MEMORANDUM AND ORDER
Plaintiff Genzyme Corporation commenced this civil action against defendants Charles Bishop, Keith Crawford, Eric Messner, ProventlV Therapeutics LLC, and Cytochroma, Inc. seeking both monetary and injunctive relief. Plaintiff alleges misappropriation and unjust enrichment against all defendants. Additionally, plaintiff alleges numerous claims against defendants Charles Bishop, Keith Crawford and Eric Messner. Such claims are as follows: (1) breach of contract based on alleged violations of a rights to intellectual property provision contained within said defendants’ Employee Agreements, (2) breach of contract based on alleged violations of a promise to return company property provision contained within said agreements, (3) breach of contract based on alleged violations of a covenant not to compete contained within said agreements, (4) breach of duty of loyalty; and (5) conspiracy. Finally, plaintiff alleges usurpation of corporate opportunity against defendant Charles Bishop. Jurisdiction is based on 28 U.S.C. § 1332. The matter is presently before the Court on defendants Bishop, Crawford, and Messner’s motion to dismiss counts three through eight of plaintiffs complaint pursuant to Federal Rule of Civil Procedure 12(b)(6).
1
For the purpose of
BACKGROUND
Plaintiff Genzyme Corporation is a Massachusetts corporation with its principal place of business in Cambridge, Massachusetts. Plaintiff is a biotechnology company whose products and services are focused on rare inherited disorders, kidney disease, orthopedics, transplant and immune disease, cancer, and diagnostic testing. On July 1, 2005 plaintiff completed its acquisition of Bone Care International (hereinafter Bone Care) a company specializing in Vitamin D products.
Defendant Charles Bishop a is citizen of the State of Wisconsin residing in Mt. Horeb, Wisconsin. He is Bone Care’s former President, Chief Executive Officer, Director and Chief Scientific Officer. Defendant Keith Crawford is likewise a citizen of the State of Wisconsin residing in Fitchburg, Wisconsin. He is Bone Care’s former Senior Director of Medical Marketing and Scientific Affairs. Defendant Eric Messner is a citizen of the State of Illinois residing in Lake Forest, Illinois. Defendant Messner served as Bone Care’s Director of Marketing.
In March of 2005 defendant Bishop became Bone Care’s Executive Vice-President and Chief Scientific Officer. On March 18, 2005 defendant Bishop entered into an Employee Agreement with Bone Care which became effective on April 25, 2005. Said agreement contained a covenant not to compete which provides in relevant part as follows:
That during the term of his ... employment by Bone Care and for a period of six months after the termination of such employment ... Employee will not directly or indirectly own, operate, manage, consult with regarding matters related to those exposed to during your employment with Bone Care, control, participate in the management or control of, be employed by in a position comparable to that occupied during your employment with Bone Care, or maintain or continue any interest whatsoever in any enterprise that competes with Bone Care in the development and or sale of vitamin D compounds as therapies for certain diseases in competition with Bone Care in pharmaceutical research and development ...
Additionally, said agreement contained a return of company property provision which provides as follows:
Employee agrees that, upon termination, he [] will not take or retain, without written authorization from an officer of Bone Care, any papers, lists, credit cards, electronic data files, patent applications, regulatory documents, standard operating procedures, assay methods, data, chemical syntheses, product development plans, equipment, samples, marketing plans, customer lists, or any other documents or copies thereof of any kind of belonging to or furnished by Bone Care or representative of his [] employment with Bone Care. All written materials and other property of Bone Care shall be returned upon termination.
Finally, said agreement contained a rights to intellectual property provision which provides in relevant part as follows:
The Employee will disclose promptly and fully to Bone Care all inventions, improvements, or discoveries made or conceived by the employee, solely or jointly with others, in the course of such employment or with the use of BoneCare’s time, material, or facilities, or related to or suggested by the business or investigations of Bone Care, or of the companies it owns or controls at the time of such inventions. The employee will assign to Bone Care all rights, title, and interest in any inventions, improvements or discoveries that he ... may conceive of or first actually reduce to practice during his ... employment with the company....
Since Employee is to assign to Bone Care inventions which he ... may conceive or first actually reduce to practice while in the employ of the company, he ... will list at the end of this Agreement all those inventions which are owned by the Employee at this time and which should be brought to the attention of the Company to avoid future misunderstandings as to ownership....
Additionally, defendants Crawford and Messner entered into Employee Agreements containing identical provisions. When plaintiff acquired Bone Care it became the successor to said agreements.
In July and August of 2005 defendants Bishop, Crawford, and Messner (hereinafter collectively referred to as individual defendants) all terminated their employment with Bone Care/Genzyme. 2 In September of 2005 the individual defendants formed defendant Proventiv Therapeutics LLC (hereinafter Proventiv.) Defendant Proventiv is a Delaware limited liability company with its principal place of business in Madison, Wisconsin.
In June of 2006 the individual defendants sold defendant Proventiv to defendant Cytochroma, Inc. (hereinafter Cy-toehroma.) Defendant Cytochroma is a Canadian corporation with its headquarters in Markham, Ontario. Defendant Cy-tochroma purchased defendant Proventiv in part for its drug pipeline and patent applications covering new Vitamin D uses. The individual defendants currently serve as defendant Cytochroma’s executive officers.
On August 8, 2006 plaintiff commenced this action. Defendants filed both their answer and their motion to dismiss on September 1, 2006. On October 10, 2006 plaintiff filed an amended complaint. As is relevant to the present motion, plaintiffs amended complaint alleges various breach of contract claims against the individual defendants based on alleged violations of provisions of their Employee Agreements. Additionally, plaintiffs complaint alleges numerous tort claims against the individual defendants. Specifically, count six of plaintiffs complaint alleges breach of duty of loyalty against all three individual defendants. Said count alleges in relevant part as follows:
... [The individual defendants] each breached their duties by engaging in competing, self-dealing activities, while employed, and by misappropriating [plaintiffs] confidential or proprietary non-trade secret information in order to form what Bishop called a ‘better Vitamin D company than Bone Care’ in an effort to compete with [plaintiff.] ... These competing, self-dealing activities include, but are not limited to, (1) meeting with each other and their attorney to discuss plans to develop a new company that would comp[]ete with [plaintiff]; (2) using time in Boston, Massachusetts, during which they were supposed to be working on the integration of Bone Care and [plaintiff,] to meet with potential supporters or advisors of the company they intended to form in order to compete with plaintiff; and (3) misappropriating [plaintiffs] business and marketing-plans, contact information for “key opinion leaders” in the Vitamin D industry, equipment, electronic files, and other materials....
Count seven of plaintiffs complaint alleges usurpation of corporate opportunity solely against defendant Bishop. Said count alleges in relevant part as follows:
... Bishop’s fiduciary duty of loyalty included, among other things, the obligation to refrain from using his position as a corporate insider to gain personally from business opportunities belonging to Bone Care. Bone Care had an opportunity to develop and market Vitamin D products and uses that were based upon proprietary development plans, some of which may or may not be trade secrets. Bone Care had both an interest and an expectancy in its ability to pursue this opportunity.... Bishop has seized this opportunity for his own benefit ... and, in doing so, has breached his fiduciary duty of loyalty to Bone Care....
Finally, count eight of plaintiffs complaint alleges conspiracy against all three individual defendants. Said count alleges in relevant part as follows:
... [Defendants Bishop, Crawford, and Messner ... formed a conspiracy to breach their duties to [plaintiff,] misappropriate confidential and/or proprietary, non-trade secret information, and unjustly retain the benefits of possessing, selling, and otherwise using [plaintiffs] confidential, non-trade secret information and materials..... [Defendants Bishop, Crawford, and Messner did, in furtherance of their unlawful conspiracy, establish Proventiv for the purpose of using and exploiting confidential, non-trade secret information belonging to Bone Care.... [Said] defendants ... used and exploited Bone Care’s confidential, non-trade secret information in competition with Bone Care.... [Said] defendants ... did, in furtherance of their unlawful conspiracy, disclose Bone Care’s confidential, non-trade secret information to Cytochroma....
Additional facts relevant to the Court’s analysis will be discussed throughout the course of this memorandum.
MEMORANDUM
Defendants Bishop, Crawford, and Messner assert several of the restrictive covenants contained within their Employee Agreements are overbroad and unenforceable as a matter of law. Additionally, defendants assert said agreements fail in their entirety because the restrictive covenants contained within them are all interdependent and indivisible. Accordingly, defendants argue their motion to dismiss plaintiffs breach of contract claims should be granted. Additionally, defendants argue their motion to dismiss plaintiffs tort claims should be granted because said claims are based on the alleged misappropriation of plaintiffs purported trade secrets. Accordingly, defendants argue these tort claims are preempted by the Wisconsin Uniform Trade Secrets Act.
Plaintiff asserts the Court must determine the reasonableness of the covenants contained within the individual defendants’ Employee Agreements based on the totality of circumstances which it asserts cannot be judged on the pleadings alone. Accordingly, plaintiff argues its complaint states claims for breach of contract and as such defendants’ motion to dismiss such claims should be denied. Additionally, plaintiff asserts its tort claims based on misappropriation of confidential and proprietary information are not preempted by the Wisconsin Uniform Trade Secrets Act unless such information constitutes a trade secret. As such, plaintiff asserts the Court does not yet possess the necessary
A. Standard of Review
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) challenges the sufficiency of the complaint for failure to state a claim upon which relief can be granted.
Gen. Elec. Capital Corp. v. Lease Resolution Corp.,
When deciding a motion to dismiss for failure to state a claim courts are generally restricted to an analysis of the complaint.
See Hill v. Trustees of Ind. Univ.,
Additionally, courts will accept all well-pleaded facts alleged in the complaint as true and draw all reasonable inferences in favor of plaintiff.
Jackson v. E.J. Brach Corp.,
B. Defendants’ Motion to Dismiss Counts Three though Five of Plaintiffs Amended Complaint. 3
Defendants assert several of the restrictive covenants contained within the individual defendants’ Employee Agreements are overbroad and unenforceable as a matter of law. Additionally, defendants assert said agreements fail in their entirety because the restrictive covenants contained within them are all interdependent and indivisible. Accordingly, defendants argue their motion to dismiss plaintiffs breach of contract claims should be granted.
It is important to note that all parties agree Wisconsin law governs this controversy. Generally, Wisconsin law disfavors covenants not to compete.
Equity Enterprises, Inc. v. Milosch,
A covenant by an assistant, servant or agent not to compete with his or her employer or principal during the term of the employment or agency, or after the termination of that employment or agency, within a specified territory and during a specified time is lawful and enforceable only if the restrictions imposed are reasonably necessary for the protection of the employer or principal. Any covenant, described in this subsection, imposing an unreasonable restraint is illegal, void and unenforceable even as to any part of the covenant or performance that would be a reasonable restraint.
Accordingly, to be enforceable a restrictive covenant must: (1) be necessary for the protection of the employer, (2) provide a reasonable time restriction, (3) provide a reasonable territorial limit, (4) not be harsh or oppressive as to the employee; and (5) not be contrary to public policy.
Fields Found., Ltd. v. Christensen,
The Court will begin its analysis by addressing count four of plaintiffs complaint. Count four alleges breach of contract against all three individual defendants based on alleged violations of the return of company property provision contained within their Employee Agreements. Said provision provides as follows:
Employee agrees that, upon termination, he [ ] will not take or retain, without written authorization from an officer of Bone Care, any papers, lists, credit cards, electronic data files, patent applications, regulatory documents, standard operating procedures, assay methods, data, chemical syntheses, product development plans, equipment, samples, marketing plans, customer lists, or any other documents or copies thereof of any kind of belonging to or furnished by Bone Care or representative of his [] employment with Bone Care. All written materials and other property of Bone Care shall be returned upon termination.
Defendants argue said provision is invalid because it is incorporated into a punitive and void liquidated damages clause which is likewise contained within the individual defendants’ Employee Agreements. However, the Court need not address this argument because it finds the return of company property provision is not a restrictive covenant which makes it divisible from any allegedly invalid clause.
The return of company property provision does not mention any post-employment restrictions on said individual defendants’ future employment. The explicit purpose of Wis. Stat. § 103.465 is to invalidate covenants that impose unreasonable
Additionally, the public policy underlying Wis. Stat. § 103.465 is that Wisconsin law favors the mobility of workers.
Mut. Serv. Cas. Ins. Co.,
at ¶ 6,
However, such a conclusion does not end the Court’s inquiry because it must also determine whether count four states a claim for breach of contract. Plaintiff alleges the individual defendants “took or retained ... Bone Care’s product development plans, Key Opinion Leader ... contact information, equipment, electronic files, and other materials.” When the Court takes plaintiffs allegations as true and draws all reasonable inferences in plaintiffs favor it finds that it is not beyond doubt that plaintiff cannot prove any set of facts in support of its breach of contract claim which would entitle it to relief.
Conley,
at 45-46,
Next, the Court will analyze whether count three of plaintiffs complaint states a claim upon which relief can be granted. Count three alleges breach of contract against all three individual defendants based on alleged violations of the rights to intellectual property provision contained within said defendants’ Employee Agreements. Said provision provides as follows:
The Employee will disclose promptly and fully to Bone Care all inventions, improvements, or discoveries made or conceived by the employee, solely or jointly with others, in the course of such employment or with the use of Bone Care’s time, material, or facilities, or related to or suggested by the business or investigations of Bone Care, or of the companies it owns or controls at the time of such inventions. The employee will assign to Bone Care all rights, title, and interest in any inventions, improvements or discoveries that he ... may conceive of or first actually reduce to practice during his ... employment with the company....
Since Employee is to assign to Bone Care inventions which he ... may conceive or first actually reduce to practice while in the employ of the company, he ... will list at the end of this Agreement all those inventions which are owned by the Employee at this time and which should be brought to the attention of the Company to avoid future misunderstandings as to ownership....
Defendants argue this provision is invalid because it is overbroad and unreasonable. Additionally, defendants argue the liquidated damages clause contained within the individual defendants’ Employee Agreements is penal which renders it invalid and because the rights to intellectual property provision is indivisible from said damage clause it is invalid as well. However, Wisconsin courts have determined that an unreasonable liquidated damages clause is not a restraint against competition which makes it divisible from the balance of the covenant. Additionally, the Court does
In
Fields Found., Ltd. v. Christensen,
Additionally, defendants argue that the rights to intellectual property provision is overbroad and unreasonable. Defendants cite
Guth v. Minn. Mining & Mfg. Co.,
Additionally, defendants failed to demonstrate how the rights to intellectual property provision restricts their mobility which is the public policy underlying Wis. Stat. § 103.465.
Mut. Serv. Cas. Ins. Co.,
at ¶ 6,
Plaintiffs complaint alleges that the individual defendants have applied for one or more patents related to Vitamin D products and uses which upon information and belief are based on inventions, improvements, or discoveries made or conceived by said defendants during the course of their employment with plaintiff. Such allegations state a claim for breach of contract based on alleged violations of the rights to intellectual property provision contained within the individual defendants’ Employee Agreements. Accordingly, dismissal of count three is not appropriate.
Conley,
at 45-46,
Finally, the Court will analyze whether count five of plaintiffs complaint states a claim upon which relief can be granted. Count five alleges breach of contract against all three individual defendants based on alleged violations of the covenant not to compete contained within said defendants’ Employee Agreements. Said provision provides as follows:
That during the term of his ... employment by Bone Care and for a period of six months after the termination of such employment ... Employee will not directly or indirectly own, operate, manage, consult with regarding.matters related to those exposed to during your employment with Bone Care, control, participate in the management or control of, be employed by in a position comparable to that occupied during your employment with Bone Care, or maintain or continue any interest whatsoever in any enterprise that competes with Bone Care in the development and or sale of vitamin D compounds as therapies for certain diseases in competition with Bone Care in pharmaceutical research and development ... without the written consent of Bone Care.... This restriction applies whether termination is voluntary, requested by the employee, or initiated by the employer.
Defendants’ attacks on said covenant are multiple. Defendants argue the covenant not to compete is unenforceable as a matter of law because: (1) it is not necessary for plaintiffs protection, (2) it is harsh and oppressive to employees, (3) it does not contain a reasonable territorial limit; and (4) it is contrary to public policy. Additionally, defendants argue the covenant not to compete is indivisible from the non-disclosure agreement which is unenforceable under Wisconsin law because it contains neither temporal nor geographic limitations. However, the “validity of a restrictive covenant is to be established by examination of the particular circumstances which surround it.”
Rollins Burdick Hunter of Wis.,
at 468,
First, Wisconsin courts have held that a determination whether a covenant not to compete is reasonably necessary for an employer’s protection cannot be intelligently made without considering the nature and character of information to which an employee had access during the course of employment, the extent to which such information is vital to an employer’s ability to conduct its business, and the extent to which such information could be obtained through other sources.
Id.
at 470,
Additionally, Wisconsin courts have held that a determination concerning whether a restraint is harsh or oppressive to an employee cannot be made without considering “the extent to which the restraint on competition actually inhibits the employee’s ability to pursue a livelihood in that enterprise, as well as the particular skills, abilities, and experience of the employee sought to be restrained.”
Id.
at 470,
Next, concerning defendants’ territorial limitation argument, Wisconsin courts have held that a territorial limitation need not be expressed in geographic terms as an absolute prerequisite to a valid and enforceable agreement.
Id.
at 467,
Finally, the Court cannot conclude that as a matter of law the non-disclosure agreement contained within the individual defendants Employee Agreements is a restraint on trade. In
Sysco Food Servs. of E. Wis., LLC v. Ziccarelli,
That during the term of employment with Bone Care and thereafter, Employee will not ... disclose or authorize or permit anyone under his or her direction to disclose to anyone not properly entitled thereto ...
Said provision does not contain the use restriction which the Court in
Sysco Food Servs. of E. Wis., LLC
found to be outcome determinative and defendants failed to demonstrate how their mobility is affected by such a provision. In the end, the non-disclosure provision may be a restraint on trade.
5
However, without a showing as
C. Defendants’ Motion to Dismiss Counts Six through Eight of Plaintiffs Amended Complaint 6
Defendants argue their motion to dismiss plaintiffs tort claims should be granted because said claims are based on the alleged misappropriation of plaintiffs purported trade secrets. Accordingly, defendants argue these tort claims are preempted by the Wisconsin Uniform Trade Secrets Act.
The Wisconsin Uniform Trade Secret Act “displaces conflicting tort law, restitu-tionary law and any other law of this state providing a civil remedy for misappropriation of a trade secret.” Wis. Stat. § 134.90(6)(a). Expressly excluded from such displacement is “any civil remedy not based upon misappropriation of a trade secret.” Wis. Stat. § 134.90(6)(b)(2). Accordingly, the Wisconsin Supreme Court has determined that civil tort claims which require the use of a statutorily-defined trade secret are abrogated by Wis. Stat. § 134.90(6)(b)(2) while civil tort claims alleging misuse of non-trade secret confidential information remain available under the directive of said statute.
Burbank Grease Servs., LLC v. Sokolowski,
The definition of trade secret is found in Wis. Stat. § 134.90(l)(c) which provides as follows:
(c) “Trade Secret” means information, including a formula, pattern, compilation, program, device, method, technique or process to which all of the following apply:
1. The information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.
2. The information is the subject of efforts to maintain its secrecy that are reasonable under the circumstances.
Minuteman, Inc. v. L.D. Alexander,
Count six of plaintiffs complaint alleges breach of duty of loyalty against defendants Bishop, Crawford, and Messner. Said count alleges in relevant part as follows:
... [The individual defendants] each breached their duties by engaging in competing, self-dealing activities, while employed, and by misappropriating [plaintiffs] confidential or proprietary non-trade secret information in order toform what Bishop called a ‘better Vitamin D company than Bone Care’ in an effort to compete with [plaintiff.] ... These competing, self-dealing activities include, but are not limited to, (1) meeting with each other and their attorney to discuss plans to develop a new company that would comp[]ete with [plaintiff]; (2) using time in Boston, Massachusetts, during which they were supposed to be working on the integration of Bone Care and [plaintiff,] to meet with potential supporters or advisors of the company they intended to form ...; and (3) misappropriating [plaintiffs] business and marketing plans, contact information for “Key opinion leaders” in the Vitamin D industry, equipment, electronic files, and other materials....
Additionally, count seven of plaintiffs complaint alleges usurpation of corporate opportunity against defendant Bishop. Said count alleges in relevant part as follows:
... Bishop’s fiduciary duty of loyalty included, among other things, the obligation to refrain from using his position as a corporate insider to gain personally from business opportunities belonging to Bone Care. Bone Care had an opportunity to develop and market Vitamin D products that were based upon proprietary development plans, some of which may or may not be trade secrets. Bone Care had both an interest and an expectancy in its ability to pursue this oppor-tunity____Bishop has seized this opportunity for his own benefit ... and, in doing so, has breached his fiduciary duty of loyalty to Bone Care....
Finally, count eight of plaintiffs complaint alleges conspiracy against defendants Bishop, Crawford, and Messner. Said count alleges in relevant part as follows:
... [Defendants Bishop, Crawford, and Messner ... formed a conspiracy to breach their duties to [plaintiff,] misappropriate confidential and/or proprietary, non-trade secret information, and unjustly retain the benefits of possessing, selling, and otherwise using [plaintiffs] confidential, non-trade secret information and materials .... defendants Bishop, Crawford, and Messner did, in furtherance of their unlawful conspiracy, establish Proventiv for the purpose of using and exploiting confidential, non-trade secret information belonging to Bone Care .... [said] defendants ... used and exploited Bone Care’s confidential, non-trade secret information in competition with Bone Care .... [said] defendants ... did, in furtherance of their unlawful conspiracy, disclose Bone Care’s confidential, non-trade secret information to Cytochroma....
Taking plaintiffs allegations as true (which the Court must at this stage) counts six through eight of plaintiffs complaint expressly allege misuse and exploitation of confidential or proprietary non-trade secret information and the Wisconsin Supreme Court has determined that these types of claims remain available under Wis. Stat. § 134.90.
Id.
at ¶ 23,
The determination of what constitutes a statutorily defined trade secret under Wis. Stat. § 134.90(l)(c) is necessarily a fact-intensive inquiry considering factors such as: (1) the extent to which the information is known outside the business, (2) the extent to which it is known by employees and others involved in the business, (3) the extent of measures taken to guard the secrecy of the information, (4) the value of the information to the business and its competitors, (5) the amount of effort or money expended by the business in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others.
Minuteman, Inc.,
at 851,
ORDER
IT IS ORDERED that defendants’ motions to dismiss counts three through eight of plaintiffs complaint are DENIED.
Notes
. Said defendants moved to dismiss counts two through seven of plaintiff’s original complaint. However, plaintiff filed an amended complaint after defendants submitted their reply brief in support of their motion to dismiss. Count two of plaintiff's amended complaint now alleges unjust enrichment while counts three through eight allege the breach of contract and tort claims which are the subject of defendants' motion. Plaintiff filed its amended complaint before the October 10, 2006 deadline to amend pleadings without further
. For the sake of clarity the Court will refer to Bone Care/Genzyme as plaintiff throughout the course of this memorandum and order. References to Bone Care individually will continue to be designated as Bone Care.
. Defendants moved to dismiss counts two through four of plaintiff's original complaint which were plaintiff's breach of contract claims. However, count two of plaintiff's amended complaint alleges unjust enrichment and counts three through five allege breach of contract. Accordingly, the Court will apply defendants' arguments contained within their motion to dismiss to counts three through five of plaintiff's amended complaint.
. In light of the Court’s findings concerning whether the covenant not to compete is reasonably necessary for plaintiff's protection, is harsh or oppressive to employees, and reasonable as to territorial limitation the Court likewise cannot so find as a matter of law that said covenant is against public policy.
. If the non-disclosure provision is found to be a restraint on trade plaintiff bears a heavy
. Defendants moved to dismiss counts five through seven of plaintiff's original complaint which were plaintiff’s tort claims. However, counts six through eight of plaintiff's amended complaint allege tort claims. Accordingly, the Court will apply defendants' arguments contained within their motion to dismiss to counts six through eight of plaintiff’s amended complaint.