A San Diego bankruptcy court issued a final judgement that two former Masimo employees had misappropriated trade secrets, which they turned over to Sotera Wireless.
A San Diego bankruptcy court issued a final judgement that two former Masimo employees had misappropriated trade secrets, which they turned over to Sotera Wireless.
The court found that James Welch and David Hunt had copied thousands of confidential Masimo documents and used those trade secrets to benefit Sotera. Per a statement by Masimo, “The Court found clear and convincing evidence that willful and malicious misappropriation exists. The court also found that the actions of Welch and Hunt were ‘despicable conduct,’ and that they ‘consciously disregarded Masimo’s rights.’”
Masimo is a global medical technology company that focuses on developing and manufacturing noninvasive patient monitoring technologies, medical devices and sensors. Sotera Wireless, also in San Diego, develops and markets patient monitors.
The court permanently “enjoined” Sotera from keeping, revealing, disseminating or using the Masimo documents. The court also enjoined the company from including Welch in Sotera’s Design Control process until Sept. 16, 2021. That also includes preparing the Customer Needs Document, the Design Input Requirements documentation, the Design Review, the Verification process, the Validation process, and developing schematics and other production specifications, as well as preparing the design history file.
Hunt has not worked at Sotera since 2015. Hunt is no longer employed there, either.
The case was originally in the Superior Court of Orange County, and was filed in May 2013 against Welch, Hunt and Sotera. It was tried in the San Diego bankruptcy court after Sotera filed for Chapter 11 bankruptcy in 2016. This ruling involved the misappropriation of Masimo trade secrets by Sotera. The rest of the court action against Welch and Hunt is pending.
“I am sad that we even had to pursue this case,” said Joe Kiani, Masimo’s founder and chief executive officer, in a statement. “These were trusted employees. I hope all members of Masimo’s team will adhere to Masimo’s guiding principles of ‘remaining faithful to your promises and responsibilities, being driven by fascination and accomplishment, not power and greed, making every day as fun as possible, making themselves better each year, and, doing what is best for patient care.’ We believe these guiding principles are critical not only to our success, but to our integrity and humanity.”
Sotera Wireless filed for Chapter 11 bankruptcy in October 2016, and in July 2017, emerged from bankruptcy with almost $32 million. Sotera developed the ViSi wireless wearable patient monitor, and in 2015 acquired Reflectance Medical, a sensor developer. By the time they filed bankruptcy, the legal costs for the lawsuit had hit $3 million.
A federal bankruptcy judge approved Sotera’s plan to exit insolvency with $31.8 million, but kept it from using any documents it acquired from Welch or Hunt.
On July 17, Sotera filed regulatory documents indicated it had raised $31.8 million from 11 investors, including $19.8 million from Apple supplier Foxconn Technology Group. Other investors included Sanderling Ventures and Xiaoai Medical Technology.
