Rock ’Em, Sock ’Em Ortho Robot Battle

Blue Belt Technologies, Inc. an upstart orthopedic robotic system maker is being accused of stealing sales reps and trade secrets by MAKO Surgical Corp. and Stryker Corporation and has been hauled into federal courts.

Blue Belt angered MAKO and Stryker management by, allegedly, hiring away some of their former marketing executives to compete with their old companies. Stryker even convinced a federal judge to order one of its former executives, James Bruty, now working for Blue Belt, from attending the recent annual meeting of the American Academy of Orthopaedic Surgeons (AAOS).

On February 19, 2013, MAKO filed a complaint in Florida against former employee Jeffrey Gellman and Blue Belt. Stryker filed its suit on March 18, 2013 in federal court in Michigan. Both suits allege breach of contract, misappropriation of trade secrets and tortious interference.

MAKO hasn’t stopped at only suing Blue Belt to protect its assets. In March, the company filed a complaint against UK-based Stanmore Implants with the U.S. International Trade Commission and in two U.S. district courts, claiming Stanmore violated three patents related to MAKO’s RIO system. Stanmore received 510(k) FDA clearance in February to market its Sculptor Robotic Guidance Arm for partial knee resurfacing. Ironically, the FDA granted Stanmore clearance based on its “substantial equivalence” to MAKO’s RIO system.

Blue Belt Technologies, Inc.

Who is this upstart?

Blue Belt was formed in 2003 as a spin-off from Carnegie Mellon University in Pittsburgh, Pennsylvania. The company’s plan was to release a computer assisted bone shaping product for spine, hip and knee-based procedures. In 2006, The Pittsburgh Life Sciences Greenhouse, a private/public partnership invested $100, 000 into the company. In 2007, the partnership invested a total of $200, 000 to continue the development of the company’s Precision Freehand Sculpting (PFS) system.

Eventually the company closed on a $2.4 million private equity Series A round of financing.

On December 7, 2011, HealthpointCapital, LLC purchased the company for an undisclosed sum. Eric Timko was named president and CEO. Healthpoint is the New York investment bank that specializes in orthopedic company investments.

NavioPFS FDA Clearance

On November 30, 2012, Blue Belt received 510(k) clearance from the FDA to market its Unicondylar Knee Replacement (UKR) knee system, called the NavioPFS. The system utilizes an advanced CT-free intra-operative registration, planning and navigation platform to aid surgeons in building patient-specific surgical plans.

By late January 2013, the company announced the first three UKR surgeries performed in the U.S. with the NavioPFS system by D. Kevin Lester, M.D. of Community Regional Medical Center in Fresno, California.

The company is currently located in Pittsburgh with 44 employees. In May, the company will open its new headquarters in Minneapolis, Minnesota. The R&D facility will remain in Pittsburgh.

Timko told OTW that the company believes MAKO’s and Stryker’s allegations are false and plans to vigorously defend itself in both actions. As usual in these cases, complaints are allegations and the accused will get their chance to defend themselves if and when a trial is scheduled.

MAKO Surgical Corp v. Jeffrey Gellman and Blue Belt Technologies, Inc.

MAKO says its former sales manager Jeffrey Gellman violated his non-compete agreement and gave Blue Belt client data and trade secrets. Gellman allegedly used his work email, while still employed at MAKO, to send confidential information about MAKO’s business to his personal email to help his new employer.

“Poaching” for Dollars

In the complaint filed in federal court in Fort Lauderdale, MAKO alleges that Blue Belt hired Gellman away to get an “improper leg up in the competition.” They charge that Blue Belt actively solicited sales and marketing executives from MAKO in order to obtain confidential trade secrets, including information about its current and potential customers.

Gellman joined MAKO in 2010 as a national sales manager. As part of his employment, the company says Gellman had to sign a non-disclosure and non-compete agreement that stated he wouldn’t give MAKO’s secrets to a competitor or assist a competitor with sales within a year of leaving the company.

Blue Belt began recruiting Gellman in late 2012, according to the lawsuit. In January 2013, while still employed at MAKO but with an agreement to join Blue Belt, Gellman allegedly sent over 45 emails from his work account to his and his wife’s personal email accounts that contained confidential information. This included customer lists, marketing proposals, information about RIO and related software, financial statements and employee compensation plans.

Gellman Joins Blue Belt

MAKO alleges that he gave his information to Blue Belt after he resigned on January 25, 2013. Blue Belt announced Gellman’s hiring as West Area vice president of sales on February 5, 2013.

Gellman is charged with breach of contract and breach of employees’ duty of loyalty. Both Gellman and Blue Belt are charged with tortious interference, civil conspiracy and misappropriation of trade secrets. The company demanded damages and an injunction against the defendants from continuing to utilize that information.

According to the complaint, Gellman had full access to all of MAKO’s highly confidential sales information through the company’s SalesLogix computer system.

Rather than developing its own business and sales methods, MAKO claims Blue Belt, as a new entrant into the market with limited experience, tried to gain an unfair advantage by improperly obtaining confidential information. They claim Blue Belt specifically hired Gellman for the purpose of soliciting and taking the clients, accounts, and customers.

MAKO alleges that while still employed at MAKO, Gellman “engaged in an intentional and improper scheme to misappropriate, transfer and utilize MAKO’s highly confidential, proprietary and trade secret business information.”

Two days after the announcement that Gellman was working for Blue Belt, MAKO sent a letter to Gellman requesting that he “cease his wrongful conduct and contractual breaches.” The company also sent a letter to Blue Belt informing them that Gellman was subject to a binding contractual agreement with MAKO, and demanding that Blue Belt “cease and desist from its continuing tortious interference activities.”

MAKO is demanding a jury trial.

Stryker Corporation v. James Bruty and Blue Belt Technologies, Inc.

On December 28, 2012, James Bruty informed Stryker that he was resigning as a senior director of marketing to take a position with 4Web, a non-competitive startup company owned and operated by one of his friends.

Bruty’s last day with Stryker was on Friday, January 18, 2013. On his last day, he was supposed to return his laptop computer and identification badge. Stryker claims he didn’t return either of those things until Tuesday, January 22, 2013.

The Hard Drive

Stryker claims that it learned that an external hard drive was inserted into Bruty’s computer for the first time on January 22, 2013. This was four days after Bruty resigned from Stryker, but before he returned his Stryker laptop computer. “The fact that he inserted an external hard drive on that morning was highly suspicious, ” says the Stryker lawsuit.

Bruty’s “My Documents” folder was allegedly transferred onto the hard drive. In addition, Stryker says that during a forensic examination of Bruty’s computer, it was determined that the contents of his “My Documents” folder was entirely deleted after the downloading and the contents of his trash or “Recycle Bin” was emptied. “Such activities are consistent with an individual attempting to hide his downloading activity, ” claims Stryker

Bruty Joins Blue Belt

On January 31 he informed Stryker he was working for Blue Belt as its vice president of Sales and Marketing.

Stryker sent Bruty and Blue Belt letters on February 8 reminding them of Bruty’s non-compete agreement which he had signed at Stryker. Stryker demanded to know how Bruty’s new responsibilities did not violate “the plain language” of that agreement.

Blue Belt responded on February 14 and denied that Bruty was in a competitive position.

On February 21, 2013, Stryker sent a follow-up letter to the defendants, again demanding an explanation how Bruty’s role with Blue Belt was not in violation of his non-compete agreement, demanding the external hard drive back, and additionally questioning the alleged recruitment of several Stryker Navigation sales representatives by Blue Belt in the weeks after Bruty left Stryker’s employment.

The defendants replied, according to the suit, and claimed that Bruty returned the hard drive, that he was not soliciting Stryker’s employees, and further claimed that his job was not navigation-related.

Immediate Threat

Stryker executives believed the risk that Bruty would use their trade secrets and confidential information was exacerbated by Blue Belt’s launch of its NavioPFS orthopedic navigation equipment in the previous two months. Prior to this launch, Blue Belt did not offer a product competitive to Stryker’s orthopedic navigation equipment.

“It [Blue Belt] now sells a system that competes directly with Stryker’s orthopedic navigation product. It also offers other products that compete directly with Stryker Navigation’s other main product offerings. Bruty also has significant relationships with some of Stryker’s most prominent Navigation customers, ” states the Stryker complaint and request to stop Bruty from attending AAOS.

They cited Blue Belt CEO Eric Timko’s announcement that Blue Belt intended to publicly launch its NavioPFS system at the American Academy of Orthopaedic Surgeons 2013 Annual Meeting

“With the departure of Bruty and his knowledge of Stryker’s confidential information, it [Stryker] stands to lose several millions of dollars in business and the loss of value of its goodwill, customer relationships, trade secrets and confidential and proprietary information, which cannot be adequately addressed at law, ” continued the complaint.

The judge ordered Bruty not to attend the AAOS meeting.

Awaiting Trial Date

In addition to asking the federal judges to order Blue Belt, Gellman and Bruty to stop their alleged wrongful actions, both complaints are asking for damages to be determined during a jury trial. No trial dates have been set.

There’s at least one lesson here. Be careful with company computers.

Breaking News – MAKO Wins in Florida

After we wrote this story, it was announced that a judge in Florida issued an Order Granting Permanent Injunction keeping Blue Belt from employing Gellman and requiring the destruction of all proprietary MAKO business information in Blue Belt’s possession.

See the accompanying news short titled “MAKO Beats Blue Belt in Court” for details and Blue Belt’s reaction.