Trade Secrets Motion Against Amazon Health Care Venture Denied in Court; Litigation Likely to Continue
When Amazon, Berkshire Hathaway and JPMorgan Chase announced their intentions in 2018 to unite and provide health care service options to their 1.2 million employees, the health care world rejoiced.
But not everyone was pleased with the startup, nicknamed ABC.
Optum Inc., a UnitedHealth subsidiary, filed suit against the ABC partnership, claiming a former mid-level executive, David William Smith, had brought critical trade information with him to his new job at ABC that could damage Optum’s bottom line.
To prove its allegations, Optum laid out Smith’s last few days at the company.
In that time he: (1) printed out an Optum document marked “Confidential” minutes before speaking with ABC; (2) approached several Optum employees seeking information unrelated to his own job duties; (3) after receiving a written offer from ABC, printed out another Optum document marked “Confidential,” which contained information on Optum’s product portfolio performance, new product development and product job family and assessment plan.
As a vice president of corporate strategy and product, Smith worked extensively on Optum’s strategy initiatives, said the company, where he attended meetings discussing highly confidential information.
He had agreed to several nondisclosure, noncompete and nonsolicitation restrictive covenants, as well.
When Smith announced his resignation, Optum immediately placed Smith on administrative leave in order to assess the risk he posed to the company’s confidentiality. It concluded that Smith would likely “give ABC a head start.”
In a January 2019 hearing, Smith testified that his role at ABC is distinctly different than his role at Optum.
At ABC, he is involved in advising the startup on best practices in providing health care to employees. While at Optum, he was tasked with creating health care products sold to customers like ABC.
This, said the judge, was significant. He denied Optum’s motion, stating that the company failed to establish Smith was likely to violate one of the noncompete agreements he signed, also noting that ABC’s venture did not currently offer any products that would compete with the Optum business.
Scorecard: Optum has lost its case on breach of confidentiality against Amazon, Berkshire Hathaway and JPMorgan Chase, though it is likely to appeal the ruling.
Takeaway: Review top-level employees’ access to confidential information in order to prevent the risk of exposing trade secrets to competitors. &