Facet Technologies, LLC announced that it has sued Asahi Polyslider Company, Limited (“Asahi”) in the United States District Court for the Northern District of Illinois, alleging misappropriation of trade secrets and tortious interference with contract. The complaint alleges that Asahi, a medical device manufacturer headquartered in Osaka, Japan, stole confidential information and trade secrets related to Facet’s revolutionary lancet technology, which helps millions of diabetes patients test their blood sugar with a minimum of pain. Asahi’s misappropriation of Facet’s trade secrets and tortious interference with Facet’s customer contracts resulted in the loss of over one hundred American manufacturing jobs to Japan and caused Facet to lose tens of millions of dollars in revenue, the lawsuit alleges.
Lancets allow the more than 100 million Americans with diabetes or pre-diabetes to perform regular self-testing of blood sugar to prevent serious medical complications. In or around 2008, Facet invented a revolutionary system that allowed diabetics to test their blood relatively pain-free. Facet became the exclusive supplier to major pharmaceutical companies such as LifeScan (then owned by Johnson & Johnson), Abbott, Roche, and Arkray for brands such as DelicaTM, UltrasoftTM, Felix, FreestyleTM, Precision Safe-T Pro Plus, and Assure lancets. To help meet robust demand, Facet relied on Asahi, its manufacturing partner of close to fifty years. Asahi was not content with the increased demand for its manufacturing services, however, and concocted a scheme to betray Facet’s trust, steal its trade secrets, and induce Facet’s customers into breaking long-term supply contracts with Facet and entering into new deals with Asahi.
Kevin Seifert, Chairman of Facet’s Board of Directors, stated, “Asahi betrayed our trust, illegally stole Facet’s trade secrets and manipulated the lancet supply chain for its own advantage. After stealing our designs, Asahi held Facet’s customers hostage, threatening to cut off supply of life-sustaining testing devices if they did not work directly with Asahi. This dishonorable and disloyal betrayal is not the conduct of a trusted partner, and we intend to pursue our case vigorously to ensure we are properly compensated for Asahi’s misconduct.”
Specifically, the suit alleges that in late 2012, as demand for Facet’s innovative lancet devices exploded, Yoshihiko Ito, the owner of Asahi’s parent company Izumi-Cosmo Co., Ltd., lured three of Facet’s board members to the Hirono Golf Club and hot springs outside Osaka, Japan to discuss a partnership to meet the increased demand. Following that meeting, and over the next six months, the parties developed an expanded relationship under which Facet shared it’s protected intellectual property with Asahi to help meet the surging demand for Lancets in the U.S. After Asahi learned how to make the Lancets on its own, and in disregard for its contractual and legal obligations, it began to intentionally withhold its supply of component parts from Facet. Asahi then exploited that supply chain disruption by approaching Facet’s customers and threatening to withhold supply of the lancet components unless these customers agreed to purchase lancets directly from Asahi.
As a result of Asahi’s intimidation tactics and malicious misappropriation of Facet’s trade secrets, Facet was forced to undertake extraordinary measures to reduce its employee population and streamline its operations in order to keep its business alive. Even so, Asahi’s violations of The Uniform Trade Secrets Act and The Defend Trade Secrets Act and other unlawful conduct has caused significant damages to Facet, which is requesting a jury trial, seeking millions in damages and reimbursement of its attorneys’ fees.