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OBP Corp. v. Welch Allyn, Inc.

Superior Court of Massachusetts, Suffolk, Business Litigation Session

November 14, 2016

OBP Corporation dba OBP Medical
Welch Allyn, Inc. No. 135617

          Filed November 15, 2016


          Edward P. Leibensperger, Justice

         Defendant, Welch Allyn, Inc., allegedly misappropriated confidential business information belonging to plaintiff OBP Corporation. The confidential business information was a list of OBP's customer names, along with confidential sales information. Welch Allyn obtained the confidential information from Owens & Minor, Inc., OBP's primary distributor. Welch Allyn allegedly used the confidential business information to craft a marketing plan intended to steal OBP's customers and to eliminate OBP as a competitor in the market for a self-illuminating, disposable vaginal speculum. Welch Allyn now moves to dismiss OBP's First Amended Complaint (Amended Complaint) pursuant to Mass.Civ.P. 12(b)(6). For the reasons that follow, the motion is DENIED.


         The following comes from the allegations, taken as true, in OBP's Amended Complaint.

         OBP sells a variety of medical examination instruments to hospitals and physician offices, including a self-illuminating disposable vaginal speculum. It generates its customers through direct marketing and sales efforts, and sells its products by entering into pricing agreements directly with individual customers and with group purchasing organizations (GPOs) acting on behalf of hospital systems and/or physician's offices. The individual customer agreements identify OBP's customers and the prices OBP negotiated directly with them. Similarly, the GPO agreements identify the prices OBP negotiated with the GPOs and include provisions indicating that the terms of the agreement are confidential.

         Since June 2011, OBP has used Owens & Minor to fulfill orders from OBP's customers. In connection with this service, Owens & Minor stocks its distribution centers with OBP products. Owens & Minor orders products directly from OBP at an agreed upon unit price based on demand from OBP's customers. When Owens & Minor fulfills customer orders, it charges customers according to the terms set forth in OBP's pricing agreements with the customers. OBP reimburses Owens & Minor through " rebates" for any difference between that price and the fixed price Owens & Minor pays to OBP. As part of this process, OBP provides copies of the relevant pricing agreements to Owens & Minor. In return for its fulfillment services, OBP pays Owens & Minor an administrative fee.

         Owens & Minor operates pursuant to a Code of Honor, made publicly available on its website, in which it states that the customer and sales information of suppliers like OBP will not be disclosed to third parties and will only be used for purposes of effectuating the parties' business relationship. The Code of Honor specifically provides that:

[a]ll Company records and information related to the Company, its customers, suppliers and teammates is confidential . . . [and] no teammate or director of the Company may provide or disclose confidential or proprietary information to anyone outside the Company (or even within the Company except to teammates who need to know such information to perform their work) or use such information other than in conducting the Company's business.

         Code of Honor at 9. The Code defines " confidential information" as " any information that has not been disclosed to the public" including " customer lists, contracts, pricing and purchase information, " " supplier lists, contracts, pricing and product information, " and " all written or verbal agreements between the Company and its teammates, customers, suppliers, strategic partners, agents and other third parties." Id. at 9-10.

         In November 2014, Welch Allyn, a global manufacturer of medical diagnostic equipment, introduced a self-illuminating disposable vaginal speculum that competes with OBP's product. About a month before it did so, Welch Allyn obtained from Owens & Minor a spreadsheet referred to as an " opportunity report." The opportunity report lists OBP's customer and sales information associated with OBP's vaginal speculum. The report specifically identified the names and addresses of 582 customers who had ordered OBP's vaginal speculum through Owens & Minor and the annualized sales totals for each of these customers. OBP alleges that this information came from the pricing agreements it shared with Owens & Minor on a confidential basis.

         After receiving the opportunity report, Welch Allyn employees exchanged several emails concerning the information. In one email dated November 7, 2014, Welch Allyn's Director of Channel Management and Marketing wrote: " When we use this, let's not be blatant about where we got the info. I don't want Owens to have problems with OBP, they may get their feathers ruffled if they find out that Owens provided the list to us. Let's just tread carefully here." In a second email dated November 18, 2014, Welch Allyn's Product Manager for Vaginal Speculums explained: " It's rare that we are given a list of customers that are buying a known competitor . . . I just wan[t] to make sure we try to take advantages in 2014." In yet another email sent two days later, Welch Allyn's Vice President of Acute Care wrote to Sales Managers: " I wanted to reach out to you on some targeted efforts surrounding the launch of our new LED vag spec. I've attached a list of accounts using the OBP spec and their respective volumes. ( This list was supplied by Owens & Minor and should be treated as highly confidential. This shouldn't be emailed out or sent to anyone else .)" (Emphasis in original.)

         Welch Allyn ultimately used the information from the opportunity report to craft a marketing plan allegedly intended to steal OBP customers and eliminate OBP as a competitor in the market for the single-use medical examination instrument. The marketing campaign was coordinated with a patent infringement lawsuit Welch Allyn filed against OBP in September 2014. In the lawsuit, Welch Allyn claimed that OBP's vaginal speculum infringed on a Welch Allyn patent and that OBP unlawfully copied Welch Allyn's color coded trade dress. In an email dated December 3, 2014, Welch Allyn's Product Manager for Vaginal Speculums explained that:

The faster we can move customers over from OBP, the more impact we also have on the litigation effort with regard to potential settlement. We want to disrupt OBP business and growth as quickly as possible. I suggested a back pocket offer for initial discount with larger purchase (end user). While I know we don't typically want to discount ...

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