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A medical practice’s list of patients is a trade secret entitled to protection under Pennsylvania law, a Philadelphia Common Pleas judge has ruled. In his 15-page opinion in Pollack v. Skinsmart Dermatology and Aesthetic Center, Judge Gene D. Cohen concluded that two doctors — Toby Shawe, a dermatologist, and her husband, Samy Badawy, a surgeon — had clearly misappropriated trade secrets when they instructed employees at the Philadelphia Institute of Dermatology to gather data on the patients they had seen and then used that list to launch their own practice. The ruling is a significant victory for Andrew Pollack because Cohen not only refused to dismiss his claims, but found that his evidence was so strong that he was entitled to summary judgment on liability for three claims — misappropriation of trade secrets, unjust enrichment and breach of the implied duty of loyalty. As a result, the only issues to be decided at trial for those three claims will be the amount of damages Pollack is entitled to. Pollack’s lawyers — David E. Landau and Kynya V. Manning of Wolf Block Schorr & Solis-Cohen, and Michael D. Shaffer of Shaffer & Gaier — argued that Shawe’s and Badawy’s own testimony helped to prove every element of Pollack’s claims. Cohen agreed, saying the evidence showed that the two doctors worked as independent contractors at Pollack’s practice, and that, just before their resignations, they had instructed Pollack’s staff to make copies of their appointment books and printouts of portions of the office’s database. Shawe and Badawy also hired one of Pollack’s longtime employees, Natalie Wilson, and then instructed her to use the list to call patients who were scheduled for procedures at Pollack’s office to “reschedule” them for appointments at Skinsmart Dermatology and Aesthetic Center, Cohen found. Wilson was also named as a defendant and was held liable by Cohen on claims of misappropriation of trade secrets and breach of the implied duty of loyalty. Cohen found that Shawe and Badawy conceded in their depositions that they had called patients and sent out a mailing to both patients and referring physicians informing them about Skinsmart. Defense attorney Alfred J. Monte Jr. of Monte & McGraw in Skippack, who represents Shawe, Badawy and Skinsmart, declined to comment on the ruling. According to court papers, Pollack is the sole proprietor of the Philadelphia Institute of Dermatology. Shawe began working at PID in 1994, and Badawy joined the practice in 1998. Wilson had worked at PID as Pollack’s medical assistant since 1987. Cohen found that neither Shawe nor Badawy had any “management responsibilities” or ownership interest in PID. Instead, he said, both worked as independent contractors and were paid a percentage of the income collected for each patient they treated. PID’s patient list was kept on a database, Cohen found, which “only certain PID employees could access in its entirety.” The list, which included every patient seen at the practice, consisted of more than 20,000 names, Cohen found. In late 2001, Cohen found that Pollack entered into discussions with Shawe and Badawy to sell them the majority of PID’s practice locations. Negotiations continued through the following summer, Cohen found, and both sides hired lawyers. Pollack had his practice appraised, Cohen noted, and a tentative agreement was reached in June 2002. But the sale never took place, Cohen found, because Shawe and Badawy instead decided to resign in August 2002 to open their own practice under the Skinsmart name. Although Skinsmart didn’t open its doors until Sept. 3, 2002, Cohen found that a lease had been executed before the two doctors’ final day at PID. Cohen found the two doctors had also offered a job to Wilson just three days after they gave Pollack their resignation letters. At the time, Cohen found, all three were still affiliated with PID. Court records show that soon after Skinsmart opened, Pollack went to court and asked for a temporary restraining order to block Shawe and Badawy from using the patient list. But Philadelphia Common Pleas Judge Esther Sylvester refused to issue any injunction. Now, after more than two years of litigation, Cohen has ruled that Pollack has solid proof of his claims for misappropriation of trade secrets and unjust enrichment, and that Shawe and Badawy have no valid defenses. Although Cohen did not award any damages, he found that a “substantial number” of the patients at Skinsmart came from PID’s patient list and “resulted in profits to Skinsmart of approximately $700,000.” Focusing first on the claim for misappropriation of trade secrets, Cohen said, “it is clear the patient list is a trade secret worthy of protection.” In the context of a medical practice, Cohen found it was a given that a list of customers would be kept secret due to medical ethics. “The confidentiality of patient information ensures that it remain unknown to those outside the practice,” Cohen wrote. Cohen found that the evidence showed that PID’s patient list “was not universally known or accessible” in the office. “Not every staff member, including the practicing physicians, could pull the records,” Cohen noted. Wilson, a longtime employee, had no access to the database, Cohen noted, and Shawe and Badawy therefore “relied on other PID employees to access [it].” Cohen found that Pollack had established every element of his claim for misappropriation of trade secrets. Shawe and Badawy argued that the patient list was not a trade secret because certain names on it may not have exclusively belonged to PID. Cohen disagreed, saying the defense argument “minimizes the additional efforts of PID in organizing and compiling the contact and other information for each patient. At bottom, this argument does not counter the finding that the patient list is a trade secret, but impacts the issue of damages.” Pollack also proved every component in his claim of unjust enrichment, Cohen found, since the patient list was “the core of plaintiff’s practice” and the defendants used it in setting up their own practice. “The patient list was a trade secret and defendants took it from plaintiff without compensation,” Cohen concluded.

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