On Wednesday in the Southern District of California, XpandOrtho Inc. and its parent company, Exactech Inc., filed a complaint against Zimmer Biomet Holdings Inc. and its subsidiaries that set forth myriad allegations, including misappropriation of company trade secrets and unfair competition.
In early 2018, the complaint recounted, Zimmer proposed a potential acquisition of the plaintiff joint replacement device developer, which the plaintiffs claimed was an attempt to convince XpandOrtho to share company information. The plaintiffs put into place a nondisclosure agreement (NDA), and because of this new business relationship, Zimmer gained access to “secret technical information, physical devices, designs, test results, specifications, blueprints, manufacturing plans, materials, processes, sterilization protocols, source code, (and) marketing materials” — in other words, XpandOrtho’s trade secrets.
Subsequently, on June 20, 2018, “Zimmer stated that it was not interested in acquiring XpandOrtho” and “began misusing XpandOrtho’s proprietary information for its own benefit and in violation of the NDA,” the plaintiffs claimed. In particular, the plaintiffs alleged that Zimmer “secretly” filed applications for patents incorporating XpandOrtho technologies used to develop its “soft tissue balancing products” and argue copyright infringement of images of a certain product: “Zimmer used images of XpandOrtho’s XO product in their patent figures and even referenced XpandOrtho’s product by name.”
Incorporating these technologies not only is trade secret misappropriation, but it constitutes “unlawful business practices and unfair competition,” the plaintiffs said, as this knowledge of trade secrets has resulted in unfair advantage in the development of competing products.
The terms of the NDA had the parties “agree() that upon a written request from XpandOrtho, Defendants would promptly return all XpandOrtho property, including XpandOrtho’s proprietary information.” The plaintiffs claim that the defendants “have failed to return files containing XpandOrtho Trade Secrets.”
The full list of allegations against Zimmer include: trade secret misappropriation, aiding and abetting trade secret misappropriation, breach of and tortious interference with contract, breach of covenant, fraud, conversion, unjust enrichment, intentional and negligent interference with prospective economic advantage, breach of confidence, copyright infringement, and unfair competition.
Requests by the plaintiffs include: permanent injunctive relief to bar Zimmer from using or sharing XpandOrtho’s trade secrets, confidential information, and copyrighted works and to license “innovations derived from and/or related to XpandOrtho confidential information … and/or XpandOrtho Trade Secrets,” among other relief.
The plaintiffs are represented by Ropes & Gray LLP.