Alifax Holding Spa v. Alcor Scientific Inc.

• Decision Date: 30 April 2019
• Docket Number: C.A. No. 14-440 WES
• Citation: 387 F.Supp.3d 170
• Parties: ALIFAX HOLDING SPA, Plaintiff, v. ALCOR SCIENTIFIC INC. ; and Francesco A. Frappa, Defendants.
• Court: U.S. District Court — District of Rhode Island

387 F.Supp.3d 170

ALIFAX HOLDING SPA, Plaintiff,

v.ALCOR SCIENTIFIC INC. ; and Francesco A. Frappa, Defendants.

C.A. No. 14-440 WES

United States District Court, D. Rhode Island.

Signed April 30, 2019

Christopher H. Little, Nicole M. Matteo, Michael J. Daly, Pierce Atwood, LLP, Providence, RI, Kyle M. Noonan, Pro Hac Vice, Margaret K. Minister, Pro Hac Vice, Robert H. Stier, Jr., Pro Hac Vice, Pierce Atwood LLP, Portland, ME, for Plaintiff.

Christine K. Bush, Craig M. Scott, Hinckley, Allen & Snyder LLP, Providence, RI, Brian D. Coggio, Pro Hac Vice, New York, NY, Jason C. Williams, Pro Hac Vice, Laurel M. Gilbert, Pro Hac Vice, Hinckley, Allen & Snyder LLP, Boston, MA, for Defendants.

MEMORANDUM AND ORDER

William E. Smith, Chief Judge

Before the Court is Defendants' Motion to Exclude the Opinions of Expert Witness Christopher J. Bokhart (ECF No. 230). Mr. Bokhart has proffered opinions concerning damages for the Plaintiffs' claims of patent infringement, copyright infringement, and trade secret misappropriation. The Defendants have asked the Court to exclude Mr. Bokhart's opinions in their entirety. The Court heard extensive argument on this motion over two days; the motion was granted in part and denied in part in two earlier rulings.¹

The Court kept the remainder of the motion under advisement and bifurcated the trial into a liability phase and a damages phase. During trial, the claims narrowed. The copyright claim fell away with the exclusion of Mr. Bokhart's damages testimony; the patent infringement claim was withdrawn (with the Court entering judgment for the Defendants) after the evidence fell short of proving the allegations. Thus, the case has been narrowed to one alleging trade secret misappropriation and breach of a confidential relationship.

The Court held a lengthy conference with the parties to discuss the scope and admissibility of Mr. Bokhart's opinions after the jury returned a verdict finding liability on April 30, 2019. This order now addresses the last subject of Mr. Bokhart's opinions: damages for trade secret misappropriation.

For the reasons that follow, the Defendants' motion is GRANTED IN PART and Mr. Bokhart's opinions concerning trade secret misappropriation damages are EXCLUDED in their entirety.

I. Bokhart's Trade Secret Damages Opinion

Mr. Bokhart advances two damages theories based on these claims: (1) a general opinion that Alifax is entitled to recover "all earned revenue"² from the sale of Alcor's iSED analyzers (including convoyed sales) from fiscal year 2012 through at least September 30, 2018, as unjust enrichment damages attributable to misappropriation of all "trade secrets"; and (2) a narrower opinion that Alifax is entitled to "head start" damages, i.e., unjust enrichment specifically arising from any temporal advantage obtained by the misappropriation of one particular trade secret — "the trade secret related to software and firmware ...."³ See Expert Report of Christopher J. Bokhart ("Bokhart Rpt.") ¶¶ 189-93, ECF No. 237; Suppl. Expert Report of Christopher J. Bokhart ("Suppl. Rpt.") ¶ 11, Ex. 8.2A S n.3, ECF No. 237-1.

On April 30, 2019, the jury returned a verdict finding that the Defendants willfully misappropriated three trade secrets:

(1) Using a clear, plastic capillary photometer sensor ("CPS") in an automated ESR analyzer, but only through February 6, 2014;

(2) Portions of computer program source code concerning the conversion of photometric measurements, including source code containing four specific conversion constants; and

(3) Information concerning an anemia factor set forth in trial exhibits 34 and 19.⁴

See Trial Tr. Vol. 10 at 14:21-15:18, 15:25-16:16. An earlier formulation of the "source code" trade secret included alleged code used by Alifax to obtain or acquire photometric measurements. See, e.g., Pl.'s Second Am. Identification of Misappropriated Trade Secrets ¶ 5, ECF No. 137-27. Over Alifax's objection, the Court declined to allow Alifax's "acquisition" theory to be presented to the jury due to a failure of proof at trial. See Charge Conf. Tr. at 11:9-16:4. Only "conversion" source code evidence was presented by Alifax during the liability phase.

II. Legal Standard

Rule 702 of the Federal Rules of Evidence instructs that an expert may only provide opinion testimony if:

(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case.

See also Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 592-93, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993). The Court, acting as gatekeeper, may exercise wide discretion to admit or exclude such testimony consistent with its obligation to ensure that the jury receives only relevant and reliable expert evidence. Morris v. Rhode Island Hosp., C.A. No. 13-304-ML, 2014 WL 3107296, *5 (D.R.I. July 7, 2014) (citing Gen. Elec. Co. v. Joiner, 522 U.S. 136, 143, 118 S.Ct. 512, 139 L.Ed.2d 508 (1997) ). And "while methodology remains the central focus of a Daubert inquiry ... trial judges may evaluate the data offered to support an expert's bottom-line opinions to determine if that data provides adequate support to mark the expert's testimony as reliable." Ruiz-Troche v. Pepsi Cola of P.R. Bottling Co., 161 F.3d 77, 81 (1st Cir. 1998) ; Joiner, 522 U.S. at 146, 118 S.Ct. 512 (1997) ("A court may conclude that there is simply too great an analytical gap between the data and the opinion proffered.").

Mr. Bokhart's damages calculations need only be proven with "reasonable certainty." See, e.g., Grieco ex rel. Doe v. Napolitano, 813 A.2d 994, 998 (R.I. 2003). But any damages theory must be anchored on "sound economic and factual predicates." LaserDynamics, Inc. v. Quanta Comput., Inc., 694 F.3d 51, 67 (Fed. Cir. 2012) (quoting Riles v. Shell Exploration & Prod. Co., 298 F.3d 1302, 1311 (Fed. Cir. 2002). This principle applies to damages for trade secret misappropriation. See, e.g., Exmark Mfg. Co. v. Briggs & Stratton Power Prods. Grp., LLC, 879 F.3d 1332, 1348 (Fed. Cir. 2018) ("[A] reasonable royalty award ‘must be based on the incremental value that the ... invention adds to the end product.’ " (quoting Ericsson, Inc. v. D-Link Sys., Inc., 773 F.3d 1201, 1226 (Fed. Cir. 2014) ) (emphasis added)).

III. Discussion

A. Bokhart's "All Earned Revenue" Opinion

The Court concludes that Mr. Bokhart's opinion that Alifax is entitled to all earned revenue from Alcor's iSED-related sales as damages for misappropriation rests on an unsound factual basis and must be excluded.

The first flaw in Mr. Bokhart's methodology concerns the predicate facts tying his damages theory to the harm attributable to the alleged misappropriation. Citing only a "[d]iscussion with Bryan Bergeron," Bokhart Rpt. ¶ 192 n. 296, Plaintiff's technical expert, he states:

I understand that Alifax's trade secrets have a direct, causal relationship to the ability to produce an ESR result in 20 seconds. Specifically, the trade secrets enabled Alcor to learn how to generate a signal when analyzing a blood sample and how to process that signal into an ESR value.

Id. at ¶ 192.⁵ The Court has scoured Dr. Bergeron's disclosures and deposition testimony. He does not opine that any specific trade secret – or that Alifax's trade secrets combined – causes the iSED to produce ESR results in 20 seconds. Dr. Bergeron has expressed no opinion whatsoever concerning the plastic CPS or Alifax's research about myeloma and anemia.⁶ And his conclusions about portions of Alifax's computer program code are strictly limited to considering whether these materials comprise trade secrets. See Expert Report of Bryan Bergeron ("Bergeron Rpt.") ¶ 7, ECF No. 144-11 (disclosing opinion that programming at issue "concerned information that has value from not being generally known to or readily ascertainable by other persons using proper means")

If Dr. Bergeron had other opinions about a competitive advantage obtained by Alcor from any alleged trade secret, they were not disclosed, and Mr. Bokhart cannot serve as his proxy. See Dura Auto. Sys. of Ind., Inc. v. CTS Corp., 285 F.3d 609, 614 (7th Cir. 2002) ("A scientist, however well credentialed he may be, is not permitted to be the mouthpiece of a scientist in a different specialty. That would not be responsible science."). Without an opinion that – at a minimum – Alifax's proprietary computer code contributes to the iSED's 20-second results, Mr. Bokhart's "all earned revenue" opinion is nothing more than ipse dixit; it has no factual foundation. Such a shortcoming cannot be written off as merely affecting the weight of the evidence. See Irvine v. Murad Skin Research Labs., Inc., 194 F.3d 313, 321 (1st Cir. 1999) ("[T]he basic premise of the expert's opinion to justify damages ... is flawed. Absent adequate factual data to support the expert's conclusions his testimony [is] unreliable."); Rothbaum v. Samsung Telecomms. Am., LLC, 52 F. Supp. 3d 185, 196 (D. Mass. 2014) (excluding opinions because they were "not supported by the data [the expert] cites, and they do not satisfy Rule 702's requirement that his testimony [be] based on sufficient facts or data" (quotation marks omitted)).

This flaw is underscored by Mr. Bokhart's failure to account for dramatic shifts in this action's factual landscape over time. Mr. Bokhart's initial report explains that Alifax first identified nearly a dozen misappropriated trade secrets. See Bokhart Rpt. ¶ 43. Since he issued that report, the number and nature of those trade secrets have narrowed significantly: just four trade secrets were presented to the jury. See Trial Tr. Vol. 10 at 13:22-14:13. Nevertheless, Mr. Bokhart neither decreased his damages calculation nor explained why no decrease is warranted.⁷ Thus, his "all...