{"id":662,"date":"2013-11-13T20:37:02","date_gmt":"2013-11-13T20:37:02","guid":{"rendered":"https:\/\/www.bfvlaw.com\/northern-district-sanctions-company-for-bringing-baseless-trade-secrets-claim\/"},"modified":"2013-11-13T20:37:02","modified_gmt":"2013-11-13T20:37:02","slug":"northern-district-sanctions-company-for-bringing-baseless-trade-secrets-claim","status":"publish","type":"post","link":"https:\/\/www.bfvlaw.com\/northern-district-sanctions-company-for-bringing-baseless-trade-secrets-claim\/","title":{"rendered":"Northern District Sanctions Company for Bringing Baseless Trade Secrets Claim"},"content":{"rendered":"

In a recent federal court case, Homecare CRM, LLC v. Adam Group, Inc.<\/em>, No. 1:12-cv-19580TCB, 2013 WL 3388389 (N.D. Ga. July 8, 2013), the Northern District of Georgia sanctioned a company for bringing a baseless trade secrets claim.<\/p>\n

The Adam Group (also known as \u201cPlaymaker\u201d) and Homecare were competitors that both developed customer-relationship management software and licensed such software to companies in the home care or hospice industry.\u00a0 Both companies have a core software product and an add-on program.\u00a0\u00a0 Homecare\u2019s add-on product is called \u201cHarvest\u201d and Playmaker\u2019s is called \u201cTargetWatch.\u201d\u00a0 Homecare developed Harvest in late 2010 and 2011 and marketed it in early 2011.\u00a0 In April 2011, PlayMaker announced the availability of TargetWatch and stated it would be available the following month.<\/p>\n

Homecare filed suit against PlayMaker alleging, among other things, that PlayMaker misappropriated Homecare\u2019s trade secrets by gaining unauthorized access to Harvest (a trade secret) and using Harvest to create TargetWatch.\u00a0 More specifically, in its complaint, Homecare asserted that it \u201ccame up with the idea to acquire raw . . . claims data\u201d and process that data for its customers to be able to better identify and target certain referral sources.\u00a0 Homecare further asserted that the underlying coding system and processes for compiling data contained in Harvest constitutes a trade secret. Homecare then contended that PlayMaker\u2019s TargetWatch program \u00a0\u201canalyzes, compiles, formats, and displays information drawn from the claims data in manners that are very similar\u201d to Harvest.\u00a0 Homecare also alleged that PlayMaker improperly accessed Harvest and certain claims data from a third-party that belonged to Homecare and used such access to \u201cdesign, develop, and\/or modify\u201d TargetWatch.<\/p>\n

In response, PlayMaker asserted that Homecare\u2019s allegations were untrue and that Homecare violated Rule 11 by including the trade-secrets claim in its complaint.\u00a0 PlayMaker requested that the court strike Homecare\u2019s claim for misappropriation of trade secrets and require Homecare to pay a monetary sanction.<\/p>\n

Although not directly relevant to its decision of the motion, the court listed a panoply of \u201cother disagreements\u201d between the parties before discussing the substance of its Rule 11 analysis. Included in this colorful list was the following: (1) PlayMaker\u2019s counterclaims for libel, slander, false advertising, unfair competition, violation of Georgia\u2019s uniform Deceptive Trade Practices Act, tortious interference with business relations, and a declaratory judgment of non-infringement; (2) PlayMaker\u2019s motion to strike portions of the answers to its counterclaims that contained accusations of \u201cunethical and unsavory\u201d conduct; (3) PlayMaker\u2019s motion for a temporary restraining order and preliminary injunction after learning that Homecare had gained unauthorized access to TargetWatch and used such access to gather confidential information about PlayMaker\u2019s products; (4) PlayMaker\u2019s motion to expand the preliminary injunction; (5) PlayMaker\u2019s motion for contempt; and (6) a summary mention of \u201cnumerous discovery disputes that required the Court\u2019s involvement.\u201d<\/p>\n

In determining whether to award Rule 11 sanctions, the court considered the allegations in the complaint as well as certain other related evidence.\u00a0 The court ultimately found that Rule 11 sanctions against Homecare were appropriate because Homecare\u2019s misappropriation of trade secrets claim\u201c(1) ha[d] no reasonable factual basis; (2) [wa]s based on a legal theory that ha[d] no reasonable chance of success and [could not] be advanced as a reasonable argument to change the law; and (3) [wa]s filed in bad faith for an improper purpose.\u201d<\/p>\n

More specifically the court found that, several months before it filed suit, Homecare had accessed PlayMaker\u2019s software and put together a matrix that, among other things, compared the features of Harvest and TargetWatch.\u00a0 The matrix revealed that there were \u201cno intellectual property concerns\u201d when comparing Harvest and TargetWatch. Homecare disputed the reliability of this matrix and asserted that its trade-secrets claim was viable based on the following allegations: (1) the similarity between Harvest and TargetWatch; (2) the release of TargetWatch soon after the release of Harvest; (3) the opportunity for PlayMaker to discover Homecare\u2019s trade secrets through certain of Homecare\u2019s customers.<\/p>\n

With respect to the first allegation, the court found that Homecare completely ignored the matrix that compared Harvest and TargetWatch and had concluded that Harvest was far superior to TargetWatch.\u00a0 For example, the matrix demonstrated that, in April 2012, TargetWatch lacked Harvest updates dating back to October 2010.\u00a0 Thus, the court stated, \u201cHomecare\u2019s own comparison of the products showed that while Harvest and TargetWatch performed similar functions, they were quite different in their capabilities.\u00a0 These differences make Homecare\u2019s argument that it could reasonably believe that PlayMaker misappropriated Harvest based on the products\u2019 similarities specious at best.\u201d\u00a0 The court then stated that Homecare\u2019s contention was \u201cfarcical\u201d because of a March 2012 email instructing Homecare\u2019s vice president of product development to \u201crob whatever we can from any good product ideas they [PlayMaker] have so we can incorporate into our product ASAP.\u201d<\/p>\n

With respect to the third allegation, the court pointed out that the matrix Homecare had prepared internally was silent with respect to any insinuation that PlayMaker was accessing Homecare\u2019s alleged trade secrets.\u00a0 The court further reasoned that the fact that the matrix explicitly concluded that there were \u201cno intellectual property concerns\u201d negated any contention that Playmaker misappropriated Harvest. The court also pointed to internal Homecare emails, none of which expressed any concerns that PlayMaker misappropriated Harvest and one of which indicates that Homecare was partaking in corporate espionage and attempting to steal certain of PlayMaker\u2019s secrets.<\/p>\n

Finally, the court rejected Homecare\u2019s contention that it was entitled to \u201cvigorous discovery\u201d to establish its trade-secrets claim because it had established adequate circumstantial evidence.\u00a0 The court based this rejection on two reasons.\u00a0 First, Homecare failed to ask the court to compel PlayMaker to produce discovery. Second, Homecare made no attempt to explain how discovery would negate the otherwise \u201coverwhelming evidence in Homecare\u2019s possession that directly refutes its own factual allegations.\u201d<\/p>\n

Ultimately, after finding that Homecare\u2019s actions \u201cwere at the very least negligent\u201d and \u201cseem[] to have resulted from a desire to injure PlayMaker as a result of Homecare\u2019s concern that PlayMaker posed a competitive business threat,\u201d the court struck Homecare\u2019s claim for misappropriation of trade secrets claim and required Homecare to reimburse PlayMaker for the fees and costs associated with bringing the Rule 11 Motion.<\/p>\n

In addition to the evidence that Homecare\u2019s trade secrets claim lacked merit, this case was riddled with other allegations of bad faith on the part of Homecare.\u00a0 The court\u2019s view of whether Homecare\u2019s trade secrets claim was so egregious as to justify sanctions may have been tainted by these allegations. Thus, there is no certainty as to which circumstances a similar analysis may apply.\u00a0 Nevertheless, this case still strongly cautions plaintiffs of the risks of pursuing a dubious trade secrets claim.<\/p>\n","protected":false},"excerpt":{"rendered":"

In a recent federal court case, Homecare CRM, LLC v. Adam Group, Inc., No. 1:12-cv-19580TCB, 2013 WL 3388389 (N.D. Ga. July 8, 2013), the Northern District of Georgia sanctioned a company for bringing a baseless trade secrets claim. The Adam Group (also known as \u201cPlaymaker\u201d) and Homecare were competitors that both developed customer-relationship management software […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_mo_disable_npp":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[4,9],"tags":[16,29],"acf":[],"yoast_head":"\nNorthern District Sanctions Company for Bringing Baseless Trade Secrets Claim - Berman Fink Van Horn P.C.<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.bfvlaw.com\/northern-district-sanctions-company-for-bringing-baseless-trade-secrets-claim\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Northern District Sanctions Company for Bringing Baseless Trade Secrets Claim - Berman Fink Van Horn P.C.\" \/>\n<meta property=\"og:description\" content=\"In a recent federal court case, Homecare CRM, LLC v. 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