IDX Systems v. Epic Systems

Citation: IDX Sys. Corp. v. Epic Sys. Corp., 285 F.3d 581 (7th Cir. 2002).

Factual Background
A developer of medical record-keeping software sued a customer and its former employees, claiming that they violated a non-disclosure agreement and misappropriated certain trade secrets. Under the NDA, the customer could not provide or make available to any third party the software or any related materials. The agreement also prohibited the customer from using or disclosing any information or data relating to the software.

District Court Decision
The district court dismissed all of the claims. It held that the plaintiff had failed to state a valid trade secret claim since it did not plead the claim with sufficient specificity. The court also dismissed the breach of contract claim since (1) it was preempted by the Wisconsin Uniform Trade Secrets Act (UTSA), and (2) the NDA was invalid because it lacked temporal or geographic limitations.

Appellate Court Decision
The Seventh Circuit Court of Appeals upheld the ruling on the trade secret claim, but reversed on the preemption and contractual claims.

On the preemption claim, the court held that the Wisconsin UTSA stated that it did not preempt any contractual remedy, whether or not based on trade secret misappropriation. The customer broke its promise not to disclose any information relating to the software, and therefore, the plaintiff stated a claim for violation of the NDA.