United States District Court, D. Colorado
A. Brimmer Chief Judge
matter is before the Court on defendant’s Motion to
Dismiss Counts Eleven through Seventeen of the Third Amended
Complaint [Docket No. 112]. The Court has jurisdiction
pursuant to 28 U.S.C. §§ 1331 and 1338.
Wright Medical Technology, Inc. (“Wright”) is a
medical device developer, manufacturer, and distributor.
Docket No. 89 at 3, ¶ 9. Among its products are surgical
plates and other instruments used to repair bones in the foot
and ankle areas. Id. Defendant Paragon 28, Inc.
(“Paragon”) also manufactures and distributes
orthopedic plate systems and other devices used to repair
bones in the foot and ankle. Id. at 8, ¶¶
was founded by three former high-level Wright employees
– Albert DaCosta, Frank Bono, and Matt Jarboe –
and one former Wright independent contractor, Lee Rosenthal
(collectively, “the founders”). Id. at
10-11, ¶¶ 43-44. Since Paragon’s founding, at
least thirteen former Wright employees or independent
contractors have begun working for or with Paragon.
Id. at 11, ¶ 44. Each of the former Wright
employees worked in the same or substantially the same
position at Paragon as he or she had at Wright. Id.
at 12, ¶ 47.
employed at Wright, these individuals had access to and
knowledge of Wright’s trade secrets, including its
current and planned product lines, business plans, customers,
sales, and other valuable information. Id. at 12-13,
¶¶ 48-49. Each of the founders had entered into a
confidentiality agreement with Wright agreeing to keep
confidential Wright’s trade secret information.
Id. at 14, ¶ 52. Further, at least twelve of
the former employees had signed confidentiality,
non-competition, non-solicitation and/or intellectual
property rights agreements while at Wright. Id. at
12, ¶ 46.
contends that the former employees misappropriated its
confidential and trade secret information for the benefit and
financial gain of Paragon, with the approval of Paragon.
Id., ¶ 48. For example, Wright alleges that
several former employees sent Wright confidential or trade
secret information to themselves via email before they left
employment at Wright. See, e.g., Id . at 20, ¶
74; at 23, ¶¶ 86-87; at 32, ¶ 117; and at 35,
¶¶ 136-37. Wright contends that the
misappropriation was “for the direct benefit of
Paragon” and gave Paragon “a significant and
unfair competitive advantage.” See, e.g., Id .
at 20, ¶ 76.
Wright alleges that the founders knowingly and deliberately
misappropriated Wright’s confidential and trade secret
information. More specifically, Wright alleges that Bono and
DaCosta, while at Wright, were privy to confidential and
trade secret information that included the specific
contractual terms and licensing agreements entered into
between Wright and surgical consultants or Wright and Key
Opinion Leaders (“KOLs”). Id. at 17,
¶ 63. Wright alleges that DaCosta and Bono
misappropriated this information by using it to solicit
certain surgical consultants and KOLs to cease their
relationships with Wright and switch to similar roles at
Paragon. Id. Further, Wright alleges that Rosenthal
induced former employee Luke Gordon to solicit a Wright
contract manager for the contract manager’s list of
products purchased from Wright so that Paragon could undercut
Wright’s pricing and induce the contract manager to
purchase equivalent devices from Paragon. Id. at
22-24, ¶¶ 81, 88-90.
Wright alleges that Paragon has participated in unfair
competition. For example, Paragon promoted a “cadaver
course” intended to teach surgeons to perform
procedures of the foot and listed Dr. Christopher Hyer, a
Wright KOL, as “anticipated course faculty” on
the course’s promotional material. Id. at 37,
¶ 142-43. The advertisement included Dr. Hyer’s
name and photo. Docket No. 89-19. Wright alleges that Dr.
Hyer did not provide consent for Paragon to use his name and
picture and that Paragon was aware that it did not have Dr.
Hyer’s consent. Docket No. 89 at 37, ¶ 144-45.
Wright argues that this constitutes false advertising.
See Id . at 37. Moreover, Wright alleges that
Paragon engaged in unfair competition when it submitted a
patent application that was nearly identical to a patent
application that W right had filed a month prior.
Id. at 20-21, ¶¶ 77-79. It also alleges
that Paragon has offered several KOLs equity or ownership
interests in Paragon and that the KOLs are using Paragon
products in surgical procedures without disclosing their
interests, which constitutes unfair competition. Id.
at 17, ¶ 64; at 76, ¶ 300.
September 28, 2018, Wright filed its Third Amended Complaint
[Docket No. 89], raising seventeen claims against Paragon.
Docket No. 89 at 38-85. Paragon filed a partial Motion to
Dismiss Counts Eleven through Seventeen of the Third Amended
Complaint [Docket No. 112] on October 31, 2018. The claims
Paragon seeks to have dismissed are (1) misappropriation of
trade secrets under the Federal Defend Trade Secrets Act
(“DTSA”), 18 U.S.C. § 1836; (2) trade secret
misappropriation under the Colorado Uniform Trade Secrets Act
(“CUTSA”), Colo. Rev. Stat. § 7-74-102(4);
(3) unfair competition under the Lanham Act, 15 U.S.C. §
1125(A)(1); (4) common law unfair competition; (5)
intentional interference with contracts; (6) civil theft; (7)
conversion. Id. at 70-84. Wright filed a response
[Docket No. 115], to which Paragon replied. Docket No. 118.
survive a motion to dismiss under Rule 12(b)(6) of the
Federal Rules of Civil Procedure, a complaint must allege
enough factual matter that, taken as true, makes the
plaintiff’s “claim to relief . . . plausible on
its face.” Khalik v. United Air Lines, 671
F.3d 1188, 1190 (10th Cir. 2012) (citing Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 570 (2007)). “The
‘plausibility’ standard requires that relief must
plausibly follow from the facts alleged, not that the facts
themselves be plausible.” RE/MAX, LLC v.
Quicken Loans Inc., 295 F.Supp.3d 1163, 1168
(D. Colo. 2018) (citing Bryson v. Gonzales, 534 F.3d
1282, 1286 (10th Cir. 2008)). Generally, “[s]pecific
facts are not necessary; the statement need only ‘give
the defendant fair notice of what the claim is and the
grounds upon which it rests.’” Erickson v.
Pardus, 551 U.S. 89, 93 (2007) (per curiam) (quoting
Twombly, 550 U.S. at 555) (omission marks omitted).
“[W]here the well-pleaded facts do not permit the court
to infer more than the mere possibility of misconduct, the
complaint has alleged – but it has not shown –
that the pleader is entitled to relief.” Ashcroft
v. Iqbal, 556 U.S. 662, 679 (2009) (internal quotation
marks and alteration marks omitted); see also
Khalik, 671 F.3d at 1190 (“A plaintiff must nudge
[his] claims across the line from conceivable to plausible in
order to survive a motion to dismiss.” (quoting
Twombly, 550 U.S. at 570)). If a complaint’s
allegations are “so general that they encompass a wide
swath of conduct, much of it innocent, ” then plaintiff
has not stated a plausible claim. Khalik, 671 F.3d
at 1191 (quotations omitted). Thus, even though modern rules
of pleading are somewhat forgiving, “a complaint still
must contain either direct or inferential allegations
respecting all the material elements necessary to sustain a
recovery under some viable legal theory.”
Bryson, 534 F.3d at 1286 (alteration marks omitted).
Trade Secret Misappropriation
argues that Wright’s claims for trade secret
misappropriation under DTSA and CUTSA must be dismissed for
failure to state a claim because (1) Wright has failed to
show that Paragon itself was responsible for any
misappropriation; (2) Wright has failed to allege that the
Paragon founders engaged in misappropriation; and (3) Wright
has failed to sufficiently identify its trade secrets. Docket
No. 112 at 6-9.
state a claim for misappropriation of trade secrets, Wright
must allege facts supporting the following elements: (1)
Wright possessed a valid trade secret; (2) the trade secret
was disclosed or used without consent; and (3) Paragon knew,
or should have known, that the trade secret was acquired by
improper means. Gates Rubber Co. v. Bando Chemical