNE R. MYERS, EILEEN MONAGHAN FICARO, GREGORY F. BROWN, KAUFMAN DOLOWICH & VOLUCK LLP, BLUE BELL, PA; IRINA VOLK RABOVETSKY, KAUFMAN DOLOWICH VOLUCK & GONZO LLP, BLUE BELL, PA; JOHN P. MCSHEA, MCSHEA LAW FIRM PC, PHILADELPHIA, PA; SEAN G. SAXON, PRO HAC VICE, WHEELER TRIGG O'DONNELL LLP, DENVER, CO.

For CHARLES O. POWELL, Defendant: ALEX G. ROMAIN, DANIEL DOCKERY, LEAD ATTORNEYS, WILLIAMS & CONNOLLY LLP, WASHINGTON, DC; ANDREW C.S. EFAW, LEAD ATTORNEY, WHEELER TRIGG & O'DONNELL LLP, DENVER, CO; ANNE R. MYERS, LEAD ATTORNEY, EILEEN MONAGHAN FICARO, GREGORY F. BROWN, KAUFMAN DOLOWICH & VOLUCK LLP, BLUE BELL, PA; ENU MAINIGI, LEAD ATTORNEY, WILLIAMS & CONNOLLY, WASHINGTON, DC; JENNIFER WICHT, LEAD ATTORNEY, WILLIAMS & CONNOLLY, LLP, WASHINGTON, DC; SEAN G. SAXON, LEAD ATTORNEY, PRO HAC VICE, WHEELER TRIGG O'DONNELL LLP, DENVER, CO; IRINA VOLK RABOVETSKY, KAUFMAN DOLOWICH VOLUCK & GONZO LLP, BLUE BELL, PA; JOHN P. MCSHEA, MCSHEA LAW FIRM PC, PHILADELPHIA, PA.

For EMERGE MEDICAL, INC., Counter Claimant: ANNA M. DARPINO, ANNE R. MYERS, KAUFMAN DOLOWICH & VOLUCK LLP, BLUE BELL, PA.

For SYNTHES USA HQ, INC., SYNTHES, INC., SYNTHES USA, LLC, SYNTHES USA SALES, LLC, SYNTHES USA PRODUCTS, LLC, Counter Defendants: ANTHONY B. HALLER, LEAD ATTORNEY, KEVIN M. PASSERINI, MICHAEL P. BROADHURST, BLANK ROME LLP, PHILADELPHIA, PA; EDWARD N. CAHN, BLANK ROME, LLP, ALLENTOWN, PA.

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MEMORANDUM

RONALD L. BUCKWALTER, S. J.

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TABLE OF CONTENTS FOR CROSS-MOTIONS FOR SUMMARY JUDGMENT TO LIABILITY

I. STATEMENT OF FACTS

A. Persons Relevant to the Suit

1. The Parties

2. Other Relevant Individuals

B. Background of the Key Players' Employment With Synthes

1. Defendant Marotta's Employment With Synthes

2. Defendant Brown's Employment With Synthes

3. Powell's Employment With Synthes

4. Trafka's Employment with Synthes and Magnum Tool

C. Written Obligations of the Parties and Other Individuals

1. Synthes Written Obligations

a. Contractual Obligations

b. Employment Policies and Obligations

2. Emerge's Written Contracts and Policies

3. Vendors' Written Contractual Obligations to Synthes

4. SIMS and Customers' Written Contractual Obligations to Synthes

D. The Formation of Emerge Prior to April 15, 2010

1. Brief Background of Emerge

2. Detailed Timeline of Emerge-Related Activities Prior to

April 15, 2010

3. Emerge's Business Plans and Investor Materials (Pre-April 2010)

a. The Private Placement Memorandum

b. Investor Presentations

c. Additional Statements Regarding Emerge's Business Model

4. Emerge's Finding of Investors and Raising Money

5. Early Design and Development of Emerge Product

E. Emerge's Use of Synthes Products and Information

1. Acquisition and Use of Synthes Product

2. Acquisition, Use, and Disclosure of Synthes's Confidential and

Proprietary Information

a. Information Related to Synthes's Manufacturing Costs

b. Information Related to Synthes' External Fixation and LCP

Products

c. Information Related to Synthes's Critical Features,

Dimensions, and Tolerances

d. Information Related to Synthes's Engineering Specifications

e. Information Related to Synthes's Cortical and

Cancellous Screws

f. Information Related to Synthes's Usage Data in Emerge's

Early Accounts

g. Information Related to Synthes's Cannulated Screw

Comparison Chart

h. Synthes Documents Marotta Emailed to His Personal Email

Address.

i. Marotta's & Powell's Retention of Synthes's Emails 51

j. Information Related to Synthes's Strategic Business

Acquisition Discussions

F. Emerge Obtains FDA Clearance

G. Emerge's Pilot Customers

1. Banner Health

2. AOSH/USPI

3. Catholic Healthcare West

4. Other System-Wide Sales and Early Targets

H. Emerge's Sales Process, Strategy, Implementation, and Commingling

of Product

I. Cardinal Health

J. Procedural History

II. STANDARD OF REVIEW

III. DISCUSSION

A. Claim Against Marotta for Breach of Fiduciary Duty (Count I)

1. Defendant's Motion for Partial Summary Judgment on Breach of

Fiduciary Duty

2. Plaintiffs' Motion for Summary Judgment on Breach of

Fiduciary Duty

B. Claim of Aiding and Abetting Breach of Fiduciary Duty Against Emerge

C. Claim Against Marotta for Breach of Contract Under the Non-Competition

and Non-Disclosure Agreements (Count II)

1. The Assignment Provision of the Non-Disclosure Agreement

2. The Non-Competition and Non-Solicitation Provisions

of the RM NCA

a. Breach of the Non-Competition Provision

b. Breach of the Non-Solicitation of Customers Provision

c. Breach of the Non-Solicitation of Employees Provision

3. Sales Consultant Non-Competition Provision

4. Return of Property Provision and Confidentiality and

Non-Disclosure Provisions in the RM NCA and NDA

a. Small Fragment Set

b. Synthes Product in Marotta's Garage

c. Synthes Emails

D. Misappropriation

1. Whether the Items at Issue Constituted Trade Secrets

a. Synthes Information Regarding Manufacturing Costs

and Usage Data

b. Product Design Information

2. Whether Emerge Misappropriated Synthes's Trade Secrets

a. Information Regarding Manufacturing Costs

and Usage Data

b. Synthes Product Drawings and Information Related to

External Fixation Products

c. Synthes Product Drawings and Information Related to

Critical Features, Dimensions, and Tolerances for Screws

Emerge Developed and Screws Emerge Identified as

Additional Product Offerings

d. Synthes Engineering Specifications and Information

Related to Products Emerge Designed and Identified as

Additional Product Offerings

e. Drawings and Information Related to Synthes Cortical and

Cancellous Screws and Product Emerge Identified as

Additional Product Offerings

f. Strategic Business Planning Information Related to

Companies Affiliated with Prospective Emerge Investors

and Advisors

3. Conclusion as to Misappropriation

E. False Advertising Under the Lanham Act

F. Computer Fraud and Abuse Act

G. Trespass to Chattels

H. Fraud

I. Tortious Interference With Contract

1. Tortious Interference with Marotta's Contracts With Synthes

a. Whether Emerge Had Knowledge of Marotta's Contractual

Agreements with Synthes

b. Whether Emerge Did Anything to Induce Marotta to

Breach Either His NDA, His RM NCA, or His SC NCA

With Synthes

2. Tortious Interference with Powell's Non-Compete Agreement With

Synthes

3. Tortious Interference With Brown's Agreements With Synthes

4. Tortious Interference With Synthes's Contractual Relationships

With Any of Its Customers or Vendors

a. Tortious Interference With Vendors

b. Tortious Interference with Customers

5. Marotta's Tortious Interference With Synthes's Contractual

Relations With Other Synthes Employees

J. Civil Conspiracy

IV. CONCLUSION

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Currently pending before the Court are the Cross-motions for Summary Judgment of Plaintiffs Synthes, Inc., Synthes USA HQ, Inc., Synthes USA, LLC, Synthes USA Sales, LLC, and Synthes USA Products, LLC (collectively " Synthes" ) and Defendants Emerge Medical, Inc., John P. Marotta, and Charles Q. Powell (collectively " Defendants" ). For the following reasons, Synthes's Motion is granted in part and denied in part and Defendants' Motion is granted in part and denied in part.

I. STATEMENT OF FACTS[1]

The factual history of this case, while not particularly long in a temporal sense,

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contains numerous discrete events and actions that give rise to the multitude of claims at issue. As the parties have already engaged in lengthy motion practice, as well as a preliminary injunction hearing, the general facts are well-known to both the parties and the Court. While the Court declines to recite every fact set forth by the parties, the Court will engage in a somewhat detailed summary in order to encompass the facts pertinent to resolution of the motions at issue.[2]

A. Persons Relevant to the Suit

1. The Parties

Synthes, Inc. is a Delaware corporation with its principal place of business in Pennsylvania, and is the parent company of the other Plaintiffs, which are also Delaware entities with their principal places of business in Pennsylvania. (Plaintiffs' Statement of Undisputed Facts (" PSUF" ) ¶ 1; Defendants' Response to Plaintiffs' Statement (" DRPS" ) ¶ 1.) Synthes has been described as a global leader in the highly competitive orthopedic device market. (PSUF ¶ 2; DRPS ¶ 2.) Its sales and marketing plan depends exclusively upon the preferences of orthopedic surgeons to influence the purchasing decisions of the hospitals and surgical centers where orthopedic surgeons practice. (PSUF ¶ 5; DRPS ¶ 5.)

Emerge Medical, Inc. (" Emerge" ) is a Colorado corporation formed on January 13, 2010, under the name Emerge Surgical, Inc. (PSUF ¶ 7; DRPS ¶ 7.) On June 23, 2010, Emerge Surgical, Inc. officially changed its name to Emerge Medical, Inc. (PSUF ¶ 8; DRPS ¶ 8.) Emerge competes with Synthes and was formed to produce and sell Generic Device Fixation Hardware " similar, but not identical to" that which Synthes also produces and sells. (PSUF ¶ ¶ 9-10; DRPS ¶ ¶ 9-10.) According to Emerge, it has " devised a new approach to the sales of [drill bits, guide wires, and screws] providing the American public with a like-numbered product that is similar to" drill bits, guide wires, and cannulated screws sold by Synthes. (PSUF ¶ 11; DRPS ¶ 11.) As of July 2012, Emerge sold only " drill bits, guide wires, and screws." (PSUF ¶ 12; DRPS ¶ 12.) Emerge's drill bits, guide wires, and screws may be " used to hold Synthes['] sophisticated implants in place." (Plaintiffs' Appendix (" Pls.' Appx." )[3] 2, Emerge Answer to Am. Compl. ¶ 156; PSUF ¶ 13; DRPS ¶ 13.) Currently, Cardinal Health, Inc. (" Cardinal Health" ) serves as the exclusive distributor of Emerge products. (PSUF ¶ 15; DRPS ¶ 15.)

Defendant John P. Marotta is a former Synthes Sales Consultant and Regional

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Manager in Synthes's Trauma Division. (PSUF ¶ 16; DRPS ¶ 16.) Marotta was a founding member of Emerge and currently serves as Emerge's Chief Executive Officer, President, and Director. (PSUF ¶ 17; DRPS ¶ 17.) As Chief Executive Officer (" CEO" ) of Emerge, Marotta has been responsible for operations and all aspects of Emerge's business, including product development, managing timelines, sales and marketing strategies, oversight of the development of sales and sales growth within the business, manufacturing, quality systems, financial responsibility for all aspects of the operation, and investor relations. (PSUF ¶ 18; DRPS ¶ 18.)

Zachary Stassen was a founding member of Emerge and was Emerge's Chief Operating Officer and Director until July or August 2010, when he became Chief Financial Officer. (PSUF ¶ ¶ 19-20; DRPS ¶ 19-20.) On November 4, 2011, Stassen resigned as an officer and employee of Emerge. (PSUF ¶ 21; DRPS ¶ 21.) Nonetheless, Stassen remains a shareholder of Emerge. (PSUF ¶ 25; DRPS ¶ 25.) Although originally a named Defendant in this action, Synthes and Stassen reached a settlement and the Court dismissed him from this action, without prejudice, on January 23, 2013. (PSUF ¶ ¶ 28-29; DRPS ¶ ¶ 28-29.)

Eric Brown is a former Area Vice President of Sales for Synthes Trauma. (PSUF ¶ 30; DRPS ¶ 30.) At some point during his employment with Synthes, Marotta reported directly to Brown. (PSUF ¶ 31; DRPS ¶ 31.) In 2009, during Brown's employment with Synthes, Brown was contemplating a new business that involved providing consulting services to distributors and start-up companies that sold orthopedic medical devices, and had hired Stassen as a business consultant in connection with that idea. (PSUF ¶ 32; DRPS ¶ 32.) Following the introduction of Marotta to Stassen in or about the summer of 2009, Brown, Marotta, and Stassen began to discuss other possible means for a new business, including the idea to sell generic medical device commodities. (PSUF ¶ 34; DRPS ¶ 34; Pls.' Appx. 26, at Interrog. Resp. No. 2.) Brown, however, was focused on a sales force model rather than the business model envisioned by Marotta and Powell. (Pls.' Appx. 19, Dep. of Zachary Stassen (" Stassen Dep." ), 228:16-229:3, July 22, 2011.) Nonetheless, Brown remained involved in discussions with Marotta and Stassen regarding the formation of a new company. (PSUF ¶ 36; DRPS ¶ 36.) By the time of incorporation, however, it was determined that Brown would have no place in either the formation or management of Emerge because Stassen and Marotta believed that Brown's Non-Compete Agreement would be a barrier to his participation. (PSUF ¶ ¶ 37-38; DRPS ¶ ¶ 37-38; Pls.' Appx. 3, Dep. of John Marotta (" Marotta Dep." ), 151:24-152:24, July 5, 2011.)[4] Although Brown was originally sued in connection with this lawsuit, he was dismissed without prejudice on January 23, 2013, as part of a settlement between him and Synthes. (PSUF ¶ ¶ 40-41; DRPS ¶ ¶ 40-41.) In that regard, Brown signed a settlement agreement which purports to assign to Synthes any and all interests that he held in Emerge or in certain intellectual property associated with Emerge. (PSUF ¶ 41; DRPS ¶ 41; Pls.' Appx. 27-28.)

Charles (Chaun) Q. Powell is a former Synthes Sales Consultant for Synthes Trauma who, during Marotta's tenure as Regional Manager of the Rocky Mountain

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Region, reported directly to Marotta. (PSUF ¶ 42; DRPS ¶ 42.) On March 15, 2010, Powell resigned from Synthes to work for Sonoma Orthopedic Products, Inc. (PSUF ¶ 43; DRPS ¶ 43.) In the summer of 2010, Powell agreed to an August 1, 2010 start date with Emerge, after which he would work on a part-time basis in a consulting position. (PSUF ¶ 44; DRPS ¶ 44.) On August 30, 2010, Powell left Sonoma Orthopedic Products, Inc. and, the following day, joined Emerge as Director of U.S. Sales. (PSUF ¶ 44; DRPS ¶ 44.) In connection with his employment, Powell executed a Revised Offer of Employment letter with Emerge dated August 1, 2010, signed by Marotta as Chief Executive Officer of Emerge. (PSUF ¶ ¶ 45-46; DRPS ¶ ¶ 45-46.) In this letter, Emerge stated that " we understand that you may be subject to certain confidentiality and competition restrictions under a confidentiality and non-compete agreement with one or more former employers (each, a 'Non-Competition Agreement')." (Pls.' Appx. 32; PSUF ¶ 47; DRPS ¶ 47.) In addition, Powell " acknowledge[d] that John P. Marotta, Chief Executive Officer, [was] also bound by the provisions of a similar agreement with his prior employer (the 'Marotta Agreement')" and " agree[d] to abide by the terms of any Non-Compete Agreement and will not do anything in [his] capacity as an employee of the Company to breach any Non-Compete Agreement nor to cause any action to be taken against the Complaint [sic] or Mr. Marotta for breach of the Marotta Agreement." (Pls.' Appx. 32; PSUF ¶ 48; DRPS ¶ 48.) Around January 1, 2012, Powell became Emerge's Vice President of U.S. Sales. (PSUF ¶ 49; DRPS ¶ 49.) Since beginning his employment, Powell has reported directly to Marotta. (PSUF ¶ 50; DRPS ¶ 50.) Powell testified that he was responsible for overseeing all aspects of marketing the majority of Emerge's products; strategic planning; identifying potential products for development; the creation, review, and approval of Emerge's marketing materials generally; performing on-site implementation of Emerge products; generating price quotations for Emerge products; website development; providing suggestions on products Emerge was in the process of making; and helping Cardinal Health understand the sales end of Emerge's business. (PSUF ¶ 51; DRPS ¶ 51; Pls.' Appx. 31, Dep. of Charles Powell (" Powell Dep." ), 63:8-66:10, 71:1-72:1, 76:1-19, 91:20-92:17, June 10, 2013.)

2. Other Relevant Individuals

Marcy Slone served as Emerge's Vice President of Operations from the summer of 2010 until her termination in January 2011. (PSUF ¶ 52; DRPS ¶ 52.) In that role, her responsibilities included overseeing the operations of the company, supplier management responsibilities, some inventory management responsibilities, day-to-day management responsibilities, and some interaction with Orchid on the design of Emerge's products. (PSUF ¶ 53; DRPS ¶ 53.) According to Marotta, Slone had intimate knowledge of the design and development efforts of Emerge's " initial phase products," including Emerge's cannulated screws, drill bits, and guide wires. (PSUF ¶ 54; DRPS ¶ 54; Pls.' Appx. 36, Marotta Dep., 654:13-55:8, July 6, 2011.)

Victoria Trafka was employed by Synthes in 1998 as a manufacturing engineer at Synthes's Monument facility. (PSUF ¶ 58; DRPS ¶ 58.) In 2009, Marotta contacted Trafka regarding potential assistance with Emerge. (PSUF ¶ 59; DRPS ¶ 59.) Thereafter, in March 2010, Trafka began working for Emerge as a part-time consultant to assist Emerge in developing product concepts. (PSUF ¶ 60; DRPS ¶ 60.) During the period of time for which she served as a part-time engineering

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contractor for Emerge, Trafka's position included contract design work paid on an hourly basis. (PSUF ¶ 61; DRPS ¶ 61.) In this role, she referred to herself as " VP Engineering" for " Emerge Medical, Inc." (PSUF ¶ 62; DRPS ¶ 62.) As of March 2011, Trafka was a part-time, salaried employee of Emerge and, at times, worked over forty hours in a week. (PSUF ¶ 63; DRPS ¶ 63.) On August 1, 2012, Trafka became a full-time employee of Emerge under the title of Vice President of Engineering and Quality. (PSUF ¶ ¶ 65-66; DRPS ¶ ¶ 65-66.) Her responsibilities in that role included, among other things: the design and development of instrumentation and devices used in trauma-based surgeries, as well as establishing and assuring compliance of Quality Systems to applicable regulations and standards; overseeing certain outside contractors; determining the materials used by Emerge in the production of its products; maintaining the design history file for Emerge's products; developing necessary regulatory strategies; reviewing all associated regulatory submissions for clinical research and marketing approval; communicating and resolving quality issues and applying root cause analysis to drive corrective and preventative actions; and coordinating the reporting of adverse events. (PSUF ¶ 67; DRPS ¶ 67.)

Preston Baus is a former Synthes Sales Consultant for Synthes Trauma and began working for Synthes in June 2004. (PSUF ¶ 72; DRPS ¶ 72.) In March 2006, Synthes promoted Baus to a new role within Synthes as a Market Development Manager in Solothurn, Switzerland, where he was responsible for driving sales of Synthes's trauma product line within his assigned areas of responsibility. (PSUF ¶ 73; DRPS ¶ 73.) Thereafter, in January 2009, Baus became Business Manager of EMEA Vet in Oberdorff, Switzerland, where he oversaw efforts to grow business for Synthes Veterinary in his area. (PSUF ¶ 74; DRPS ¶ 74.) In September 2010, he became a Sales Consultant for Synthes Trauma again, and remained in that position until he resigned from Synthes on April 7, 2011. (PSUF ¶ 75; DRPS ¶ 75.)

B. Background of the Key Players' Employment With Synthes

1. Defendant Marotta's Employment With Synthes

From June 2004 through April 15, 2010, Marotta was employed by Synthes in its Trauma Division. (PSUF ¶ 79; DRPS ¶ 79.) Prior to his employment with Synthes, Marotta had no experience in the orthopedic medical device industry. (PSUF ¶ 80; DRPS ¶ 80.) As part of his employment with Synthes, Marotta received specialized training, had some limited access to Synthes's resources and information, and would travel to existing and prospective customers of Synthes. (PSUF ¶ ¶ 81-82, 85-86; DRPS ¶ ¶ 81-82, 85-86.) On occasion, Marotta would have access to Synthes's product development and manufacturing facilities. (PSUF ¶ 87; DRPS ¶ 87.)

When Synthes first hired Marotta in 2004, he was employed as a sales consultant in a territory in the Desert Valley region of Arizona. (PSUF ¶ 88; DRPS ¶ 88.) In connection with his hiring, and as a condition of his employment with Synthes, Marotta entered into two agreements with Synthes: a Sales Consultant Confidentiality, Non-Solicitation, and Non-Competition Agreement (" SC NCA" ) and an Employee Innovation and Non-Disclosure Agreement (" NDA" ). (PSUF ¶ 89; DRPS ¶ 89.) According to Marotta's resume, his responsibilities as a Synthes Sales Consultant included " [m]anag[ing] a customer base including 97 surgeons," and

Page 635

" [p]roduct specialties includ[ing] Locked Plates, Cannulated Screws, IM Nails, External Fixation, Bio-Materials, and Power Equipment." (Pls.' Appx. 17; PSUF ¶ 90; DRPS ¶ 90.) As a Sales Consultant, Marotta had responsibility to develop, maintain, and expand customer relationships, including relationships at the hospital level with the operating room, materials management, sterile processing and other hospital staff, and physicians. (PSUF ¶ 92; DRPS ¶ 92.) In that role, he established direct contact with orthopedic surgeons, some of whom were Synthes customers, and became familiar with their preferences. (PSUF ¶ 93; DRPS ¶ 93.) His responsibilities included being physically present in the operating room to support surgeries with respect to all Synthes products. (PSUF ¶ 94; DRPS ¶ 94.)

Marotta received a substantial amount of field inventory to help support operations in his territory. (PSUF ¶ 98; DRPS ¶ 98.) His territory included, among others, the following customer accounts: Banner Gateway Medical Center, Banner Baywood Medical Center, Banner Desert Medical Center, Chandler Regional Hospital, Mercy Gilbert Medical Center, and Arizona Orthopedic Hospital. (PSUF ¶ 99; DRPS ¶ 99.) Some of the physicians that worked at sales facilities within Marotta's Sales Consultant Territory include: Neil Motzkin, Peter Seipel, Dan Aschenbrener, Salvatore La Cognata, John Duggan, Danton Dungy, Dennis Armstrong, Daniel Mullen, Earl Feng, Jason Tani, and Anthony Theiler. (PSUF ¶ 100; DRPS ¶ 100.)

Marotta was a highly successful sales consultant in his Synthes Sales Consultant territory and had developed very good relationships and goodwill with both the physician customers and the hospitals. (PSUF ¶ 110; DRPS ¶ 110.) As such, Synthes promoted Marotta to Regional Manager for the Rocky Mountain Region in September 2007. (PSUF ¶ 111; DRPS ¶ 111.) Marotta's promotion took effect on February 1, 2008, however, Marotta indicated that he effectively became acting Regional Manager of Rocky Mountain Region back in October 2007. (PSUF ¶ ¶ 113-14; DRPS ¶ ¶ 113-14.) In connection with this promotion, Marotta received a compensation package, which included a minimal annual income guarantee of $320,000 for two years, and he executed a Regional Manager Confidentiality, Non-Solicitation, and Non-Competition Agreement (" RM NCA" ). (PSUF ¶ ¶ 115-16; DRPS ¶ 115-16.) In addition, Marotta received a relocation package of approximately $190,000. (PSUF ¶ 117; DRPS ¶ 117.)

According to Marotta's resume, his responsibilities as Synthes Regional Manager involved management of a " $36 million P& L" and a total of twenty-six direct reports. (PSUF ¶ 118; DRPS ¶ 118.) He handled high level, multi-million dollar sales and negotiations in major integrated delivery networks (" IDN" s) and established warehouse, distribution, and office operations in Colorado. (PSUF ¶ 119; DRPS ¶ 119.) In addition, among other job duties, Marotta had responsibility for maintaining and growing sales in his region; leading a sales time to achieve ongoing company sales goals; handling Regional business; establishing and nurturing effective working relationships with key accounts, surgeons, and AO faculty in the Region; and maintaining good customer relations with the hospitals and physicians in his region. (PSUF ¶ ¶ 120-22; DRPS ¶ 120-22.) Customer accounts within Marotta's region during this time included: Denver Health, Swedish Medical Center, University of Colorado University Hospital, St. Mary's Hospital and Regional Medical Center, Banner Health Facilities, USPI

Page 636

Facilities, Centura Health Facilities, an Intermountain Healthcare facility. (PSUF ¶ 124; DRPS ¶ 124.)

One of the physicians who worked at the Denver Health facility in the Rocky Mountain Region was Dr. Steve Morgan. (PSUF ¶ 128; DRPS ¶ 128.) Dr. Morgan is a leader in the field of orthopedics, is regarded as an expert in orthopedic trauma surgery, and is a member of the AO faculty. (PSUF ¶ ¶ 130-31; DRPS ¶ ¶ 130-31.) Marotta first met Dr. Morgan in Arizona and continued to have dealings with him on Synthes's behalf. (PSUF ¶ ¶ 126-27; DRPS ¶ ¶ 126-27.)

During Marotta's tenure as a Synthes Regional Manager, Synthes dispatched Marotta to Arizona in January 2010 while the assigned Regional Manager for that region, Chance Leonard, was on medical leave. (PSUF ¶ 132; DRPS ¶ 132.) As a regional manager, Marotta made some introductions between Leonard and the physicians in Marotta's former Sales Consultant territory. (PSUF ¶ 134; DRPS ¶ 134.) Marotta also attended some meetings with customer accounts in his former Sales Consultant territory. (PSUF ¶ 136; DRPS ¶ 136.) While Regional Manager, Marotta also assisted Leonard with his role in Arizona and helped him with an initiative called " Operation Checkmate." (PSUF ¶ 138; DRPS ¶ 138.)

During his employment, Synthes provided Marotta with information regarding its products and customers. (PSUF ¶ 141; DRPS ¶ 141.) Marotta also had access to and received technical, customer, prospect, financial, and other information that is proprietary and confidential to Synthes. (PSUF ¶ 142; DRPS ¶ 142.) Among this information was Synthes sales data, product introduction plans, profit and loss information, information related to the performance and ranking of Synthes Sales Consultants and territories/regions, information related to Synthes product development plans and product-specific promotions, information related to the compensation of Synthes's Sales Consultants, and information related to Synthes pricing strategies and negotiations. (PSUF ¶ ¶ 143-44; DRPS ¶ ¶ 143-44.) Marotta also visited Synthes's product development and manufacturing facilities, including Synthes's facilities in Monument, Colorado and Paoli, Pennsylvania. (PSUF ¶ 145; DRPS ¶ 145.)

During his career with Synthes, Marotta earned in excess of $2.5 million. (PSUF ¶ 146; DRPS ¶ 146.) In addition to his compensation and relocation package, Marotta received business expense advances and tuition reimbursement for his MBA degree received in March 2010. (PSUF ¶ ¶ 148-50, 152; DRPS ¶ ¶ 148-50, 152.) According to Synthes's employee policy manuals and the applications for tuition reimbursement, if an employee leaves Synthes within one year of completing the courses for which reimbursement was paid by Synthes, the employee is required to reimburse Synthes for any tuition reimbursement paid within the past year. (PSUF ¶ 153; DRPS ¶ 153.) Marotta acknowledged this policy. (PSUF ¶ 154; DRPS ¶ 154.)

2. Defendant Brown's Employment With Synthes

Brown was employed by Synthes from November 9, 1995 to August 2, 2010. (PSUF ¶ 159; DRPS ¶ 159.) Prior to commencing employment, Brown was required to execute an Employee Innovation and Non-Disclosure Agreement (" Brown NDA" ). (PSUF ¶ 160; DRPS ¶ 160.) In addition, Brown received and reviewed Synthes's Employee Policy Manuals and Sales Policy Manual, and Synthes's Global Code of Business Conduct and Ethics and IT Security Policy. (PSUF ¶ 162; DRPS ¶ 162.) During his tenure with Synthes,

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Brown also received specialized training concerning the trauma industry, product segments, human anatomy, the treatment of traumatic fractures, and the application of trauma products in the surgical environment. (PSUF ¶ 164; DRPS ¶ 164.)

In April 2006, Brown received a promotion to Regional Manager of the Rocky Mountain Region, effective June 1, 2006. (PSUF ¶ 165; DRPS ¶ 165.) As a condition of his promotion, Brown executed a Regional Manager Confidentiality, Non-Solicitation and Non-Competition Agreement (" Brown RM NCA" ) on April 24, 2006. (PSUF ¶ 166; DRPS ¶ 166.) He then received a second promotion to Area Vice President of the Rocky Mountain Area effective January 1, 2008, a condition of which required execution of an Area Vice President Confidentiality, Non-Solicitation and Non-Competition Agreement (" AV NCA" ). (PSUF ¶ ¶ 167-68; DRPS ¶ ¶ 167-68.)

During his employment with Synthes, Brown had regular and direct contact with Synthes's customers and became intimately familiar with their business needs. (PSUF ¶ 170; DRPS ¶ 170.) In addition, he had access to Synthes's confidential, sensitive, proprietary, and trade secret information. (PSUF ¶ 171; DRPS ¶ 171.)

Around the same time that Marotta and Powell tendered their resignations from Synthes on March 15, 2010, Brown requested and obtained a transfer to a lower level position with Synthes as Regional Manager of the Lone Star Region of Texas, effective April 1, 2010. (PSUF ¶ 174; DRPS ¶ 174.) In close proximity to his transfer, Brown contacted Synthes Human Resources to inquire into the effect of his AVP NCA after taking the position as Regional Manager in Texas and whether a Regional Manager Non-Competition Agreement would supersede his AVP NCA. (PSUF ¶ 175; DRPS ¶ 175.) Synthes indicated that if Brown signed a Regional Manager Non-Competition Agreement for this new position in Texas, his AVP NCA would remain in effect. (Id.)

3. Defendant Powell's Employment With Synthes

Defendant Powell applied to Synthes on March 11, 2004, without any background in the orthopedic medical device industry. (PSUF ¶ 176; DRPS ¶ 176.) On March 18, 2004, Powell accepted a position as a Territory Assistant in Synthes's Trauma division based in the Great Lakes West Territory in the area of Chicago, Illinois. (PSUF ¶ 177; DRPS ¶ 177.) In connection with his hiring, Powell executed an Employee Innovation and Non-Disclosure Agreement (" Powell NDA" ). (PSUF ¶ 178; DRPS ¶ 178.) Powell also received and reviewed Synthes's Employee Policy Manual and amended Employee Policy Manual, Sales Policy Manual, Global Code of Business Ethics, and IT Security Policy. (PSUF ¶ 179; DRPS ¶ 179.)

In September 2004, Synthes promoted Powell to Associate Sales Consultant and, in June 2006, to Sales Consultant for the territory covering Vail, Colorado. (PSUF ¶ 180; DRPS ¶ 180.) As part of his promotion, Powell reviewed and executed a Sales Consultant Confidentiality, Non-Solicitation, and Non-Competition Agreement on June 1, 2006. (" Powell SC NCA" ). (PSUF ¶ 181; DRPS ¶ 181.) One of Powell's key responsibilities as a Sales Consultant was to build relations with surgeons, operating room personnel, and other key hospital personnel. (PSUF ¶ 183; DRPS ¶ 183.) Powell reported directly to Marotta during the time period when Marotta was Regional Manager for the Rocky Mountain Region. (PSUF ¶ 187; DRPS ¶ 187.)

Page 638

During his tenure with Synthes, Powell earned approximately $300,000 in 2008, and just over half of that in 2009. (PSUF ¶ 188; DRPS ¶ 188.) Synthes also paid over $34,000 in tuition reimbursement in connection with the MBA degree Powell obtained from the University of Denver while employed by Synthes. (PSUF ¶ 189; DRPS ¶ 189.) Powell completed his MBA program in August 2010. (PSUF ¶ 190; DRPS ¶ 190.) Powell was under the same tuition reimbursement policy as Marotta and acknowledged that he would have to reimburse Synthes for any tuition if he left within one year of completing the courses for which reimbursement was paid by Synthes. (PSUF ¶ ¶ 191-92; DRPS ¶ ¶ 191-92.)

On March 15, 2010, Powell tendered his resignation to his direct supervisor, Marotta. (PSUF ¶ 197; DRPS ¶ 197.) Prior to that time, Powell had given his resume to Marotta for other positions within Synthes. (PSUF ¶ 198; DRPS ¶ 198.) Ultimately, Powell was offered employment with Sonoma Orthopedic Products, Inc., on February 25, 2010. (PSUF ¶ 199; DRPS ¶ 199.) He accepted the offer on March 1, 2010, and signed an employment agreement with Sonoma on March 15, 2010. (PSUF ¶ 200; DRPS ¶ 200.) Powell then disclosed to Synthes that he would be joining a competitor. (PSUF ¶ 201 DRPS ¶ 201.) In turn, Synthes sent a letter to Powell, on March 25, 2010, enclosing copies of the Powell SC NDA and Powell NDA, and indicating, in part, as follows:

Dear Chaun,
I am writing to remind you of our continuing obligations to Synthes under the Confidentiality, Non-Solicitation and Non-Competition Agreement (" Non-Competition Agreement" ) that you signed June 1, 2006 and the Innovation and Non-Disclosure Agreement (" Non-Disclosure Agreement" ) that you signed on March 14, 2004. Copies of these Agreements are enclosed for your reference.
The Agreements prohibit you from disclosing Synthes' or its customers' confidential and proprietary information to any competitor or third party at any time. They also prohibit you from using such information for any purpose after leaving Synthes The Non-Competition Agreement also prohibits you from disclosing Synthes' or its customers' confidential and proprietary information to any competitor or third party at any time. It also prohibits you from using such information for any purpose after leaving Synthes. The Non-Competition Agreement also prohibits you, for a period of one-year following your employment with Synthes, from soliciting the prospects or customers or their affiliates with whom you had contact for Synthes. You are similarly prohibited from soliciting or hiring any Synthes employee to work elsewhere. Finally, you are required to return all materials that belong to Synthes immediately upon the termination of your employment. If you have not done so already, you should talk to your supervisor about returning these materials.
. . .

(PSUF ¶ 202; DRPS ¶ 202; Pls.' Appx. 113.) On the same day, Synthes sent a letter to Sonoma Orthopedic Products, Inc., which enclosed copies of the Powell SC NCA and Powell NDA, and stated, in part, as follows:

Dear Sir or Madam:
You should be made aware that one of your newly hired employees, Charles (Chaun) Powell, was recently employed by our company, Synthes (USA), and had signed an " Employee Innovation and Non-Disclosure Agreement" and a " Non-Competition Agreement" with us,

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in which he assumed certain legal obligations that extend to his subsequent employment activities. A copy of the Agreements, signed by Chaun, is enclosed for your reference.
The " Employee Innovation and Non-Disclosure Agreement" prohibits Chaun from disclosing Synthes' or its Customers' confidential and proprietary information, as defined in the agreement, to any competitor or third party at any time and from using such information for any purpose after leaving Synthes. Such information or knowledge would include, but not limited to, any or all product information gained as a result of his participation in our product technology, project information, manufacturing methods, technology, reports or reporting systems, product development process, test market activities, Sales Meetings and/or Annual Meetings, as well as any other proprietary information to which they have had access.
The " Non-Competition Agreement" also prohibits Chaun, for a period of one-year following his employment with Synthes, from soliciting the prospects or customers or their affiliates with whom he had contact for Synthes.
Any violation of the " Employee Innovation and Non-Disclosure Agreement" is also a violation of the Federal Uniform Trade Secrets Act which makes illegal any misappropriation or disclosure of Trade Secrets.
. . .

(PSUF ¶ 203; DRPS ¶ 203; Pls.' Appx. 115.)

Powell began his employment with Sonoma Orthopedic Products, Inc. as a Trauma Sales Representative on March 15, 2010. (PSUF ¶ 204; DRPS ¶ 204.) That employment included a three-month guarantee of $10,000 per month. (PSUF ¶ 205; DRPS ¶ 205.) On August 2, 2010, Powell tendered his resignation to Sonoma Orthopedic Products, Inc., to take effect on September 1, 2010. (PSUF ¶ 206; DRPS ¶ 206.)

4. Trafka's Employment with Synthes and Magnum Tool

Synthes offered Trafka a position as a manufacturing engineer at Synthes's Monument, Colorado facility on May 29, 1998. (PSUF ¶ 207; DRPS ¶ 207.) In connection with her employment, Trafka executed an Employee Innovation and Non-Disclosure Agreement and reviewed Synthes's Employee Policy Manual. (PSUF ¶ ¶ 208-09; DRPS ¶ 208-09.) As a manufacturing engineer at Monument, Trafka's duties were to create aid to manufacturing processes and then document those manufacturing processes. (PSUF ¶ 211; DRPS ¶ 211; Pls.' Appx. 39, Dep. of Victoria Trafka (" Trafka Dep." ), 44:15-4:1, June 12, 2013.) In that role, she worked directly with both product development engineers and quality control engineers. (PSUF ¶ 212; DRPS ¶ 212; Trafka Dep. 48:9-49:14.) In April or May of 2001, Trafka resigned from Synthes. (PSUF ¶ 213; DRPS ¶ 213.)

From May 2005 until December 2010, Trafka was employed by Magnum Tool (" Magnum" ). (PSUF ¶ 214; DRPS ¶ 214.) Magnum was a vendor used by Synthes for certain manufacturing products. (PSUF ¶ 218; DRPS ¶ 218.) At Magnum, Trafka held positions as project engineer, engineering manager, senior project development engineer, and International Standards Organization manager. (PSUF ¶ 215; DRPS ¶ 215.) During this time, Trafka agreed to maintain the confidentiality of Synthes's proprietary and confidential information accessible to Magnum employees in connection with Magnum's vendor relationship with Synthes. (PSUF ¶ 219; DRPS ¶ 219.) Indeed, she personally

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signed an agreement on behalf of Magnum, providing that:

The Parties agree that any business and technical information, including but not limited to volume, forecasts, drawings, specifications, formulae and manufacturing processes, whether marked or unmarked, verbal or written, provided by either Party are to be considered proprietary and confidential, and are to be treated in a confidential manner by both the supplier and Synthes.
It is further understood that duplication or disclosure of such information to a third party without written permission of the disclosing party is prohibited. This information and any material supplied by either Party remain the property of the disclosing Party and shall be returned in their entirety upon request.

(PSUF ¶ 220; DRPS ¶ 220; Pls.' Appx. 122.) During Trafka's employment with Magnum, she also entered into additional non-disclosure agreements with Synthes. (PSUF ¶ 221; DRPS ¶ 221.)

In connection with her employment with both Synthes and Magnum, Trafka was privy to information about Synthes's specifications for raw materials, machining and manufacturing of product, the finishing of Synthes products, and the inspection of Synthes products. (PSUF ¶ 222; DRPS ¶ 222.) She was also given information about how and where Synthes stores its product drawings and how and where Synthes stores specifications related to raw materials, machining and manufacturing, finishing, and inspection. (PSUF ¶ 223; DRPS ¶ 223.) Finally, Trafka admitted that she had access to Synthes specifications and information regarding raw materials, machining, manufacturing, finishing, and inspection. (PSUF ¶ 224; DRPS ¶ 224.)

C. Written Obligations of the Parties and Other Individuals

1. Synthes Written Obligations

a. Contractual Obligations

Under Synthes's employee policies, " All employees are required to sign an Employee Innovation and NonDisclosure agreement prior to employment." (PSUF ¶ ¶ 225-26; DRPS ¶ ¶ 225-26.) In addition, Non-Competition Agreements are required as a condition of employment for all new Sales Consultants and other positions which may have access to proprietary and/or confidential business information. (PSUF ¶ ¶ 227-28; DRPS ¶ ¶ 227-28.) Further, in connection with a promotion, Synthes also requires employees, such as Regional Managers, to execute Synthes's Confidentiality, Non-Solicitation, and Non-Competition Agreements. (PSUF ¶ 229; DRPS ¶ 229.)

Marotta's Regional Manager Non-Competition Agreement (" RM NCA" ) required that he acknowledge the following:

I acknowledge that: (1) Synthes (U.S.A.), its partners, and its and their parents, affiliates, subsidiaries, divisions, and related companies or entities, including but not limited to Synthes, Inc., Synthes Spine Company, L.P., Synthes Maxillofacial, Synthes North America, Inc., Spine Solutions, Inc., SYTH, Inc. and Norian Corporation (collectively referred to herein as " Synthes" ), are engaged in the business of developing, designing, manufacturing, and selling surgical, medical and veterinary implants, medical biomaterial and endoscopic technologies, products and services in connection with osteosynthesis, musculoskeletal, maxillofacial and spine surgery, including, but not limited to, compression plates and screws, intermedullary nails, external fixation devices, percutaneous devices, cranio-facial

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implants, mandible implants, spinal implants and screws, surgical instruments, osteobiologic and disc replacement products, and minimally invasive and endoscopic products (the " Business" ); (2) the Business encompasses a broad range of technologies, products and services that Synthes now provides and may in the future develop internally or obtain through acquisitions, merger, sub-contracting or otherwise; (3) Synthes is in a highly competitive industry; (4) Synthes invests substantial time, money, and effort, on an ongoing basis, to train its employees with specialized skill and knowledge unique to Synthes and its Business, to develop technologies, products and services for the Business, to develop and maintain a proprietary data base of prospects, to maintain and expand its customer base, and to improve and develop its technologies, products and services; (5) from the outset of and during my employment with Synthes, I have had and will continue to have access to, receive, learn, develop and/or conceive technical, customer, prospect, financial or other information that is proprietary and/or confidential to Synthes; (6) this information must be kept in strict confidence to protect Synthes' Business and maintain its competitive position in the marketplace, and this information would be useful to Synthes' existing and potential competitors for indefinite periods of time; (7) from the outset of and during my employment with Synthes, I have had and will continue to have access to and will be required to maintain, supervise, develop and initiate customer relationships and goodwill that are valuable to Synthes and which it has a legitimate interest in protecting; (8) Synthes would be irreparably harmed by my subsequent work with, for or as a competitor of Synthes, in an executive, managerial, marketing, sales, technical, administrative, or product development capacity, due to the possibility that there would be inadvertent or other disclosures of Synthes's proprietary and/or confidential information or that there would be improper intererence with its valuable customer relationships and goodwill; (9) I acknowledge that my promotion to Regional Manager constitutes adequate consideration for signing this agreement and that, as further consideration for this agreement and the restrictions contained herein, I acknowledge that I have been given access to confidential, proprietary and trade secret information of Synthes; and (10) the restrictions in this agreement are reasonable and necessary to protect Synthes' legitimate business interests.

(PSUF ¶ 230; DRPS ¶ 230; Pls.' Appx. 68.) This language is typical of many of the other NCA's signed by Synthes employees, including those of Brown and Powell. (PSUF ¶ 231 (citing similar agreements).) These agreements also specified what constituted confidential and proprietary information, including information concerning: (1) the identity of customers and prospects, their specific requirements, and their names, addresses, and telephone numbers; (2) prices, renewal dates, and other detailed terms of customer and supplier contracts and proposals; (3) pricing policies, methods of delivering services and products, marketing and sales strategies, product know-how, product technology, and product development strategies; (4) physical security systems, access control systems, network, and other equipment designs; (5) employment and payroll records; (6) forecasts, budgets, and other non-public financial information; (7) product performance information, product technical information, and product know-how; and (8) expansion plans, management

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policies, and other business strategies and policies. (PSUF ¶ 232; DRPS ¶ 232; Pls.' Appx. 49, 68, 98, 104.)

Under these agreements, Marotta, Brown, and Powell agreed that, upon termination of their employment with Synthes, they would immediately return " all correspondence files, business card files, customer and prospects lists, price lists, product lists, software, manuals, technical data, forecasts, budgets, notes, electronically stored information or data, and other materials that contain any of this information." (PSUF ¶ 233; DRPS ¶ 233.) The agreements indicated that the provisions applied " even to information of this type that is developed or conceived by me, alone or with others, at Synthes' instruction or otherwise" and that " these provisions apply to all information I may receive that is confidential and/or proprietary to any customer or other person or entity who does business with Synthes." (PSUF ¶ 234; DRPS ¶ 234; Pls.' Appx. 49, 68, 98, 104.)

Under Marotta's, Brown's, and Powell's and Employee Innovation and Non-Disclosure Agreements (" NDA" s), the three individuals agreed to the following:

. . . to disclose and assign to SYNTHES as its exclusive property, all inventions and technical or business innovations, including computer software developed or conceived by me solely or jointly with others on company time or on my own time during the term of my employment, (1) that are along the lines of the businesses, work or investigations of SYNTHES or its affiliates to which my employment relates, or as to which I may receive information due to my employment, or (2) that result from or are suggested by any work which I may do for SYNTHES or (3) that are otherwise made through the use of SYNTHES time, facilities or materials . . .
. . . upon any termination of my employment to deliver to SYNTHES promptly all items which belong to SYNTHES or which by their nature are for the use of SYNTHES employees only, including, without limitation, all written and other materials which are of a secret or confidential nature relating to the business of the Company or its affiliates . . .
. . . not to use, publish or otherwise disclose (except as my SYNTHES duties may require) either during or subsequent to my employment, any secret or confidential information or data of SYNTHES or any information or data of others, such as, but not limited to, sales dollars or units, product technology or product development, project information, manufacturing methods or technology, reports or reporting systems, which SYNTHES is obligated to maintain in confidence.

(PSUF ¶ 237; DRPS ¶ 237; Pls.' Appx. 52, 96, 100.) Synthes employees Victoria Trafka, Chance Leonard, Sean North, Brennen Warren, Preston Baus, Brian Hahn, and Craig Lynn had similarly-worded obligations under their respective Employee Innovation and Non-Disclosure Agreements. (Pls.' Appx. 118, 126, 127, 128, 129, 130, 131.) Baus also maintained an additional confidentiality and non-disclosure obligation in connection with his promotion within Synthes to Market Development Manager in Solothurn, Switzerland, as follows:

The Employee shall not, during the term of his employment and thereafter disclose to any party of use for his own benefit any information concerning the business of the Company or any of its affiliated companies, which have become known to the Employee. " Information about the business" includes, without limitation, all business, organization and technical knowledge, know-how, proprietary

Page 643

or confidential information, names or addresses of customers of the Company or any of its affiliated companies and any other information which is known only to a limited number of persons and which is not intended to become known outside of the Company or any of its affiliated companies.
All written and other record and all tangibles concerning the Company or any of its affiliated companies and their business which are in the possession of the Employee shall be carefully kept and shall be immediately returned to the Company upon its request, and in any case upon termination of the employment.

(Pls.' Appx. 132.)

Under their respective Sales Consultant Non-Competition Agreements (" SC NCA" s), Marotta and Powell agreed as follows:

I will not, for a period of one year after my employment with Synthes terminates for any reason, solicit or contact, directly or through others, for the purpose of competing or interfering with any part of Synthes' business, (1) any customer of Synthes that I solicited at any time during the last three years of my employment; (2) any prospective customer of Synthes that received or requested a proposal or offer from me on behalf of Synthes at any time during the last three years of memployment; or (3) any customer or prospective customer of Synthes for which I had any responsibility, directly or indirectly, at any time during the last three years of my employment . . .
I agree I will not, for a period of one year after my employment terminates for any reason, work for (as an employee, consultant, contractor, agent or representative) any competitor of Synthes in the territory or territories that I am now, or have been responsible for at any time during the last year of my employment with Synthes.

(PSUF ¶ 240; DRPS ¶ 240; Pls.' Appx. 49, 104.) " Competitors" as stated in the SC NCAs, were deemed to be " any persons or entities who now, or in the future, sell, or intend to sell, orthopedic, bone fixation, maxillofacial, medical, endoscopic and/or spinal implant devices or instrumental technologies, products, or services." (PSUF ¶ 241; DRPS ¶ 241; Pls.' Appx. 49, 104.) Again, Synthes employees Colin Brown and Brennen Warren had similarly-worded obligations in their own Confidentiality, Non-Soliciation, and Non-Competition Agreements. (Pls.' Appx. 133, 135.)

Upon his promotion to Regional Manager, Marotta again agreed to certain non-competition provisions in his RM NCA, as follows:

NO CONTACT WITH OR SOLICITATION OF CUSTOMERS & PROSPECTS:
I agree that, during my employment and for a period of twelve (12) months after my employment with Synthes terminates for any reason, voluntary or involuntary, I will not solicit, contact, or provide services to (or attempt to do any of the foregoing), directly or indirectly, for the purpose or effect of competing or interfering with any part of Synthes' Business: (1) any customer of Synthes within my assigned territory; (2) any Customer of Synthes that I contacted, solicited, received compensation on sales, to whom I provided coverage, or in any way supported or dealt with at any time during the last two years of my employment; (3) any prospective Customer of Synthes that I contacted, for whom I had coverage responsibility, or who received or requested a proposal or offer from me on behalf of Synthes at any time during the last two years of my

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employment; (4) any existing or prospective Customer of Synthes for which I had any direct or indirect responsibility at any time during the last two years of my employment . . .
NO SOLICITATION OR HIRING OF EMPLOYEES:
I agree that, during my employment and for a period of twelve (12) months after my employment with Synthes terminates for any reason, voluntary or involuntary, I will not directly or indirectly, (1) solicit, induce, or encourage any employee of Synthes to leave his/her employment with Synthes, (2) offer any employee of Synthes employment elsewhere, (3) participate in the recruitment of any employee of Synthes to work elsewhere, or (4) hire any employee of Synthes to work elsewhere.
NO COMPETITION IN SAME REGION:
I agree that, during my employment and for a period of twelve (12) months after my employment with Synthes terminates for any reason, voluntary or involuntary, I will not, directly or indirectly, compete in my former Region with Synthes' Business. This means that I will not work for or be involved in the Business of any Competitor of Synthes in an executive, managerial, marketing, sales, technical, administrative or product development capacity, whether as an owner, principal, partner, employee, consultant, contractor, agent or representative.

(PSUF ¶ 243; DRPS ¶ 243; Pls.' Appx. 68.) The term " Customer" included hospitals, hospital employees that influenced medical device purchasing decisions " including material management, operating room, sterile processing, and related personnel; and physicians who may use the devices, together with their partners, employees, and staff nurses." (PSUF ¶ 245; DRPS ¶ 245; Pls.' Appx. 68.)

Synthes employees Chance Leonard, Colin Brown, Mike Saunders, Sean North, and Andy White had similarly-worded obligations under their respective Regional Manager Confidentiality, Non-Solicitation, and Non-Competition Agreements. (Pls.' Appx. 134, 136, 137, 139.) Likewise, Synthes employees Josh Gorman, Jason Fowler, Brian Hah, and Preston Baus had similarly-worded obligations under their respective Sales Consultant Confidentiality, Non-Soliciation, and Non-Competition Agreements, with the exception of the non-competition covenant limiting competition in their former Sales Consultant territory, as opposed to a regional manager region. (Pls.' Appx. 140, 141, 142, 143.)

Under his Area Vice-President Non-Competition Agreement (" AVP NCA" ), Brown agreed to similar prohibitions on a national scale, as follows:

NO CONTACT WITH OR SOLICIATION OF CUSTOMERS & PROSPECTS
I agree that, during my employment and for a period of twelve (12) months after my employment with Synthes terminates for any reason, voluntary or involuntary, I will not solicit, contact, or provide services to (or attempt to do any of the foregoing) directly or indirectly, for the purpose or effect of competing or interfering with any part of Synthes' Business: (1) any Customer of Synthes within the United States; (2) any Customer of Synthes that I contacted, solicited, received compensation on sales, to whom I provided coverage, or in any way support or dealt with at any time during the last two years of my employment; (3) any prospective Customer of Synthes that I contacted, for whom I had coverage responsibility, or who received or requested a proposal or offer

Page 645

from me on behalf of Synthes at any time during the last two years of my employment; (4) any existing or prospective Customer of Synthes for which I had any direct or indirect responsibility at any time during the last two years of my employment . . .
NO SOLICITATION OR HIRING OF EMPLOYEES:
I agree that, during my employment and for a period of twelve (12) months after my employment with Synthes terminates for any reason, voluntary or involuntary, I will not directly or indirectly, (1) solicit, induce, or encourage any employee of Synthes to leave his/her employment with Synthes, (2) offer any employee of Synthes employment elsewhere, (3) participate in the recruitment of any employee of Synthes to work elsewhere, or (4) hire any employee of Synthes to work elsewhere.
NO COMPETITION IN SAME REGION:
I agree that, during my employment and for a period of twelve (12) months after my employment with Synthes terminates for any reason, voluntary or involuntary, I will not, directly or indirectly, compete with Synthes' Business within the United States. This means that I will not work for or be involved in the Business of any Competitor of Synthes in an executive, managerial, marketing, sales, technical, administrative or product development capacity, whether as an owner, principal, partner, employee, consultant, contractor, agent or representative.

(PSUF ¶ 251; DRPS ¶ 251; Pls.' Appx. 98.)

All of the Synthes Confidentiality, Non-Soliciation, and Non-Competition Agreements cited above, including Marotta's SC NCA and RM NCA, Brown's AVP NCA, and Powell's SC NCA, have choice of law provisions under which Pennsylvania law is to govern the agreements. (PSUF ¶ 257; DRPS ¶ 257.)

b. Employment Policies and Obligations

In connection with his employment at Synthes, Marotta received the Synthes Employee Policy Manual, the Global Code of Business Ethics, the Synthes Sales Policy Manual, and Synthes's IT Security Policy, and, in 2009, Marotta received and reviewed Synthes's amended Employee Policy Manual. (PSUF ¶ 259; DRPS ¶ 259.) Marotta was trained on all of these policies. (PSUF ¶ ¶ 261, 263, 265, 267; DRPS ¶ ¶ 261, 263, 265, 267.) Marotta generally understood, based on these policies, that computer systems belonged to Synthes, that he was expected to operate in accordance with the terms of the Employee Policy Manuals, that he understood that he had an obligation to abide by Synthes's rules as an employee of Synthes, and that, as a Regional Manager, he should enforce Synthes's rules. (PSUF ¶ ¶ 269-72; DRPS ¶ ¶ 269-72.)

2. Emerge's Written Contracts and Policies

Upon joining Emerge, Marotta executed an Executive Employment Agreement. (PSUF ¶ 273; DRPS ¶ 273.) Marotta's Executive Employment Agreement contained, among others, the following relevant provisions:

6. Confidential Information.

6.1 Company Information. Except for the benefit of Company, Executive agrees at all times . . . to hold in strictest confidence, and not to use, or to disclosure to any person, firm or corporation without written authorization . . . any Confidential Information (as defined below) of the Company. For purposes of this Agreement

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" Confidential Information" is defined as any Company proprietary information, technical data, trade secrets or know-how, including, but not limited to, research, product plans, products, services, customer lists and customers, software developments, inventions, processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, finances or other business information . . .
6.2 Former Employer Information. Executive agrees that he will not, during his employment with the Company, improperly use or disclose any proprietary information or trade secrets of any former employer or other person or entity and that he will not bring onto the premises of the Company any unpublished document or proprietary information belonging to any such employer, person or entity unless consented to in writing by such employer, person or entity. The Company and Executive acknowledge that Executive is subject to certain confidentiality and competition restrictions with his former employer under the terms of a confidentiality, non-solicitation and non-competition agreement with his former employer (the " NCA Agreement" ). Executive will not and will not cause Company to breach the NCA Agreement and shall indemnify the Company from any costs and expenses which may be incurred by the Company as a result of a claimed breach of the NCA Agreement.

(Pls.' Appx. 146 (emphasis in original).) In addition, this Employment Agreement contained its own non-competition and confidential information provisions. (Id.)

Emerge also required its employees--including Marotta and Powell--to sign Confidential Information and Innovations and Proprietary Rights Assignment Agreements. (PSUF ¶ 276; DRPS ¶ 276.) Aside from provisions regarding the protection of Emerge proprietary information, the document contained the following provision:

1.4 No Improper Use of Information of Prior Employers and Others. During my employment or business relationship with the Company I will not improperly use or disclose any confidential information or trade secrets, if any, of any former employer or any other person to whom I have an obligation of confidentiality, and I will not bring onto the premises of the Company any unpublished documents or any property belonging to any former employer or any other person to whom I have an obligation of confidentiality unless consented to in writing by that former employer or person. I will use in the performance of my duties only information which is generally known and used by persons with training and experience comparable to my own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by the Company. . . .

(Pls.' Appx. 147.)

3. Vendors' Written Contractual Obligations to Synthes

Synthes entered into Supplier Quality Agreements and Non-Disclosure Agreements with the following vendors for the provision of the vendors' goods or services to Synthes: Orchid Unique, Orchid Stealth, Orchid Bio-Coat, LLC, Magnum Tool Company, Inc., and Precision Edge

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Surgical Product Company, LLC. (Pls.' Appx. 148, 149.) Each of the Supplier Quality Agreements required vendors to adhere to certain Synthes-specific requirements regarding the manufacture of Synthes products. (Pls.' Appx. 148.) The Non-Disclosure Agreements required the vendors not to disclose any " Confidential Information" of Synthes. (Pls.' Appx. 149.)

4. SIMS and Customers' Written Contractual Obligations to Synthes

Synthes' Inventory Management Systems (" SIMS" ) are cabinets which store Synthes products. (PSUF ¶ 283; DRPS ¶ 283.) The SIMS cabinets are designed to " enhance and standardize inventory management practices of [Synthes] customers as they relate to Synthes products" and provide customers with " access to critical components . . . with storage units and workstations designed to improve organization and response in the operating room." (Pls.' Appx. 152.) The SIMS cabinets include features such as high-density drawer storage, a visual inventory, fully enclosed compartments, lockable cabinets, adjustable dividers, and labeled plastic dividers. (Id.)

Notably, Synthes SIMS cabinets are placed into a customer account and are either owned by Synthes, the customer, or a combination of both. (PSUF ¶ 299; DRPS ¶ 299.) Generally, if not on loan, Synthes enters into agreements with customers concerning the SIMS placed at the customer account. (PSUF ¶ 300; DRPS ¶ 300.) Each of the SIMS agreements states that " the storage units will house only Synthes products." (Pls.' Appx. 260-76, 278-80 (emphasis in original).) These provisions appear in SIMS agreements regardless of whether the customer owns all or part of the SIMS units. (PSUF ¶ 303; DRPS ¶ 303.)

D. The Formation of Emerge Prior to April 15, 2010

1. Brief Background of Emerge

In 2009, Brown, while still employed with Synthes, was contemplating a new business that involved providing consulting services to distributors and start-up companies that sold orthopedic medical devices. (PSUF ¶ 308; DRPS ¶ 308.) In connection with this idea, Brown hired Zachary Stassen as a consultant. (Id.) This business model was different from the business model that ultimately became Emerge. (PSUF ¶ 309; DRPS ¶ 309.)

In or around the spring of 2009, Marotta first conceived the business plan upon which Emerge would later be based. (PSUF ¶ 310; DRPS ¶ 310.) Shortly thereafter, Marotta discussed this idea with Brown. (PSUF ¶ 311; DRPS ¶ 311.) Following the introduction of Marotta to Stassen in or about the summer of 2009, Brown, Marotta, and Stassen began to discuss other possible means for a new business, including the idea to sell generic medical device commodities. (PSUF ¶ 312-13; DRPS ¶ 312-13; Pls.' Appx. 26, Interrog. Resp. No. 2.) Brown, Marotta and Stassen saw an opportunity to create a business that would sell non-patented generic medical device commodities, although Brown remained focused on his distributorship idea. (Pls.' Appx. 6; Marotta Dep. 351:6-352:1.) At some point, Brown proposed naming the new company " Emerge" and, upon agreement by the others, a company was incorporated under the name " Emerge Surgical, Inc." (PSUF ¶ 316; DRPS ¶ 316.) Before incorporation, however, it was agreed that Brown would have no further place in the formation or management of Emerge. (Marotta Dep. 152:8-24.)

Following the initial meeting, Marotta and Stassen began analyzing the market to

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determine the feasibility of starting a generic orthopedic device company and, during the fall and winter of 2009, the two men drafted a business plan and private placement memorandum for Emerge. (PSUF ¶ ¶ 317-18; DRPS ¶ ¶ 317-18.) A November 2009 draft of the business plan identified Synthes as a competitor of Emerge, noting that it dominated the orthopedic trauma industry with a nearly 50% market share. (PSUF ¶ 319; DRPS ¶ 319.) While employed by Synthes, Marotta had begun to identify pressures or challenges on hospital administrations that suggested to him that there may be an alternative model of distribution to better serve them. (PSUF ¶ 326; DRPS ¶ 326.)

In January 2010, Stassen resigned from his primary employment. (PSUF ¶ 323; DRPS ¶ 323.) Emerge's Articles of Incorporation were filed on January 13, 2010. (PSUF ¶ 324; DRPS ¶ 324.) Prior to Marotta's resignation from Synthes, he had spoken with potential investors on behalf of Emerge and engaged in numerous other actions to get Emerge up and running. (PSUF ¶ ¶ 328, 332-35; DRPS ¶ ¶ 328, 332-335.) Thereafter, from January 2010 to March 2010, Marotta and Stassen were focused on finding investors for Emerge's initial round of financing. (PSUF ¶ 329; DRPS ¶ 329.) As of March 26, 2010, a substantial amount of money had already been raised and was in the bank. (PSUF ¶ 331; DRPS ¶ 331.) Marotta did not terminate his employment with Synthes until April 15, 2010. (PSUF ¶ 337; DRPS ¶ 337.)

2. Detailed Timeline of Emerge-Related Activities Prior to April 15, 2010

Prior to Marotta's and Stassen's introduction, Brown and Stassen worked together on a business plan for an " outsourced sales force business concept." (PSUF ¶ 338; DRPS ¶ 338.) Marotta first conceived of the business plan on which Emerge would later be based--the concept of a company that sells generic orthopedic products--in the spring of 2009. (PSUF ¶ 341; DRPS ¶ 341.) Shortly thereafter, Marotta discussed his idea with Brown. (PSUF ¶ 342; DRPS ¶ 342.) In late July 2009, Brown met with Stassen and Stassen's father to discuss Brown's " outsourced sales force business concept," but Stassen and his father did not think this was a viable idea. (PSUF ¶ ¶ 343-44; DRPS ¶ ¶ 343-44.)

As noted above, in the summer of 2009, following Brown's introduction of Marotta to Stassen, the three began to discuss a possible idea to sell generic medical device commodities. (PSUF ¶ ¶ 346-47; DRPS ¶ ¶ 346-47.) On August 2, 2009, Marotta emailed Stassen and Brown a " first cut" of the Emerge business model, which identified an initial offering of drill bits and cannulated screws, a market strategy of no sales representatives and low-cost, non-surgeon preference items, and a management team of Brown, Marotta, and Stassen. (PSUF ¶ ¶ 348-50; DRPS ¶ ¶ 348-50.)

Following this " first cut" email, Marotta and Brown continued to formulate ideas for the new business. (PSUF ¶ 356; DRPS ¶ 356.) Marotta and Brown then inquired with various manufacturing companies as to the types of products they could make. (PSUF ¶ ¶ 357-58; DRPS ¶ ¶ 357-58.) During the remainder of August 2009, Marotta and Brown exchanged numerous emails regarding this new business venture. (PSUF ¶ ¶ 359-64; DRPS ¶ ¶ 359-64.) Marotta also sought out Synthes invoices for 2008 and 2009, which contained customer purchasing information, including historical purchases and specific pricing. (PSUF ¶ 365-67; DRPS ¶ ¶ 365-67.)

On August 13, 2009, Marotta met with Stassen and Brown in Colorado to discuss

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the business concept. (PSUF ¶ 368; DRPS ¶ 368.) Armed with a viable idea, Stassen and Marotta prepared a business plan and private placement memo to raise money from potential investors. (PSUF ¶ 369; DRPS ¶ 369.) On August 16, 2009, Brown proposed the name " Emerge Surgical." (PSUF ¶ 375; DRPS ¶ 375.) That same day, Marotta emailed Brown and made reference to then-Synthes VP of Sales Louis Houff, stating " Houff will figure it out in about 10 months when we are eating his lunch." (Pls.' Appx. 286; PSUF ¶ ¶ 376-77; DRPS ¶ ¶ 376-77.) The back-and-forth emails continued, with a constant concern that they keep their activities " off" or " under the radar." (PSUF ¶ ¶ 378-81; DRPS ¶ ¶ 378-81.) Stassen, Brown, and Marotta also discussed meeting with other Synthes employees regarding their plans. (PSUF ¶ ¶ 385-86, 388; DRPS ¶ ¶ 385-86, 388.)

At one point, Marotta accidentally sent an Emerge-related email to Brown's Synthes account. (PSUF ¶ 390; DRPS ¶ 390.) When Brown identified the error and Marotta recognized his mistake, the two agreed to forego using personal email from phones, use only personal computers and phone, and discuss only bare essentials with everyone from there on, i.e. their " stealth" plan. (PSUF ¶ ¶ 391-92, 396-99; DRPS ¶ ¶ 391-92; 396-99.) This plan continued throughout Emerge's sales efforts in 2010. (PSUF ¶ ¶ 401-02; DRPS ¶ ¶ 401-02.)

On September 2, 2009, in Denver, Colorado, Marotta had dinner with Charlie Knight, a Synthes employee, concerning Emerge. (PSUF ¶ 403; DRPS ¶ 403.) Marotta was considering retaining him in connection with the formation strategy for the business described in Marotta's August 2, 2009 " first cut" email. (PSUF ¶ 404; DRPS ¶ ¶ 404.) Marotta then submitted an expense report to Synthes for the cost of this dinner, in the amount of $120.58, and identified a Dr. Fitzgerald as the Synthes customer entertained for this expense. (PSUF ¶ ¶ 405-06; DRPS ¶ ¶ 405-06.) Following some discussion about Knight's non-compete obligations, Marotta ultimately retained Knight on behalf of Emerge in the fall of 2009. (PSUF ¶ ¶ 409-11; DRPS ¶ ¶ 409-11.)

On September 18, 2009, Stassen sent Marotta and Brown a PowerPoint presentation with the file name " Emerge Surgical -- Zach Sections." (PSUF ¶ 417; DRPS ¶ 417.) This presentation identified Brown as one of the " key management members." (PSUF ¶ 418; DRPS ¶ 418.) Brown, in turn, noted that he was " organizing an amazing amount of data," was " planning to create a Sales Strategy," and " our combined efforts will result in a very tangible plan to take this to market." (PSUF ¶ 420; DRPS ¶ 420.) In the September and October time frame, Marotta met with venture capitalists and began working with a vendor for the design of Emerge's corporate logos. (PSUF ¶ ¶ 421-22; DRPS ¶ ¶ 421-22.)

Also in October 2009, Marotta met with Brown and Knight to discuss the non-compete agreements Marotta and Brown each had with Synthes. (PSUF ¶ 423; DRPS ¶ 423.) In subsequent emails, Brown " emphasized [their] adherence to the 'stealth' plan in order to avoid detection from Synthes and identified a number of legal issues that [they] needed to address in the upcoming week, including the recruitment of Synthes employees and whether Emerge could be formed prior to [Brown's] and Marotta's resignations from Synthes." (Pls.' Appx. 24, Brown's Statement ¶ 72; PSUF ¶ 426; DRPS ¶ 426.) Brown also " described in detail the idea of [Emerge's] model as an 'unbundling' of trauma segments" and " identified potential customers to target, including hospitals,

Page 650

group purchasing organizations, and surgical centers, many of which were Synthes' customers." (Brown's Statement ¶ 73; PSUF ¶ 427; DRPS ¶ 427.)

Throughout the remainder of September and October of 2009, Brown, Marotta, and Stassen exchanged many additional emails addressing strategy for Emerge. (PSUF ¶ ¶ 438-86; DRPS ¶ ¶ 438-86.) Synthes contends that many of these emails were sent during the course of Brown and Marotta's employment by Synthes and that several business lunches were expensed to and paid for by Synthes. (Id.)

In late October 2009, Marotta met with Victoria Trafka to discuss her interest in doing contract design work for Emerge. (PSUF ¶ 487; DRPS ¶ 487.) Marotta had originally been introduced to Trafka in 2008, through her husband Richard Brown, and was aware that Trafka was formerly a manufacturing engineer for Synthes at its Monument, Colorado facility. (PSUF ¶ 490; DRPS ¶ 490.) Marotta contacted Trafka in October 2009 because no one at Emerge had engineering knowledge and Trafka had compiled an extensive engineering background. (PSUF ¶ 491; DRPS ¶ 491.)

Thereafter, in November 2009, Marotta and Stassen developed a Private Placement Memorandum for Emerge to use with investors, which identified Brown as a " founder," " majority owner," " Chief Executive Officer," President," and " Chairman of the Board." (Pls.' Appx. 292.) Brown and Marotta had also developed a listing of potential Emerge products and customers. (PSUF ¶ 496; DRPS ¶ 496.) In the twenty-first version of the draft, the memorandum stated, under " Company Ownership," that " Emerge was established in January 2010 by founders John Marotta, Zack Stassen and Eric Brown whom are company owners." (Pls.' Appx. 216.) The business plan also contained a table and chart of " milestones" reflecting a formation date in January 2010 and targeted dates for other objectives running from February 2010 to November 2010. (Id.) On December 2, 2009, however, Stassen sent Marotta an " initial draft of the Company Overview for the Investment Memorandum," which contained no reference to Brown under the Management Team. (PSUF ¶ ¶ 507-08; DRPS ¶ ¶ 507-08; Pls.' Appx. 712.) Indeed, as of December 14, 2009, it was determined that Brown could no longer participate in the company because of the national scope of his AVP NCA with Synthes. (PSUF ¶ 528; DRPS ¶ 528.)

The record reflects that Stassen and Marotta, on behalf of Emerge, met with several Synthes customers in the December 2009 time frame. Both Stassen and Marotta met with Denise Rosnick from Denver Health in an effort to become Denver Health's supplier for low-cost trauma products. (PSUF ¶ 510-14; DRPS ¶ 510-14.) In addition, Stassen and Marotta began working with Dr. Morgan, also from Denver Health, with respect to the concepts portrayed in Emerge's business plan. (PSUF ¶ ¶ 520-23.) In connection with Stassen and Marotta's meetings with Dr. Morgan, Marotta expensed his meals to Synthes under the guise of meetings with other Synthes clients. (PSUF ¶ ¶ 532-38; DRPS ¶ ¶ 532-38.) Marotta also met with Dr. Motzkin regarding Motzkin's interest in investing in Emerge--meetings which were likewise subsidized by Synthes. (PSUF ¶ 556-57, 566-71; DRPS ¶ 556-57, 566-71.)

Emerge's Articles of Incorporation were filed with the Colorado Secretary of State on January 13, 2010, and they listed Emerge's principal executive office as Marotta's home address in Denver, Colorado. (PSUF ¶ 545-46; DRPS ¶ ¶ 545-46.) The Initial Written Consent of the Board of Directors indicated that Marotta and

Page 651

Stassen were 50/50 owners of Emerge and that each had invested $5,000. (PSUF ¶ 548, DRPS ¶ 548.) Stassen was listed as Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer, and Secretary of Emerge. (PSUF ¶ 549; DRPS ¶ 549.)

On February 9, 2010, Marotta emailed Stassen's father identifying Synthes employees Bryan Murray, Brennen Warren, and Colin Brown as potential employees for Sonoma Orthopedics. (PSUF ¶ 578-79; DRPS ¶ ¶ 578-79.) Thereafter, on February 11, 2010, a meeting was scheduled between Marotta and Powell. (PSUF ¶ 583; DRPS ¶ 583.) Powell emailed his resume to Marotta's personal account. (PSUF ¶ 584; DRPS ¶ 584.) Marotta then forwarded the resumes of several Synthes people to Sonoma for consideration. (PSUF ¶ 590; DRPS ¶ 590.)

Notably, throughout 2009 and 2010, Marotta submitted his telephone bills to Synthes and Synthes reimbursed him for these payments. (PSUF ¶ 603-04; DRPS ¶ ¶ 603-04.) In addition, Marotta submitted an expense report to Synthes for reimbursement of his February communication expenses, including for wireless numbers used, in part, for Emerge purposes. Synthes also reimbursed Marotta for these expenses. (PSUF ¶ ¶ 605-08; DRPS ¶ ¶ 605-08.)

On March 15, 2010, Marotta submitted his official letter of resignation to Brown, his Synthes Area Vice President and supervisor. (PSUF ¶ 614; DRPS ¶ 614.) That same day, he submitted an inventory check out memorandum to Synthes, effective April 15, 2010, and then forwarded both the letter and memorandum to Stassen and Knight. (PSUF ¶ ¶ 615, 617; DRPS ¶ ¶ 615, 617.) After submission of his resignation, but while still employed by Synthes, Marotta had two separate meetings with Synthes sales management personnel, Tony Randazzo and Ken Carpenter, at which time he suggested that he was going to work with his uncle. (PSUF ¶ ¶ 618-19; DRPS ¶ ¶ 618-19; Pls.' Appx. 18, Marotta Dep., 116:18-117:7, June 26, 2013.) Specifically, he stated that " I will be working for one of my Uncle's companies, he is a Health Care Services guy. It's a good move for me. One of his companies in which he is on the board of is in Tennessee called Centerre." (PSUF ¶ 620; DRPS ¶ 620; Pls.' Appx. 18, Marotta Dep. 113:16-21, June 26, 2013.) Brown knew that Marotta " was planning to join Emerge and that Emerge's plan was to enter the orthopedic market focused on drill bits and cannulated screws." (Pls.' Appx. 24, Brown Statement ¶ 93, PSUF ¶ ¶ 621-22; DRPS ¶ ¶ 621-22.) Brown, however, never told anyone at Synthes what Marotta's plans were. (PSUF ¶ 623; DRPS ¶ 623.)

As of March 26, 2010, Emerge's initial round of financing brought in approximately $2 million. (PSUF ¶ ¶ 630-31, DRPS ¶ ¶ 630-31.) Around that time, Emerge sent physical samples of Synthes products to Orchid for reverse engineering and design of Emerge's initial product offerings of drill bits, guide wires, and cannulated screws. (PSUF ¶ ¶ 632-33; DRPS ¶ ¶ 632-33.) In addition, Trafka sent Marotta information regarding the manufacture of reaming rods, including information regarding the production of Synthes reaming rods. (PSUF ¶ 634; DRPS ¶ 634.) By late June 2010, Orchid was evaluating samples of reaming rods and working on reverse engineering Synthes reaming rods on behalf of Emerge. (PSUF ¶ 635; DRPS ¶ 635.)

Multiple other steps were taken by Marotta and Stassen to finalize Emerge's start up in March 2010. The two men toured potential office space, obtained business cards, and purchased office supplies.

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(PSUF ¶ 636; DRPS ¶ 636.) Marotta executed a form W-4 on April 1, 2010, listing Emerge Surgical, Inc. as his employer. (PSUF ¶ 637; DRPS ¶ 637.) During the rest of April 2010, Marotta had communications with multiple Synthes employees, often in connection with the employees' efforts to obtain new opportunities outside of Synthes. (PSUF ¶ ¶ 639-48; DRPS ¶ ¶ 639-48.)

3. Emerge's Business Plans and Investor Materials (Pre-April 2010)

a. The Private Placement Memorandum

Marotta was personally involved in the preparation and finalization of Emerge's Private Placement Memorandum (" PPM" ) for its initial round of financing, which occurred during the course of Marotta's employment with Synthes. (PSUF ¶ ¶ 649-51; DRPS ¶ ¶ 649-51.) Marotta and Stassen understood that the PPM needed to be accurate and truthful. (PSUF ¶ ¶ 652-56; DRPS ¶ ¶ 652-56.) The description of the business indicated that Emerge " plans to take a new approach to distribution, focusing more on hospital administration and department heads rather than marketing to individual surgeons." (Pls.' Appx. 166; PSUF ¶ 664; DRPS ¶ 664.) Emerge's initial plan was to target specific products in specific segments of the orthopedic implant industry, referred to as " unbundling." (PSUF ¶ 667; DRPS ¶ 667.) Emerge's target market was the entire $92 billion U.S. device market, but it chose to initially focus on the $2 billion trauma segment of the orthopedic device market. (PSUF ¶ ¶ 668-69; DRPS ¶ ¶ 668-69.) The PPM identified Emerge's initial products as representing a potential $500 million market. (PSUF ¶ 670; DRPS ¶ 670.) In order to accomplish this goal, the PPM noted that " it is our observation that hospitals have been and continue to decrease the presence of sales representatives in the hospital in an effort to disintermediate the sales reps with the physicians." (PSUF ¶ 672; DRPS ¶ 672.) This concept of disintermediation involved selling to hospitals directly and attempting to take sales representatives and physicians out of purchasing decisions. (PSUF ¶ 673; DRPS 673.) Under the " Initial Products" section of the PPM, Emerge identified its initial product portfolio as cannulated screws, drill bits, and guide wires. (PSUF ¶ 675; DRPS ¶ 675.)

The PPM identified Marotta and Stassen as 50/50 owners in Emerge as of January 30, 2010. (PSUF ¶ 680; DRPS ¶ 680.) The PPM also listed Dr. Steven Morgan, John Lewis (Marotta's uncle), and Stassen's father as advisors. (PSUF ¶ 681, DRPS ¶ 681.) Notably, Dr. Morgan is currently a director of Emerge and was granted additional options for his involvement as a director and his duties as a medical advisor. (PSUF ¶ 682; DRPS ¶ 682.) As part of the potential risks for investors, the PPM contained a discussion of Marotta's RM NCA. (PSUF ¶ 683; DRPS ¶ 683.) It did not, however, identify or discuss Marotta's SC NCA or NDA or Synthes's written employment policies. (PSUF ¶ 686; DRPS ¶ 686.) Notably, Marotta did not provide his SC NCA or NDA or Synthes's employment policies to Stassen or Knight for review and had not even thought about the NDA until after Synthes filed suit. (PSUF ¶ ¶ 687, 689; DRPS ¶ ¶ 687, 689.)

During Emerge's second round of financing, Emerge circulated another Private Placement Memorandum that contained language characterizing certain aspects of Emerge's business model as " new" and " unique." (PSUF ¶ 692; DRPS ¶ 692.) This second Private Placement Memorandum was distributed to existing investors, some of whom

Page 653

were physicians, as well as new physicians who had not previously invested. (PSUF ¶ 693; DRPS ¶ 693.)

b. Investor Presentations

In January 2010, Emerge gave an investor presentation in order to attract investor interest in the organization. (PSUF ¶ ¶ 694-95; DRPS ¶ ¶ 694-95.) The stated " Corporate Goal" in the presentation indicated that " Emerge Surgical will be the first medical device company willing to partner with hospitals to provide true and meaningful cost savings while at the same time delivering product of the highest quality." (Pls.' Appx. 436; PSUF ¶ 696; DRPS ¶ 696.) The presentation identified a " Unique Approach to Product Distribution" and noted that Synthes was one of Emerge's competitors. (PSUF ¶ ¶ 697-98; DRPS ¶ ¶ 697-98.)

The slide entitled " Implementation" depicted how a hospital manages product inventory and how Emerge fits in. (PSUF ¶ 699; DRPS 699.) The photographs on this slide contained photographs of Synthes Inventory Management System (SIMS) and dividers with Synthes's logo on them. (PSUF ¶ 700; DRPS ¶ 700.)

In order to have someone from the medical community represented and to show that the organization had credible business minds behind it, Dr. Morgan was listed as an advisor on the final investor presentation. (PSUF ¶ ¶ 702-03; DRPS ¶ ¶ 702-03.) Stassen testified that Dr. Morgan's listing may have helped raise money. (PSUF ¶ 704; DRPS ¶ 704; Stassen Dep. 203:10-15.)

c. Additional Statements Regarding Emerge's Business Model

Marotta has stated that " Emerge has devised a new approach to the sales of Implantation Hardware providing the American public with like-numbered, [sic] product that is similar to the Synthes Implantation Hardware and that can be stored alongside Synthes' sophisticated orthopedic implants and used with Synthes' inventory management systems and surgical sets." (Pls.' Appx. 7, Marotta Answer to Am. Compl. ¶ 156; Pls.' Appx 2, Emerge Answer to Am. Compl. ¶ 156.) A press release of April 4, 2011 characterized Emerge as offering " the industry's first-ever line of high-quality generic implants and instruments." (Pls.' Appx. 141; PSUF ¶ 708; DRPS ¶ 708.) In a subsequent press release dated April 7, 2011, Marotta indicated that Emerge's " supply chain model offers hospitals and physicians high-quality products at significantly lower cost, changing the way medical device sales are approached . . ." (Pls.' Appx. 167; PSUF ¶ 709; DRPS ¶ 709.)

4. Emerge's Finding of Investors and Raising Money

Beginning in January 2010, Marotta was personally involved in Emerge's fundraising efforts and contacted a number of potential investors regarding the formation of Emerge. (PSUF ¶ 710; DRPS ¶ 710.) From January 2010 to March 2010, Marotta and Stassen were focused on finding investors for Emerge's initial round of financing. (PSUF ¶ 711; DRPS ¶ 711.) In these efforts, Marotta used the Private Placement Memorandum. (PSUF ¶ 712; DRPS ¶ 712.) Prior to leaving Synthes, Marotta, on behalf of Emerge, targeted a lengthy list of orthopedic surgeons regarding investment in Emerge. (PSUF ¶ 713; DRPS ¶ 713.) Dr. Morgan also became involved in soliciting investors on behalf of Emerge. (PSUF ¶ 714; DRPS ¶ 714.) Synthes Sales Consultant Brennen Warren also introduced Marotta and Stassen to Dr. David Laverty for purposes of discussing Emerge and soliciting potential investments in Emerge. (PSUF ¶ 715; DRPS ¶ 715.) Ultimately, twenty-one orthopedic surgeons invested in Emerge during

Page 654

Emerge's initial round of financing in early 2010. (PSUF ¶ 716; DRPS ¶ 716.)

Aside from speaking with surgeons, Marotta was also involved in discussions with Synthes employees--including Colin Brown, Mike Saunders, Andy White, Craig Lynn, and Brian Hahn--regarding potential investments in Emerge. (PSUF ¶ 717; DRPS ¶ 717.) All of them or their spouses, with the exception of Brian Hahn, invested in Emerge in the initial round of financing. (PSUF ¶ 718; DRPS ¶ 718.) Synthes later terminated these Synthes employees because it believed that investment in a privately-held competing business such as Emerge constituted a violation of Synthes's policies. (PSUF ¶ 719; DRPS ¶ 719.)

5. Early Design and Development of Emerge Product

As noted above, in January 2010, Marotta had discussions with Orchid about contracting for design and manufacturing services for Emerge. (PSUF ¶ 721; DRPS ¶ 721.) Stassen was aware that Orchid was a vendor of Synthes at that time. (PSUF ¶ 724; DRPS ¶ 724.) Emerge and Orchid discussed the fact that Synthes's product would be the " gold standard" for the design and development of Emerge product. (PSUF ¶ 725; DRPS ¶ 725.) Marotta and Orchid representative Brian McLaughlin exchanged a series of emails between January 26, 2010 and February 24, 2010, regarding product designs for Emerge. (PSUF ¶ ¶ 727-32; DRPS ¶ ¶ 727-32.) On March 16, 2010, Orchid sent Emerge a proposal on which Marotta's approval appears on behalf of Emerge as CEO. (PSUF ¶ ¶ 737-38; DRPS ¶ ¶ 737-38.) The proposal required payment of an $8,000 deposit, which Marotta believes he paid and for which he was later reimbursed by Emerge. (PSUF ¶ 739; DRPS ¶ 739.)

Prior to April 15, 2010, Emerge sent physical samples of Synthes cannulated screws to Orchid to assist in reverse engineering those products and begin the design of Emerge's initial product offerings. (PSUF ¶ 740; DRPS ¶ 740.) The process of reverse engineering cannulated screws involved, in part, looking at the screw samples provided by Emerge, taking measurements from those samples, looking at industry standards for screws, and then creating CAD models and drawings. (PSUF ¶ 742; DRPS ¶ 742.) Orchid had also begun working on draft versions of prints for Emerge's initial product offerings of drill bits, guide wires, and cannulated screws, and was in communication with Emerge regarding those drawings. (PSUF ¶ ¶ 745-46; DRPS ¶ ¶ 745-46.) The design prints Emerge ultimately submitted to the FDA in the 510(k) submission for its " cannulated screw fixation system" are dated March 29, 2010, which is prior to the termination of Marotta's employment with Synthes. (PSUF ¶ 747; DRPS ¶ 747.)

On August 24, 2010, Orchid emailed Marotta and Stassen regarding the possible development of an " external fixation" system and attached a Synthes technique guide for a large external fixation system. (PSUF ¶ ¶ 748-49; DRPS ¶ ¶ 748-49.) In addition, on September 16, 2010, Orchid sent Marotta and Stassen a proposal for the design and development of locking screws, which was also something being considered and discussed at Emerge. (PSUF ¶ ¶ 750-51; DRPS ¶ ¶ 750-51.) On August 30, 2011, however, Emerge received a letter from the CEO of Orchid, Michael E. Miller, informing Emerge that Orchid would fulfill existing contractual agreements with Emerge, but would not take any additional orders, as follows:

Over the past several weeks, Orchid has had a unique opportunity to examine its working relationship with Emerge Surgical.

Page 655

After careful review of products and services provided to Emerge Surgical, Orchid Orthopedics has concluded that it is in Orchid's best interest to decline any further business with Emerge Surgical. Orchid appreciates Emerge selecting our company to perform certain manufacturing and design services. However, as stated above, Orchid must respectfully decline any additional orders for products and services. Orchid will honor its contractual agreements to fill any purchase order that has been acknowledged as of August 30, 2011.

(Pls.' Appx. 624; PSUF ¶ 752; DRPS ¶ 752.)

E. Emerge's Alleged Use of Synthes Products and Information

1. Acquisition and Use of Synthes Products

As of at least early April 2010, Emerge was shipping Synthes products to Orchid. (Pls.' Appx. 178; PSUF ¶ 753; DRPS ¶ 753.) Marotta had a significant volume of Synthes-branded product in his home garage. (PSUF ¶ 758; DRPS ¶ 758.) By the time Marcy Slone joined Emerge in early 2010, Emerge already had obtained Synthes product that was being stored at the Emerge office and covered with a black curtain. (PSUF ¶ ¶ 760-61; DRPS ¶ ¶ 760-61.) When Powell later joined Emerge in September 2010, he brought some Synthes product with him. (PSUF ¶ 762; DRPS ¶ 762.) Even before Powell officially joined Emerge, however, Powell provided product to Emerge while he was employed with Sonoma Orthopedic Products, Inc. (PSUF ¶ 762; DRPS ¶ 763.) Later in 2010, Emerge, through Marotta and Powell, asked for sample Synthes product from a number of Synthes representatives, including: Jason Fowler, Colin ...


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