BAYER CORP. v. ROCHE MOLECULAR SYSTEMS, INC.
72 F.Supp.2d 1111 (1999)
BAYER CORPORATION, Plaintiff,
v.
ROCHE MOLECULAR SYSTEMS, INC., Defendant.
No. C99-01165 WHA.
United States District Court, N.D. California.
October 15, 1999.
C. Robert Boldt, Rick Richmond, and Brian McKeever, Kirkland & Ellis, Los Angeles, CA, for Bayer Corporation.
Charles B. Cohler, Kevin C. McCann, Lasky Haas & Cohler, San Francisco, CA, for Roche Molecular Systems, Inc.
ORDER DENYING MOTION FOR PRELIMINARY INJUNCTION BUT IMPOSING PERIODIC DISCOVERY TO MONITOR PROTECTION OF TRADE SECRETS; DENYING CROSS-MOTION TO STRIKE EXPERT DECLARATION; DENYING CROSS-MOTION TO DISMISS
ALSUP, District Judge.
INTRODUCTIONThis motion for a preliminary injunction presents a conflict between two strong public policies of California — the policy favoring employee mobility free of encumbering restriction and the policy favoring protection of genuine trade secrets. On the present record, the Court concludes that employee mobility must prevail and denies plaintiff's motion to prohibit a former employee from pursuing his trade at a competitor. The theory of "inevitable disclosure" is not the law in California and, at trial, plaintiff will have to demonstrate actual use or disclosure, or actual threat thereof. For the purposes of a preliminary injunction, under California law, the theory of inevitable disclosure does not supply the proof needed to establish a probability of success on the merits nor does it suffice to raise serious questions about actual use or threat. In light of the substantial issues raised concerning actual use in this case and the ongoing risk of trade-secret disclosure, however, the court imposes certain periodic discovery obligations on the defendant and the employee. If this periodic and ongoing discovery reveals misuse of plaintiff's confidential or proprietary information, then plaintiff may renew its request preliminary injunctive relief.
STATEMENTLast February, Pete Betzelos quit his job as HIV Marketing Manager for the World-Wide Marketing Group at Bayer Corporation ("Bayer") to go to work for a competitor, Roche Molecular Systems, Inc.
("Roche"), as its International Marketing Manager, HIV. There is a clear overlap in job responsibilities. Bayer and Roche both produce and market tests, called viral-load assays, that measure quantities of the Human Immunodeficiency Virus (HIV) in blood samples. Roche manufactures and distributes approximately 70% of the HIV viral-load assays sold throughout the world, and Bayer manufactures and distributes approximately 20 to 25% of the HIV viral-load assays sold throughout the world (Declaration of Dr. Gary T. Ford in Opposition to Bayer's Motion for Preliminary Injunction ("Ford Decl.") ¶ 14). Bayer's tests use bDNA technology. Roche's tests use PCR technology. They are completely different approaches to competing products. Bayer's products include its bDNA HIV 2.0 and 3.0 assays. Bayer's bDNA 3.0 assay is "ultra sensitive," meaning that it has a detection limit at or below 50 copies per milliliter of blood (Declaration of Michael Urdea, Ph.D. ("Urdea Decl.") at ¶¶ 10 & 11). Roche produces and markets a line of assay products under the name Amplicor HIV-1 Monitor (id. at ¶ 8). As part of this line Roche markets an "ultra sensitive" assay known as Amplicor HIV-1 Monitor Ultrasensitive method (id. at ¶ 11).
1. In addition, Roche points to the following areas where Mr. Betzelos' responsibilities at Roche do not overlap with his former responsibilities at Bayer: full product life cycle marketing; participation with new product research and feasibility studies; defining product specifications and performance parameters; financial analysis of return on investment, time to market, and net present value; new product prioritization; managing details of implementation of marketing campaigns; frequent contact with customers (Betzelos Decl. at ¶¶ 23-30).
2. Roche counter-moved to dismiss this case as moot. Bayer, however, alleged and showed evidence that it still has trade secrets that may be misappropriated absent injunctive relief from this Court. The Court therefore DENIES the counter-motion to dismiss. Roche also counter-moved to strike the expert declaration of Dr. Randall J. Voorn, filed in support of Bayer's motion for a preliminary injunction. The Court does not rely on Dr. Voorn's declaration in deciding Bayer's motion; thus the Court does not reach whether Dr. Voorn's declaration is reliable under Federal Rule of Evidence 702. The Court therefore DENIES as moot Roche's counter-motion to strike Dr. Voorn's declaration.
3. In fact, the Seventh Circuit recognized this in its PepsiCo opinion. In an earlier case, AMP Inc. v. Fleischhacker,823 F.2d 1199 (7th Cir.1987), the Seventh Circuit affirmed the denial of a preliminary injunction in a case alleging that a former employee would compromise trade secrets in his new position at a competitor. In that case, the Seventh Circuit emphasized that "the mere fact that a person assumed a similar position at a competitor does not, without more, make it `inevitable that he will use or disclose ... trade secret information' so as to `demonstrate irreparable harm.'" PepsiCo, 54 F.3d at 1269 (citing AMP Inc. v. Fleischhacker). 4. See Stephen L. Sheinfeld & Jennifer M. Chow, "Protecting Employer Secrets and the `Doctrine of Inevitable Disclosure,'" 600 PLI/ LIT 367 (1999).
5. The case was decided March 12, 1999, by Senior Judge Rafeedie of the U.S. District Court, Central District of California. It was reported at 50 U.S.P.Q.2d 1638. Bayer filed its motion for a preliminary injunction on August 3, 1999.