Wright Medical Technology, Inc. v. Paragon 28, Inc.

Filing 177

ORDER by Chief Judge Philip A. Brimmer on 9/30/2019, re: 112 Motion to Dismiss Paragon's Motion to Dismiss Counts Eleven Through Seventeen of the Third Amended Complaint is GRANTED IN PART and DENIED IN PART as set forth in this order. ORDERED that Wright's eleventh and twelfth claims are DISMISSED insofar as they are based on allegations that non-founder employees misappropriated trade secrets, with the exception of the allegations as to Gordon in Docket No. 89 at 22-26, 81, 88-93. ORDERED that Wright's thirteenth and fourteenth claims are DISMISSED to the extent that they are based on the failure to disclose the KOLs' equity shares or the filing of the 391 application. ORDERED that Wright's sixteenth and seventeenth claims are DISMISSED. ORDERED that, within fourteen days of this order, Paragon shall file its answer..(sphil, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Chief Judge Philip A. Brimmer
Civil Action No. 18-cv-00691-PAB-STV
WRIGHT MEDICAL TECHNOLOGY, INC.,
Plaintiff,
v.
PARAGON 28, INC.,
Defendant.

ORDER

This matter is before the Court on defendant’s Motion to Dismiss Counts Eleven
through Seventeen of the Third Amended Complaint [Docket No. 112]. The Court has
jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1338.
I. BACKGROUND1
Plaintiff Wright Medical Technology, Inc. (“Wright”) is a medical device
developer, manufacturer, and distributor. Docket No. 89 at 3, ¶ 9. Am ong its products
are surgical plates and other instruments used to repair bones in the foot and ankle
areas. Id. Defendant Paragon 28, Inc. (“Paragon”) also manufactures and distributes
orthopedic plate systems and other devices used to repair bones in the foot and ankle.
Id. at 8, ¶¶ 33-34.

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The Court assumes the allegations in plaintiff’s third amended complaint are
true in considering the motion to dismiss. Brown v. Montoya, 662 F.3d 1152, 1162
(10th Cir. 2011).

Paragon was founded by three former high-level Wright employees – Albert
DaCosta, Frank Bono, and Matt Jarboe – and one f ormer Wright independent
contractor, Lee Rosenthal (collectively, “the founders”). Id. at 10-11, ¶¶ 43-44. Since
Paragon’s founding, at least thirteen former Wright employees or independent
contractors have begun working for or with Paragon. Id. at 11, ¶ 44. Each of the
former Wright employees worked in the same or substantially the same position at
Paragon as he or she had at W right. Id. at 12, ¶ 47.
While employed at Wright, these individuals had access to and knowledge of
Wright’s trade secrets, including its current and planned product lines, business plans,
customers, sales, and other valuable information. Id. at 12-13, ¶¶ 48-49. Each of the
founders had entered into a confidentiality agreement with Wright agreeing to keep
confidential Wright’s trade secret information. Id. at 14, ¶ 52. Further, at least twelve of
the former employees had signed confidentiality, non-competition, non-solicitation
and/or intellectual property rights agreements while at Wright. Id. at 12, ¶ 46.
Wright contends that the former employees misappropriated its confidential and
trade secret information for the benefit and financial gain of Paragon, with the approval
of Paragon. Id., ¶ 48. For example, Wright alleges that several former employees sent
Wright confidential or trade secret information to themselves via email before they left
employment at Wright. See, e.g., id. at 20, ¶ 74; at 23, ¶¶ 86-87; at 32, ¶ 117; and at
35, ¶¶ 136-37. Wright contends that the misappropriation was “for the direct benefit of
Paragon” and gave Paragon “a significant and unfair competitive advantage.” See,
e.g., id. at 20, ¶ 76.

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Further, Wright alleges that the founders knowingly and deliberately
misappropriated Wright’s confidential and trade secret information. More specifically,
Wright alleges that Bono and DaCosta, while at Wright, were privy to confidential and
trade secret information that included the specific contractual terms and licensing
agreements entered into between Wright and surgical consultants or Wright and Key
Opinion Leaders (“KOLs”). Id. at 17, ¶ 63. Wright alleges that DaCosta and Bono
misappropriated this information by using it to solicit certain surgical consultants and
KOLs to cease their relationships with Wright and switch to similar roles at Paragon. Id.
Further, Wright alleges that Rosenthal induced former employee Luke Gordon to solicit
a Wright contract manager for the contract manager’s list of products purchased from
Wright so that Paragon could undercut Wright’s pricing and induce the contract
manager to purchase equivalent devices from Paragon. Id. at 22-24, ¶¶ 81, 88-90.
Finally, Wright alleges that Paragon has participated in unfair competition. For
example, Paragon promoted a “cadaver course” intended to teach surgeons to perform
procedures of the foot and listed Dr. Christopher Hyer, a Wright KOL, as “anticipated
course faculty” on the course’s promotional material. Id. at 37, ¶ 142-43. The
advertisement included Dr. Hyer’s name and photo. Docket No. 89-19. W right alleges
that Dr. Hyer did not provide consent for Paragon to use his name and picture and that
Paragon was aware that it did not have Dr. Hyer’s consent. Docket No. 89 at 37, ¶ 14445. Wright argues that this constitutes false advertising. See id. at 37. Moreover,
Wright alleges that Paragon engaged in unfair competition when it submitted a patent
application that was nearly identical to a patent application that W right had filed a

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month prior. Id. at 20-21, ¶¶ 77-79. It also alleges that Paragon has offered several
KOLs equity or ownership interests in Paragon and that the KOLs are using Paragon
products in surgical procedures without disclosing their interests, which constitutes
unfair competition. Id. at 17, ¶ 64; at 76, ¶ 300.
On September 28, 2018, Wright filed its Third Amended Complaint [Docket No.
89], raising seventeen claims against Paragon. Docket No. 89 at 38-85. Paragon filed
a partial Motion to Dismiss Counts Eleven through Seventeen of the Third Amended
Complaint [Docket No. 112] on October 31, 2018. T he claims Paragon seeks to have
dismissed are (1) misappropriation of trade secrets under the Federal Defend Trade
Secrets Act (“DTSA”), 18 U.S.C. § 1836; (2) trade secret misappropriation under the
Colorado Uniform Trade Secrets Act (“CUTSA”), Colo. Rev. Stat. § 7-74-102(4); (3)
unfair competition under the Lanham Act, 15 U.S.C. § 1125(A)(1); (4) common law
unfair competition; (5) intentional interference with contracts; (6) civil theft; (7)
conversion. Id. at 70-84. Wright filed a response [Docket No. 115], to which Paragon
replied. Docket No. 118.
II. LEGAL STANDARD
To survive a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil
Procedure, a complaint must allege enough factual matter that, taken as true, makes
the plaintiff’s “claim to relief . . . plausible on its face.” Khalik v. United Air Lines, 671
F.3d 1188, 1190 (10th Cir. 2012) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). “The ‘plausibility’ standard requires that relief must plausibly follow from the
facts alleged, not that the facts themselves be plausible.” RE/MAX, LLC v. Quicken

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Loans Inc., 295 F. Supp. 3d 1163, 1168 (D. Colo. 2018) (citing Bryson v. Gonzales, 534
F.3d 1282, 1286 (10th Cir. 2008)). Generally, “[s]pecific facts are not necessary; the
statement need only ‘give the defendant fair notice of what the claim is and the grounds
upon which it rests.’” Erickson v. Pardus, 551 U.S. 89, 93 (2007) (per curiam) (quoting
Twombly, 550 U.S. at 555) (omission marks omitted). “[W]here the well-pleaded facts
do not permit the court to infer more than the mere possibility of misconduct, the
complaint has alleged – but it has not shown – that the pleader is entitled to relief.”
Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) (internal quotation marks and alteration
marks omitted); see also Khalik, 671 F.3d at 1190 (“A plaintiff must nudge [his] claims
across the line from conceivable to plausible in order to survive a motion to dismiss.”
(quoting Twombly, 550 U.S. at 570)). If a complaint’s allegations are “so general that
they encompass a wide swath of conduct, much of it innocent,” then plaintiff has not
stated a plausible claim. Khalik, 671 F.3d at 1191 (quotations omitted). Thus, even
though modern rules of pleading are somewhat forgiving, “a complaint still must contain
either direct or inferential allegations respecting all the material elements necessary to
sustain a recovery under some viable legal theory.” Bryson, 534 F.3d at 1286
(alteration marks omitted).
III. ANALYSIS
A. Trade Secret Misappropriation
Paragon argues that Wright’s claims for trade secret misappropriation under
DTSA and CUTSA must be dismissed for failure to state a claim because (1) Wright
has failed to show that Paragon itself was responsible for any misappropriation; (2)

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Wright has failed to allege that the Paragon founders engaged in misappropriation; and
(3) Wright has failed to sufficiently identify its trade secrets. Docket No. 112 at 6-9.
To state a claim for misappropriation of trade secrets, Wright must allege facts
supporting the following elements: (1) Wright possessed a valid trade secret; (2) the
trade secret was disclosed or used without consent; and (3) Paragon knew, or should
have known, that the trade secret was acquired by improper means. Gates Rubber Co.
v. Bando Chemical Industries, Ltd., 9 F.3d 823, 847 (10th Cir. 1993). CUTSA defines a
“trade secret” as
any scientific or technical information, design, process, procedure,
formula, improvement, confidential business or financial information,
listing of names, addresses, or telephone numbers, or other information
relating to any business or profession which is secret and of value. To be
a “trade secret” the owner thereof must have taken measures to prevent
the secret from becoming available to persons other than those selected
by the owner to have access thereto for limited purposes.
Colo. Rev. Stat. § 7-74-102(4). A “trade secret” under DTSA includes:
all forms and types of financial, business, scientific, technical, economic,
or engineering information, including patterns, plans, compilations,
program devices, formulas, designs, prototypes, methods, techniques,
processes, procedures, programs, or codes, whether tangible or
intangible, and whether or how stored, compiled, or memorialized
physically, electronically, graphically, photographically, or in writing if . . .
(A) the owner thereof has taken reasonable measures to keep such
information secret; and (B) the information derives independent economic
value, actual or potential, from not being generally known to, and not
being readily ascertainable through proper means by, another person who
can obtain economic value from the disclosure or use of the information.
18 U.S.C. § 1839(3).
Paragon argues that Wright has failed to identify trade secrets because,
throughout its complaint, it “continues to refer to its alleged ‘confidential, highly
confidential and trade secret information’ without distinguishing between any of the
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aforementioned categories of information and fails to plead what it considers to be its
trade secrets with sufficient specificity.” Docket No. 112 at 9. While Wright often refers
to its “confidential, highly confidential and trade secret information” in its complaint, it
also sets out its purported trade secrets in detail, including “[p]roduct cost and pricing
information, including pricing strategies, . . . customer demand and purchasing
information, and the terms of customer and supplier contracts,” and “[k]nowledge of
[Wright’s] surgical consultants/KOLs, including consulting contract provisions, including
ownership of IP and compensation.” Docket No. 89 at 70, ¶ 267. Accordingly, Wright
has done more than plead “conclusory recantations of claim elements,” as Paragon
suggests. Docket No. 112 at 10. The Court finds that Wright’s allegations sufficiently
identify the nature of the trade secrets allegedly misappropriated so as to give Paragon
fair notice of the basis of Wright’s claim. See SBM Site Servs., LLC v. Garrett, No. 10cv-00385-WJM-BNB, 2012 WL 628619, at *10 (D. Colo. Feb. 27, 2012) (com plaint that
“set forth specific documents and subjects of information” was sufficient to identify
purported trade secrets at issue).
Paragon also argues that Wright has failed to state a claim for trade secret
misappropriation because it did not allege that Paragon had knowledge of any alleged
misappropriation performed by its employees or that it used what was allegedly
misappropriated. Docket No. 112 at 7. To support its argument, it relies upon Ciena
Communications, Inc. v. Nachazel, No. 09-cv-02845-MSK-MJW, 2010 WL 3489915 (D.
Colo. Aug. 31, 2010). In Ciena, the court rejected an argument that an employee’s
acquisition and possession of another’s trade secrets can be imputed onto the
employer simply by virtue of the employer hiring that employee. Id. at *4. To hold
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otherwise would “essentially impos[e] strict liability on a corporation that hires a person
possessing others’ trade secrets.” Id. Rather, the plaintiff must make “specific factual
averments showing [the defendant’s] ‘misappropriation’ of [the plaintiff’s] secrets.” Id.
The Court agrees with Paragon that Wright must allege facts that go beyond
Paragon’s mere hiring of former Wright employees who may have been privy to
Wright’s confidential information and trade secrets. Much of Wright’s complaint fails to
do so. Wright’s complaint is replete with factual allegations concerning its former
employees’ acquisition of Wright trade secrets and subsequent alleged trade secret
misappropriation, but lacks any factual allegation that Paragon itself misappropriated or
knowingly used such misappropriated information. For example, Wright alleges that
former employee Adam Yoder “became privy to certain of [Wright’s] trade secret
information” during his employment at Wright and left Wright to work for Paragon in the
same or a substantially similar role. Docket No. 89 at 31, ¶¶ 113, 115. Yoder is alleged
to have sent himself an email containing Wright’s “confidential, highly confidential and
trade secret information” prior to ending his employment at Wright. Id., ¶ 116. Finally,
Wright alleges that “[u]pon information and belief, Yoder worked in concert with other
Paragon employees to hide and conceal Yoder’s breach of his obligations not to
disclose confidential information” and that “[s]uch information clearly provided Yoder,
and thusly Paragon, a significant and unfair competitive advantage.” Id. at 32-33,
¶ 120.2
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See also Docket No. 89 at 33, ¶ 124, at 33, ¶ 125, at 33-34, ¶ 126, and at
34, ¶ 129 (making same allegations as to former Wright employee Matthew Brock
Howard) and id. at 35, ¶ 133-135, at 36, ¶ 139 (making same allegations as to former
Wright employee Brandon Strange).
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Such allegations are insufficient to plead a claim of trade secret misappropriation
against Paragon. Although Wright alleges that Paragon “was aware” of the former
employees’ misappropriation and “actively participated in, substantially assisted, or
endorsed” the former employees’ use of that information, Docket No. 89 at 70, ¶ 268,
this allegation is conclusory and not supported by factual averments. See Ciena, 2010
WL 3489915, at *4, *5 (finding allegation that defendant “misappropriated, or
threaten[ed] to misappropriate, [plaintiff’s] trade secrets for the purpose of using and
exploiting such information” was “entirely conclusory” and insufficient to state a claim).
Wright makes no specific factual allegation that Paragon (1) was aware of these former
employees’ alleged misappropriation or (2) used the information that the former
employees allegedly misappropriated. The mere fact that Paragon hired individuals to
work in similar roles as they held at Wright is insufficient to impute any misappropriation
onto Paragon. Ciena, 2010 WL 3489915 at *4. “In the absence of specific factual
averments showing [the defendant’s] misappropriation of [the plaintiff’s] secrets,” the
Court will not “reflexively impute” any improper acquisition of Wright’s trade secrets to
Paragon. Id. Accordingly, the Court will dismiss Wright’s trade secret misappropriation
claims to the extent that they are based on the actions of the non-founder employees.
Paragon also argues that Wright’s allegations as to Paragon’s founders are
insufficient to state a claim of trade secret misappropriation. Docket No. 112 at 8-9.
The Court disagrees. In its complaint, Wright alleges that certain Paragon founders,
“acting on behalf of Paragon,” “deliberately targeted and knowingly solicited known
[Wright Key Opinion Leaders (“KOLs”)], using confidential, highly confidential and trade
secret information learned while they were employed at Wright [], in order to induce
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them to work for Paragon.” Docket No. 89 at 17, ¶ 62. Specifically, Wright asserts that
founders Bono and DaCosta have used their knowledge of the specific contractual
terms and licensing agreements created by Wright “to unfairly solicit and attempt to
convert certain Wright Medical surgical consultants and KOLs to switch to similar roles
at Paragon.” Id., ¶ 63. Further, Wright claims that the founders used this information to
benefit Paragon, alleging that “[u]pon information and belief,” Paragon, as well as Bono
and DaCosta, have offered several Paraon KOLs equity positions or ownership
interests in Paragon to entice them to consult for Paragon. Id., ¶ 64; see Viesti
Assocs., Inc. v. Pearson Educ., Inc., 2013 WL 1229534, at *4 (D. Colo. Mar. 26, 2013)
(considering allegations based “on information and belief” when allegations otherwise
pled factual statements and met requirements for notice pleading).
In addition, Wright alleges that founder Rosenthal, along with former employee
Gordon, knowingly obtained Wright trade secret information from a third-party contract
manager in order to “undercut Wright Medical pricing and unfairly induce the Contract
Manager to purchase plates from Paragon 28 instead of Wright Medical.” Docket No.
89 at 24, ¶ 90, at 26, ¶ 93. The Court finds that these allegations set out (1) the
existence of trade secrets; (2) that the trade secrets were used or disclosed without
Wright’s consent; and (3) Paragon knew or should have known that the trade secrets
were acquired by improper means. Accordingly, these allegations are sufficient to state
a claim for trade secret misappropriation. Contra RE/MAX, 295 F. Supp. 3d at 1175
(dismissing claims where plaintiff failed to make “specific factual allegations of
disclosure of trade secrets by . . . former employees” or “specific factual allegations of
how such employees used” the trade secrets).
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Any argument that the actions of Paragon’s founders cannot be imputed onto
Paragon, see Docket No. 118 at 3 n.3, is without merit. Generally, “the actions of
corporate officers and directors are attributable to the corporate entity.” In re Stat-Tech
Securities Litigation, 905 F. Supp. 1416, 1422 (D. Colo. 1995). Unlike Ciena or
RE/MAX, this is not simply a case of an employer hiring individuals with prior knowledge
of another company’s trade secrets with no allegation that the employees wrongfully
disclosed those trade secrets or that the employer used the wrongfully disclosed trade
secrets. Rather, Wright alleges that the founders of Paragon have used their personal
knowledge of Wright trade secret information in order to incur benefits for Paragon. A
corporation acts through its agents, Stat-Tech, 905 F. Supp. at 1422, and the actions of
the Paragon founders may be imputed onto the corporation.
Thus, insofar as it alleges that DaCosta or Bono used confidential contractual
information to solicit surgical consultants and KOLs to work for Paragon, or that
Rosenthal and Gordon misappropriated purchasing and pricing trade secrets to
undercut Wright pricing, Paragon’s motion will be denied and Wright’s trade secret
misappropriation claim can proceed.
B. Preemption
Paragon next argues that Wright’s claims for conversion, intentional interference
with a contract, and civil theft are preempted by its trade secret misappropriation claims.
Docket No. 112 at 10. “CUTSA preempts common law claims that ‘conflict’ with its
trade secret misappropriation provisions.” Abbott Labs v. Finkel, No. 17-cv-00894CMA, 2017 WL 5517399, at *3 (D. Colo. Nov. 17, 2017) (citing Powell Prods., Inc. v.

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Marks, 948 F. Supp. 1469, 1474 (D. Colo. 1996)); see also Colo. Rev. Stat. § 7-74108(1) (“[T]his article displaces conflicting tort, restitutionary, and other law of this state
providing civil remedies for misappropriation of a trade secret”). “[I]f a common law
claim is no more than a restatement of the same operative facts which would plainly
and exclusively spell out trade secret misappropriation, preemption is appropriate.”
Abbott, 2017 WL 5517399, at *3. Thus, “the salient question in addressing . . .
preemption is whether a challenged common law claim depends solely on a finding of
trade secret status to be actionable. W here it does not, the claim is not preempted.”
Virtual Cloud Services, Inc. v. CH2M Hill, Inc., No. 02-cv-01004, 2006 WL 446077, at *2
(D. Colo. Feb. 21, 2006).
For example, when a claim “involv[es] a trade secret misappropriation issue,” but
also “include[s] additional elements not necessary for a misappropriation claim” under
CUTSA, the claim is not preempted. Powell, 948 F. Supp. 1474. In Gates Corporation
v. CRP Industries, Inc., No. 16-cv-01145-KLM, 2017 WL 5714342 (D. Colo. Nov. 28,
2017), the court noted that the elements required to prove tortious interference with a
contract involve consideration of different elements than a trade secret misappropriation
claim. Id. at *6. Thus, the tortious interference with a contract claim was not
preempted “because it include[d] an element that does not need to be proven for the
CUTSA claim.” Id.
To prove intentional interference with a contract, a plaintiff must demonstrate
“(1) the existence of a contract between the plaintiff and a third-party; (2) knowledge by
the defendant of the contract or knowledge of facts which would lead the defendant to

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inquire as to the existence of the contract; (3) intent by the defendant to induce a
breach of contract with the third-party; (4) action by the defendant which induces the
breach of contract; and (5) damages to the plaintiff.” Galleria Towers, Inc. v. Crump
Warren & Sommer, Inc., 831 P.2d 908, 912 (Colo. App. 1991). Plaintif f need not
demonstrate, for example, the existence of a contract in order to prove trade secret
misappropriation. Thus, plaintiff’s intentional interference with a contract claim is not
preempted by CUTSA. See Powell, 948 F. Supp. at 1474 (finding that plaintiff’s
interference with business relationships claim was not preempted because the
defendant “could be liable for interference with business relations even if [it] did not
misappropriate any trade secrets from plaintiff.”). Paragon’s motion will be denied as to
Wright’s intentional interference with a contract claim.
When analyzing whether claims of civil theft or conversion are preempted by
CUTSA, courts look to the nature the subject of the alleged theft or conversion. To the
extent that a plaintiff seeks “to recover for confidential information that does not rise to
the level of a trade secret or has value ‘independent of its value as a trade secret,’” the
claim would not be preempted. Abbott, 2017 WL 5517399, at *3 (quoting Virtual Cloud
Servs., Inc., 2006 WL 446077, at *4). For example, conversion or civil theft claims
involving the alleged misappropriation of physical property are not preempted by
CUTSA. See SBM Site Services, 2012 WL 628619, at *11 (civil theft claim not
preempted because complaint alleged theft of physical property, which would not be the
subject of a CUTSA claim); cf. L-3 Commc’ns Corp. v. Jaxon Engineering &
Maintenance, Inc., 863 F. Supp. 2d 1066, 1087 (D. Colo. Mar. 27, 2012) (unjust

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enrichment claim not preempted where plaintiff alleged misappropriation of physical
equipment and misuse of internal computer resources). However, preemption would
bar a conversion or civil theft claim that seeks only to recover for the alleged
misappropriated trade secrets. Abbott, 2017 WL 5517399, at *3; see also Powell, 948
F. Supp. at 1475 (“To the extent that plaintiff’s claim seeks recovery for defendants’
misappropriation of plaintiff’s intellectual property, it is seeking to recover for
misappropriation of trade secrets. If the design of the plaintiff’s machine is not a trade
secret, plaintiff has no property right in its design, and it therefore would have no
claim.”).
Wright’s civil theft and conversion claims are based on the alleged
misappropriation of Wright’s “business plans and roadmaps, customer lists and
demand[s], product pricing lists, discount plans, distribution, supply agreements, sales
training and detailed knowledge concerning the design, dimensions and manufacturing
processes used to develop, manufacture and sell” certain of its products. Docket No.
89 at 83, ¶ 339, at 84, ¶ 345. T he complaint states that, “[t]o the extent that this
information is deemed business information that, while valuable, does not rise to the
level of trade secret, Wright Medical pleads in the alternative that Paragon 28 has taken
this material and information, and has used it for its own benefit without Wright
Medical’s consent or authorization.” Id. at 84, ¶ 340, at 85, ¶ 346.
Wright argues that the Court should follow Abbott and allow its civil theft and
conversion claims to survive the motion to dismiss stage. Docket No. 115 at 13. In
Abbott, the court declined to dismiss plaintiff’s conversion claim on preemption grounds
because it was “without a sufficient record to determine whether some, part, or all of
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Plaintiff’s conversion claim depends on a finding of trade secret status and is, therefore,
preempted by the CUTSA.” 2017 WL 5517399, at *3 (noting that “none of the allegedly
converted information has been presented to the Court, nor has it been described in
much detail.”). Further, Abbott noted that Rule 8(d)(2) allows pleading in the
alternative, even where the alternative claims are inconsistent. Id.; Fed. R. Civ. P.
8(d)(2) (“A party may set out 2 or more statements of a claim or defense alternatively or
hypothetically, either in a single count or defense or in separate ones.”). The court
determined that “under Rule 8, dismissal under Rule 12(b)(6) is inappropriate at this
stage in the proceedings.” Abbott, 2017 WL 5517399, at *3.
Abbott is distinguishable because the Court has a sufficient record before it to
determine that Wright’s claims are preempted by CUTSA. Wright makes no allegation
that the allegedly converted or stolen property has value “independent of its value as a
trade secret,” Abbott, 2017 WL 5517399, at *3, and has not alleged that Paragon stole
any physical property from it. Even if the Court were to agree with Wright’s contention
that it can plead these tort claims in the alternative because it also alleges that Paragon
stole “confidential” and “highly confidential,” non-trade-secret information, Wright’s
claims are still insufficient. See Cypress Advisors, Inc. v. Davis, No. 16-cv-01935-MSKMEH, 2019 WL 1242331, at *5 n.5 (D. Colo. Mar. 18, 2019) (noting that “the theft of
intellectual property that does not rise to the level of a trade secret would not give rise
to a claim for civil theft, as the property’s owner cannot demonstrate some other legal
basis to exclusive use”); see also Hawg Tools, LLC v. Newso Int’l Energy Servs., Inc.,
2015 WL 1064519, at *5 (D. Colo. Feb. 23, 2015) (recom mending dismissal of civil theft

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and unjust enrichment claim because allegedly stolen designs were not “protectable by
virtue of anything other than their potential status as trade secrets”). Because Parag on
is alleged to have stolen “only information, and only information that could be
characterized as a trade secret,” Wright’s civil theft and conversion claims are
preempted. Cypress Advisors, 2019 WL 1242331, at *5. The Court will grant
Paragon’s motion as to Wright’s civil theft and conversion claims.
C. Unfair Competition and False Advertising
Finally, Paragon argues that Wright’s Lanham Act and common law unfair
competition claims fail to state a claim under Rule 12(b)(6). Docket No. 112 at 12. To
state a claim of unfair competition under the Lanham Act, the plaintiff must allege that
(1) the defendant “made a false or misleading statement of fact in commercial
advertising or promotion” about another’s goods or services; (2) “the statement actually
deceives or is likely to deceive a substantial segment of the intended audience”; (3) the
deception is “material in that it is likely to influence purchasing decisions”; (4) “the
defendant caused the statement to enter interstate commerce”; and (5) “the statement
results in actual or probable injury to the plaintiff.” Zenith Electronics Corp. v. Exzec,
Inc., 182 F.3d 1340, 1348 (Fed. Cir. 1999); see also 15 U.S.C. § 1125(a)(1)(A)-(B).
Further, under Colorado law, “[t]he law of unfair competition has its roots in the
common-law tort of deceit.” Powell, 948 F. Supp. at 1475. “[W ]hat constitutes unfair
competition is a question of fact; no inflexible rules govern the applicability of the
doctrine, but the most important consideration [is] whether defendant’s conduct will
confuse or deceive the public.” US West, Inc. v. Bus. Discount Plan, Inc., 196 F.R.D.

16

576, 593 (D. Colo. 2000) (internal quotation omitted). The Colorado Court of Appeals
has framed the inquiry as a question whether the defendant has “unfairly
misappropriat[ed] and exploit[ed] [a competitor’s] business values.” Id. (quoting Am.
Television and Commc’ns Corp. v. Manning, 651 P.2d 440, 445 (Colo. App. 1982)).
Paragon first argues that Wright’s allegations fail to state a claim because
naming Dr. Hyer as an anticipated course faculty member was not a false
representation of fact, but merely a prediction and therefore cannot constitute false
advertising. Docket No. 112 at 13. The Court disagrees. Wright alleges in its
complaint that Dr. Hyer, along with his picture, is listed among the anticipated course
faculty for Paragon’s cadaver course. Docket No. 89 at 37, ¶¶ 142-44; Docket No. 8919. Wright alleges that Dr. Hyer did not provide consent for his name and picture to be
used in conjunction with the cadaver course. Docket No. 89 at 37, ¶¶ 143-44. Finally,
Wright claims that Paragon “was aware that Dr. Hyer did not provide consent for
Paragon 28 to use his name and picture in connection with this Paragon 28-sponsored
cadaver course prior to publishing its advertisement, and knowingly and/or recklessly
published its advertisement containing false information.” Id., ¶ 145.
The Court finds that these allegations are sufficient to state a false advertising
claim. While “[a]n honest or sincere statement of belief about a future event is not
actionable,” . . . a statement known at that time by the speaker to be false, or a
statement by a speaker who lacks a good faith belief in the truth of the statement, may
constitute an actionable misrepresentation.” PhotoMedex, Inc. v. Irwin, 601 F.3d 919,
931 (9th Cir. 2010). Wright has sufficiently pled that Paragon lacked a good faith belief
in the truth of its statement that Dr. Hyer was an anticipated course faculty member at
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its cadaver course, as it knew that Dr. Hyer had not provided consent to have his name
and picture used in the promotion. Docket No. 89 at 37, ¶ 144. The Court is
unpersuaded by Paragon’s argument that this was a mere “prediction,” as the cases
Paragon cites in support of this argument are distinguishable. See, e.g., Randa Corp.
v. Mulberry Thai Silk, Inc., 2000 WL 1741680, at *3 (S.D.N.Y. Nov. 27, 2000)
(statement that defendant “would predict” that business acquisition would cause 30%
revenue loss was not fraudulent statement); Duty Free Americas, Inc. v. Estee Lauder
Companies, Inc., 2014 WL 1329359, at *18 (S.D. Fl. Mar. 31, 2014) (statem ents
indicating predictions about sales prospects not actionable as f alse advertising).
Paragon’s argument is unavailing.
Paragon also argues that Wright’s allegations about Paragon’s purported failure
to disclose its KOLs’ equity or ownership interests “fails to plead an unfair competition
claim” because there is no allegation of public confusion. Docket No. 112 at 13-14.
Wright counters that “Paragon’s actions deceive the public by giving the market the
false impression that [Wright’s] KOL[s] are switching to Paragon’s products because
they are somehow superior (instead of simply a more lucrative financial arrangement.”
Docket No. 115 at 15. However, in its complaint, Wright makes no allegation of
deception. It simply alleges that “[t]o the extent that these KOLs are using Paragon 28
products in surgical procedures without disclosing their respective equity and/or
ownership interest in the company, these KOLs, and thusly Paragon 28, may be
violating various statutes and unfairly competing with Wright.” Docket No. 89 at 17-18,
¶ 64. And, although Wright alleges that Paragon’s acts “are intended to cause
confusion, to deceive, and to trade upon and reap the benef its of years of effort and
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investment by Wright,” id. at 18, ¶ 66, this allegation is not supported by any specific
factual averments. This is insufficient to state a claim under Rule 12(b)(6). Bryson, 534
F.3d at 1286. Thus, the Court agrees with Paragon that Wright has failed to state a
claim for unfair competition based upon Paragon’s, or the KOLs’, alleged failure to
disclose the KOLs’ interests in Paragon, and Wright’s unfair competition claims will be
dismissed insofar as they are based on these allegations.
Finally, Paragon argues that Wright fails to state a sufficient passing off claim.
Docket No. 112 at 14. “Passing off . . . occurs when a producer misrepresents his own
goods or services as someone else’s.” Dastar Corp. v. Twentieth Century Fox Film
Corp., 539 U.S. 23, 27 n.1 (2003). In its complaint, Wright alleges that, one month after
its ’300 application was published, Paragon filed a provision application (“the ’391
application”) that has an “identical or near identical design” as that claimed in the ’300
application, which Wright alleges is the basis for an unfair competition claim. Docket
No. 89 at 21, ¶¶ 78-79; see also id. at 76-77, ¶¶ 301-04; at 80, ¶¶ 317-320. Parag on
argues that Wright’s claim must fail because (1) a patent application is not a tangible
good offered for sale and (2) a patent application is not a marketing product. Docket
No. 112 at 14.
The Court agrees that Wright’s claim could be dismissed under either basis. A
patent application is not a good or service under the Lanham Act, and a patent
application is not a marketing product. See Beane v. Beane, 2008 WL 163044, at *1
(D.N.H. Jan. 15, 2008) (“A patent is not a ‘good or service’ as those terms are used in
the Lanham Act.”); see also Akzo Nobel Surface Chemistry LLC v. Stern, 2014 WL

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6982674, at *3 (S.D. Ohio Dec. 9, 2014) (rejecting plaintiff’s argument that filing a
patent application equates to commercial advertising or promotion). Although Wright
argues that “Paragon actively advertises its patent filings on its website and, thus, its
attempt to pass [off] [Wright’s] inventions as its own is likely to deceive the public,”
Docket No. 115 at 15, it makes no substantive argument as to why a patent application
may be deemed a good or a service or why a patent application is commercial
advertising or promotion material. To the extent Wright alleges that Paragon unfairly
competed with it by filing the ’391 application, Wright has failed to state a claim, and
Paragon’s motion to dismiss will be granted as to these allegations.
IV. CONCLUSION
For these reasons, it is
ORDERED that Paragon’s Motion to Dismiss Counts Eleven Through Seventeen
of the Third Amended Complaint [Docket No. 112] is GRANTED IN PART and DENIED
IN PART as set forth in this order. It is further
ORDERED that Wright’s eleventh and twelfth claims are DISMISSED insofar as
they are based on allegations that non-founder employees misappropriated trade
secrets, with the exception of the allegations as to Gordon in Docket No. 89 at 22-26,
¶¶ 81, 88-93. It is further
ORDERED that Wright’s thirteenth and fourteenth claims are DISMISSED to the
extent that they are based on the failure to disclose the KOLs’ equity shares or the filing
of the ’391 application. It is further
ORDERED that Wright’s sixteenth and seventeenth claims are DISMISSED. It is

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further
ORDERED that, within fourteen days of this order, Paragon shall file its answer.

DATED September 30, 2019.
BY THE COURT:

s/Philip A. Brimmer
PHILIP A. BRIMMER
Chief United States District Judge

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