Rule 9(b) Pleading Standards for Lanham Act False Advertising Claims

Posted on March 31, 2008 by R. David Donoghue

CardioNet, Inc. v. LifeWatch Corp., No. 07 C 6625, 2008 WL 567031 (N.D. Ill. Feb. 27, 2008) (Conlon, J.).

Judge Conlon granted in part counter-defendant CardioNet’s Fed. R. Civ. P. 12(b)(6) motion to dismiss counter-plaintiffs’ (collectively, “LifeWatch”) Lanham Act false advertising and related Uniform Deceptive Trade Practices Act (“UDTPA”) and Consumer Fraud and Deceptive Trade Practices Act (“CFA”) claims. LifeWatch alleged that CardioNet improperly acquired one of LifeWatch’s prescription-only heart monitoring devices, the Life Star ACT. The device monitors a person’s heart rate and uses a cell phone to transmit irregular readings to a monitoring station. CardioNet allegedly inspected and tested the device. Then based on its tests, CardioNet allegedly misappropriated LifeWatch’s trade secrets and intentionally made false and misleading statements about the LifeStar ACT in its advertising. LifeWatch’s Lanham Act, UDTPA and CFA claims were all based upon CardioNet’s allegedly false advertising.

LifeWatch identified the allegedly false statements with specificity, but because LifeWatch did not plead who made them or when and where they were made, LifeWatch’s claims did not meet Rule 9(b) heightened pleading standards. The Court, therefore, dismissed the Lanham Act, UDTPA and CFA claims.

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Trade Secret Act Preempts State Claims Based Upon Confidential Information

Posted on March 27, 2008 by R. David Donoghue

CardioNet, Inc. v. LifeWatch Corp., No. 07 C 6625, 2008 WL 567223 (N.D. Ill. Feb. 27, 2008) (Conlon, J.).

Judge Conlon granted in part defendants’ (collectively, “LifeWatch”) motion to dismiss plaintiff CardioNet’s state law claims as preempted by the Illinois Trade Secrets Act (“ITSA”). CardioNet alleged that LifeWatch improperly obtained one of CardioNet’s prescription-only MCOT remote heart monitoring devices by getting a false prescription for it. LifeWatch then tested the MCOT by, among other things, simulating a heart attack. Based upon the tests, LifeWatch gathered allegedly trade secret information from the MCOT.

The Court held that CardioNet’s conversion claim was preempted to the extent it was based upon gathering trade secret information from the MCOT because conversion of trade secrets is a restatement of misappropriation. But the claim was not preempted as it related to conversion of the MCOT device.

Similarly, CardioNet’s fraud claim was preempted to the extent the alleged fraud was acquiring the trade secret or confidential information, but the claim was not preempted to the extent the alleged fraud was acquiring the MCOT device.

CardioNet’s intentional interference with contract claim was not preempted. The alleged wrong was not the alleged misappropriation, but interference with the contract signed by the patient to get the MCOT.

Finally, CardioNet’s unfair competition claim was preempted. The alleged unfair competition was possession and use of the alleged trade secret information taken from the MCOT, the same acts forming the trade secret claim.

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