From our friends at JurisNotes.com
CardioNet, Inc. v. LifeWatch Corp.
Cardio sued LWC, Lehman, Ament, and Konarzewska (collectively "LWC") for misappropriation of trade secrets and related claims. The court granted in part and denied in part LWC's motion to dismiss.
Cardio and LWC are competitors in the heart monitoring business. Cardio developed a medical device known as the Mobile Cardiac Outpatient Telemetry ("MCOT") that monitors a patient's heart throughout the day. The MCOT is not sold to patients, but is rather prescribed by doctors for short-term use. As a condition to activate the device, patients must agree to promptly return the device to Cardio, solely use the device for heart monitoring, and refrain from tampering with or reverse engineering the device. LWC acquired two MCOTs by obtaining false prescriptions for LWC employees Lehman and Ament. LWC employee Dr. Konarzewska prescribed the MCOT for Lehman and Ament. While using the MCOT, Lehman faked a heart attack using a cardiac simulator. In addition, Lehman and Ament failed to timely return their MCOT kits.
LWC argued that Cardio's conversion, fraud, intentional interference, and unfair competition claims were preempted by the Illinois Trade Secrets Act. Regarding the conversion claim, it was clear that Cardio alleged conversion of two property items: the MCOT kits and the trade secret information. Cardio's claim that LWC converted its kits was not subject to preemption because the conversion claim was not based on the misappropriation of trade secrets. Rather, the claim was based on LWC's misappropriation of the kits themselves. The kits had intrinsic value apart from information they contained. The kits were not for sale, were Cardio's central product, and were available only through limited means. However, the conversion claim was preempted to the extent that it alleged conversion of confidential, proprietary, and trade secret information derived from the contents of the kits. The information contained in the kits was comprised of technical engineering data that fell squarely in the Act's definition of a trade secret.
Because the harm of fraudulently obtaining the kits was separate from the harm of obtaining trade secrets, the fraud claim with regard to the kits was not preempted. To the extent that the fraud claim was based on fraudulent appropriation of trade secret information contained in the kits, it was preempted. The intentional interference claim was not preempted because the tort alleged was the interference with Lehman's and Ament's contract with Cardio regarding the kits. The intentional interference claim did not depend of the existence of a trade secret. In contrast, the unfair competition claim inextricably depended on the allegation that LWC possessed and used information obtained from examination and testing of the kits.
