A federal judge in Pennsylvania ruled on June 5, 2014 that John Marotta, a former Synthes, Inc. regional manager, breached his non-compete agreement with the company when he left to take over Emerge Medical Inc., a generic device maker. A jury has yet to decide whether Marotta’s actions constituted unfair competition.
Marotta left Synthes in early 2010 to run Emerge Medical incorporated in the same year by a former Synthes co-worker.
Emerge Takes Business
Emerge quickly signed deals to sell its generic devices at specially negotiated pricing and terms, including a deal with Premier, Inc., the nation’s second largest healthcare group purchasing organization (GPO) with over 2, 500 hospital members. Emerge also signed a deal to provide trauma products, including cannulated screws, drill bits and guide wires, through Cardinal Health, a $103 billion health care services company providing medical and surgical products to 60, 000 locations.
Emerge guarantees customers annual cost reductions for the term of their contract.
Synthes Sues – Marotta Countersues
Synthes sued, accusing Marotta of violating his non-compete agreement and taking Synthes products with him so he could reverse engineer them and make generic versions that worked with other Synthes products.
Marotta countersued, accusing Synthes of violating antitrust statutes and using legal tactics to limit competition. He told OTW in May 2012, that Synthes was using a litigation plan to drive up the costs of litigation and wear down its young opponents. Marotta also accused the company of trade libel and tortious interference.
Non-Compete Violation
But in a 208-page decision, the judge agreed with Synthes, finding that, “Both during and after his employment with Synthes, Marotta used the technical skills and specialized training obtained from Synthes to create a competing company in his former region, develop competing products, finance the competitor, and actively start soliciting customers. Such conduct falls well within the ambit of the non-compete provision of Marotta’s [contract], thus entitling plaintiffs to summary judgment on this claim.”
The judge continued, “Emerge attempted to make its products look and feel like Synthes’s products so that it could market them as substitutes for Synthes products. This strategy also included using a similar part numbering scheme for Emerge’s products, where Emerge would use Synthes part numbers and add only ‘.EM’ to the end.”
No Case Against Synthes
The judge also dismissed Marotta’s charges of antitrust violations, saying that Marotta failed to back up the trade libel, tortious interference and unfair competition claims against Synthes.
“With respect to its trade libel claim, Emerge has failed to create any issue of material fact as to whether the litigation letters or other statements were false or resulted in actionable damages.”
“With respect to its tortious interference claim, Emerge has not put forth sufficient evidence upon which a reasonable fact finder could determine that all elements of that claim are satisfied. As to the unfair competition claim, Emerge has rested its allegations on the same conduct underlying the previous two claims, and because such conduct is not otherwise tortious or unlawful, it cannot support an allegation of unfair competition, ” the judge wrote.
“Finally, having already considered the substantive merits of the subjects on which Emerge seeks a declaratory judgment, the court declines to exercise jurisdiction over the declaratory judgment claims.”
Marotta Keeps Emerge Property
Marotta had one victory. Synthes argued that Emerge Medical’s business plan and products belong to the company under an assignment provision in Marotta’s nondisclosure agreements.
The judge ruled that the idea for Emerge’s business plan, as well as the design for non-patented devices including screws and drill bits could not be classified as the type of intellectual property Synthes could claim a right to repossess under the nondisclosure agreement’s assignment provision.
What will happen to Emerge Medical now? We inquired and are waiting to hear from Marotta’s attorneys.
