Optum sues former executive, says he took trade secrets to Amazon health venture

Gavel court room lawsuit judge
Optum sued a former executive who left the company to join the Amazon-Berkshire Hathaway-JPMorgan Chase health venture. (Pixabay)

Optum has sued a former executive who left the company to join the healthcare venture between Amazon, Berkshire Hathaway and JPMorgan Chase, saying he stole trade secrets that he then provided to the still-nascent disrupter. 

In the lawsuit (PDF), Optum says David Smith, who was hired in December to be the joint venture’s director of strategy and research, will be unable to serve in the role due to noncompete clauses in his contract with the insurer. Smith is also not the only Optum staffer who was lured away from the insurer, according to the suit. 

The new venture has also pilfered several notable names from elsewhere around the industry to join its stable, including the choice of famed surgeon and author Atul Gawande as CEO

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The suit names several alleged instances where Smith breached his contract. For example, on the same day he interviewed with the venture, referred to in the suit as ABC, Smith printed both his resume and a confidential internal strategy document within a minute of each other, according to the lawsuit. 

RELATED: Amazon teams up with Berkshire Hathaway, JPMorgan Chase in technology-driven healthcare venture 

Optum also alleges that Smith contacted several colleagues at the insurer to discuss confidential business information that was unrelated to his role, and he would have no business case to request, according to the lawsuit. 

“Optum’s trade secrets are mission-critical, competitively sensitive, confidential information that Optum has developed and implemented through a significant investment of time, labor, and capital,” the insurer said in the suit. “Optum therefore derives significant economic value and advantage from maintaining the secrecy of its trade secrets.” 

In a response (PDF), however, Smith says that there’s one flaw in the argument: the joint venture isn’t yet a competitor to Optum, and the circumstances named in the lawsuit don’t provide evidence that he gave away trade secrets, even if his new employer was a competitor. 

Instead, he said, Optum’s concerns are related to Amazon’s potential entry into the pharmaceutical supply chain—which would make it a competitor to Optum’s pharmacy benefit management business—and not the work that the still-unnamed venture may do. 

RELATED: Hospital executives believe Amazon can deliver on its hype as a healthcare disrupter 

“While it is not Smith’s burden, his undisputed evidence proves that ABC offers no products or services to the general market, is not profit-seeking and does not compete for any business with Optum,” according to the filing. “The crux of a non-compete restriction is actual competition.” 

Smith's attorneys also emphasized that Optum and Amazon-JPMorgan-BH company would not be competitors in a letter (PDF) sent in December. 

The joint venture, they said, is also not looking to compete with Optum or its parent company United Health but would instead like to partner with such firms to advance its goals, which, while vague at present, include lowering healthcare costs and reducing administrative waste for the companies' employees. The venture also has no products to be a competitor with any company at present, they said. 

“Optum is well aware of these facts. Optum’s own head of strategy has openly stated that ABJ is ‘more likely a customer than a competitor,’” the attorneys said. “This observation is accurate, and dispositive of Optum’s non-competition claim.” 

A hearing on the suit is slated for Jan. 29 in Boston. 

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