Court Issues Mixed Discovery Ruling in X-Ray Technology Trade Secrets Case

On Wednesday, a Western District of North Carolina court resolved five motions concerning document production, deposition, a protective order, and other disputes in a case filed by Philips Medical Systems Nederland B.V., Philips North America LLC, and Philips Electronics India Ltd. (collectively, Philips) against TEC Holdings Inc., Transtate Equipment Company Inc. (together, Transtate), and an individual in his personal capacity and as the administrator of a deceased’s estate. The court explained that the case was originally filed in 2017, and was transferred from the Northern District of Georgia to the present district in January 2020.

The 2019-filed second amended complaint reportedly explained that Philips develops, sells, and supports medical imaging systems, like X-ray machines used in hospitals and medical centers. Philips claimed that it uses proprietary and copyrighted hardware and software to operate and service these systems, which are equipped with access controls that restrict unauthorized use.

Allegedly, Transtate provides maintenance and support services for certain medical systems, including Philips’. The plaintiffs accused the defendants, and several former Philips employees now employed by Transtate as service specialists and technicians, of misappropriating trade secret information in order to sidestep access controls on Philips’ medical imaging systems to gain unauthorized access to proprietary and copyrighted software. In turn, Philips brought six causes of action under state and federal trade secret and copyright law against the defendants.

Among its determinations, the court held that the plaintiffs must do more to comply with the defendants’ interrogatory asking them to “identify and describe in detail all Trade Secrets that Plaintiffs allege or contend any Defendant misappropriated.” The court reasoned that the plaintiffs’ current response does not give “sufficient detail to inform Defendants (or a finder of fact) of what Defendants are accused of misappropriating and to mount a defense.”

The court also admonished the parties for failing to work out an appropriate deposition schedule when it reviewed the plaintiffs’ motion to compel the depositions of three defendant witnesses. The court called the parties’ failure “disappointing,” and remarked that there “does not seem to be any meaningful dispute that these depositions should proceed.”

In addition, the magistrate judge declined to grant the plaintiffs’ motion for a protective order, pointing to the chance that it “would likely thwart the very discovery the presiding district judge seems to expect to be conducted here.” In its conclusion, the court noted that “counsel’s efforts to compromise and resolve these issues without Court intervention have been underwhelming,” and that in order to resolve the litigation, the parties are going to have to “work hard and work together.” 

The fact discovery deadline is May 14, and the ready for trial date is Oct. 18.

Philips is represented by Fox Rothschild LLP and Reed Smith LLP. Transtate is represented by Morningstar Law Group, and the individual defendant by Parker Poe Adams & Bernstein LLP and Faegre Drinker Biddle & Reath LLP.