IP Law Daily, TRADE SECRETS—W.D. Wis: Therapy practice failed to show its patient list constituted trade secrets, (Apr 23, 2024)

By Patricia K. Ruiz, J.D.

The court determined the patient list was kept secret to comply with HIPAA, not to keep trade secret information confidential.

The U.S. District Court for the Western District of Wisconsin denied a motion for summary judgment by a therapy practice that alleged former therapists stole its patient list to solicit patients to a competing practice. The court found the plaintiff failed to establish the existence of a protectable trade secret under the Defend Trade Secrets Act (DTSA) and Washington’s Uniform Trade Secrets Act (UTSA) (Traverse Therapy Services, PLLC v. Sadler-Bridges Wellness Group, PLLC, April 19, 2024, Pechman, M.).

Patient list. Traverse Therapy Services PLLC offers counseling and therapy in the fields of mental health and interpersonal relationships. It alleges former employees used its customer list to solicit at least 50 clients, diverting them to a competing business, Sadler-Bridges Wellness Group, PLLC. One therapist employed with Traverse left to open the competing business. When a second therapist resigned from Traverse to join Sadler-Bridges, she sent an email to approximately 50 clients to let them know she was moving to a new practice, offering to continue providing services for clients who wished to follow her but noting that she would assist any clients interested in finding a new therapist. She also included in her email a list of insurance providers her new practice would accept and provided a non-Traverse email address clients could use to contact her.

Lawsuit. Traverse filed suit alleging the therapist’s and other employees’ resignations from Traverse were coordinated with Sadler-Bridges with the intent of soliciting clients from Traverse to Sadler-Bridges. Traverse brought claims under the Defend Trade Secrets Act (DTSA) and Washington’s Uniform Trade Secrets Act (UTSA). Traverse moved for summary judgment on its DTSA and UTSA claims.

Misappropriation of trade secrets. A plaintiff asserting a DTSA or UTSA claim must establish (1) the existence of a protectable trade secret; and (2) facts constituting misappropriation. The court disagreed with Traverse that its patient identities and contact information is a protectable trade secret. Traverse put forth no evidence to suggest its patient list constituted a trade secret. Instead, it conflated the mere existence of a patient list that it is legally required to keep confidential under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) with a trade secret. While the information as restricted, the evidence showed that this was pursuant to HIPAA and not to keep trade secret information confidential. Further, the court found Traverse failed to demonstrate the patient information was in any way innovative or contained such unique information that competitors would want the information in order to enjoy a competitive advantage.

Summary judgment denied. The court determined Traverse failed to meet the threshold requirement of demonstrating the existence of a protectable trade secret and denied Traverse’s motion for summary judgment. Because Traverse failed to put forth evidence to support its claims, the court granted summary judgment in favor of the defendants and dismissed Traverse’s DTSA and UTSA claims.

The Case is No. C23-1239.

Attorneys: Daniel J. Spurgeon (Davis Grimm Payne & Marra) for Traverse Therapy Services, PLLC. Howard Ramsey Morrill (Howard R. Morrill, Attorney at Law) for Sadler-Bridges Wellness Group, PLLC.

Companies: Traverse Therapy Services, PLLC; Sadler-Bridges Wellness Group, PLLC

Cases: TradeSecrets WisconsinNews