Neural Magic, Inc. v. Meta Platforms, Inc.

• Decision Date: 17 January 2023
• Docket Number: 20-cv-10444-DJC
• Parties: NEURAL MAGIC, INC., Plaintiff, v. META PLATFORMS, INC. and ALEKSANDAR ZLATESKI, Defendants.
• Court: U.S. District Court — District of Massachusetts

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NEURAL MAGIC, INC., Plaintiff, v. META PLATFORMS, INC. and ALEKSANDAR ZLATESKI, Defendants.

No. 20-cv-10444-DJC

United States District Court, D. Massachusetts

January 17, 2023

[UNDER SEAL]

Entered in Redacted Form on March 1, 2023]

MEMORANDUM AND ORDER

Denise J. Casper, United States District Judge

I. Introduction

Plaintiff Neural Magic, Inc. ("NMI") has sued Defendants Meta Platforms, Inc. ("Meta") and Dr. Aleksandar Zlateski ("Zlateski") (collectively "Defendants"), a former NMI employee, for Zlateski's alleged disclosure of trade secrets to Meta and Meta's internal use and posting of same on an open-source forum, GitHub. D. 109. Specifically, NMI alleges that both Defendants misappropriated trade secrets in violation of the Massachusetts Uniform Trade Secrets Act ("MUTSA"), Mass. Gen. L. c. 93, § 42 (Count I) and the Defend Trade Secrets Act ("DTSA"), 18 U.S.C. § 1836 (Count II), and committed unfair and deceptive business practices in violation of Mass. Gen. L. c 93A, § 11 (Count III). NMI also alleges that Zlateski breached the non-disclosure and non-competition provisions of his employment contract with NMI (Count IV) and that Meta tortiously interfered with its advantageous contractual relations with Zlateski (Count V).

Before the Court are Defendants' motion for summary judgment on all counts and NMFs theories of damages as to diminution of value and reasonable royalties, D. 303, and motions to strike the opinions, in whole or part, of Plaintiffs' experts: namely, Dr. Michael L. Scott ("Scott"), D. 297, D. 304; Professor Elizabeth Rowe ("Rowe"), D. 305; Dr. Sara Ellison ("Ellison"), D. 307; and Dr. Michael Akemann ("Akemann"), D. 308. Also before the Court are NMI's motion to strike the opinions of Defendants' experts: namely, Dr. David Kaeli ("Kaeli"), D. 287, Mr. Christopher Bakewell ("Bakewell"), D. 341, and Mr. R. Cuyler Robinson ("Robinson"), D. 342.

For the reasons explained below, the Court denies Defendants' motion for summary judgment in substantial part, but allows it as to Trade Secret No. 1, NMI's c. 93A claim and as to as much of the breach of contract claim that alleges violation of the non-compete provision. As to the experts, the Court ALLOWS Defendants' motion to strike Ellison's opinion regarding an alleged $880+ million diminution in valuation of NMI and limits the opinions of some of the other experts as described below. Accordingly, the Court ALLOWS Defendants' motion for summary judgment in part and DENIES it in part, D. 303, DENIES Defendants' motion to strike Scott's June 22, 2022 declaration on Fed.R.Civ.P. 26(e) grounds, D. 297, DENIES Defendants' Daubert motion to strike Scott's opinion relating to NMI's code comparison testing, D. 304, ALLOWS Defendants' motion to strike Rowe's opinion in part and DENIES it in part, D. 305, ALLOWS Defendants' motion to strike Ellison's opinion, D. 307, and DENIES Defendants' motion to strike Akemann's opinion, D. 308. Further, the Court DENIES NMI's motion to strike Kaeli's expert opinion, D. 287, DENIES NMI's motion to strike BakewelPs opinion in part and ALLOWS it in part, D. 341, and DENIES NMI's motion to strike Robinson's opinion, D. 342.

II. Standard of Review

A. Summary Judgment

The Court grants summary judgment where "there is no genuine dispute as to any material fact" and the undisputed facts demonstrate that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). "A fact is material if it carries with it the potential to affect the outcome of the suit under applicable law." Santiago-Ramos v. Centennial P.R. Wireless Corp., 217 F.3d 46, 52 (1st Cir. 2000) (citation and internal quotation marks omitted). The movant bears the burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Carmona v. Toledo, 215 F.3d 124,132 (1st Cir. 2000) (citations omitted). If the movant meets its burden, the non-moving party may not rest on the allegations or denials in its pleadings, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986), but must come forward with specific admissible facts showing that there is a genuine issue for trial, Borges v. Serrano-Isern, 605 F.3d 1, 5 (1st Cir. 2010) (citing cases). The Court "view[s] the record in the light most favorable to the nonmovant, drawing reasonable inferences in his favor." Noonan v. Staples, Inc., 556 F.3d 20, 25 (1st Cir. 2009) (citation omitted).

B. Daubert

Under Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993), trial judges must act as gatekeeper to "insur[e] that the fact-finding process does not become distorted by 'expertise that is fausse and science that is junky.'" Fed. Ins. Co. v. Pentair Residential Filtration, LLC, No. 12-10853-RGS, 2013 WL 6145531, at *3 (D. Mass. Nov. 21, 2013) (quoting Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 159 (1999) (Scalia, J., concurring)). As a threshold question, the judge must first determine whether the witness is sufficiently qualified by "knowledge, skill, experience, training, or education" to give his proffered opinion. Id. (quoting Fed.R.Evid. 702) (internal quotation marks omitted). If the witness is deemed qualified, the judge must next determine whether the specific testimony offered in the case "both rests on a reliable foundation and is relevant to the task at hand." In re Nexium [Esomeprazole] Antitrust Litis., 842 F.3d 34, 52 (1st Cir. 2016) (quoting Daubert, 509 U.S. at 597) (internal quotation marks omitted). "The reliable foundation requirement necessitates an inquiry into the methodology and the basis for an expert's opinion." Samaan v. St. Joseph Hosp., 670 F.3d 21, 31 (1st Cir. 2012). The relevancy requirement "seeks to ensure that there is an adequate fit between the expert's methods and his conclusions" by determining whether the expert's conclusions "flow rationally from the methodology employed." Id. at 32 (citations omitted). Generally, "[vigorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof are the traditional and appropriate means of attacking shaky but admissible evidence," Daubert, 509 U.S.at 596 (citation omitted), but "a court may exclude an expert's opinion when it is based upon conjecture or speculation deriving from an insufficient evidentiary source," Equal Emp. Opportunity Comm'n v. Tex. Roadhouse. Inc., 215 F.Supp.3d 140, 158 (D. Mass. 2016) (citing United States v. Organon USA Inc., No. 070-12153-RWZ, 2015 WL 10002943, at *3-4 (D. Mass. Aug. 17, 2015)).

III. Factual Background

Unless otherwise noted, the following facts are undisputed. These facts are primarily drawn from the combined statement of material facts, D. 352.

A. Founding of NMI

NMI is a start-up company co-founded by Dr. Nir Shavit ("Shavit") and Dr. Alexander Matveev ("Matveev"). D. 352 at 491. Prior to NMI's founding, Shavit and Matveev worked together, applying machine learning ("ML") techniques to neural networks involving large data sets. Id. at 493. Generally speaking, neural networks are systems that mirror the way a human brain learns by experience. D. 318-4 at 24 (Kaeli Rpt); D. 319-2 ¶ 29 (Scott Rpt.).^[1] These networks analyze inputs, detect and label patterns from those inputs, and use the labeled patterns to recognize objects when new inputs are received, resembling the way the human brain learns by experience. D. 318-4 at 24; D. 319-2 ¶ 29. Because running neural networks on large data sets typically involved the use of Graphic Processing Units ("GPU"), which are large and expensive, Shavit and Matveev started to work on algorithms that would allow ML-based neural networks to run faster at GPU speeds on commodity Central Processing Units ("CPU")-the standard processors in most computers. See D. 319-2 ¶ 40; D. 352 at 493-95; but see D. 318-4 at 39 (explaining that "[b]efore July 2019, it was widely known that both CPUs and GPUs could be used with neural network and matrix multiplication applications").

B. Zlateski and His Work Before NMI

Zlateski is a computer scientist who earned his bachelor's and master's degrees, along with his Ph.D., from the Massachusetts Institute of Technology ("MIT"). D. 352 at 14-15. Zlateski and Shavit met in 2014 while Zlateski was at MIT. Id. at 15. Shavit served on Zlateski's Ph.D. thesis committee. Id. Before NMI was founded, Zlateski conducted research on speeding up neural networks on CPUs, a fact of which both Shavit and Matveev were aware. Id. at 15-31. NMI disagrees with Defendants' characterization that Zlateski's pre-NMI research "involved research into speeding up sparse^[2] neural networks on CPUs;" rather, NMI contends his research involved only dense, not sparse, neural networks on CPUs. Id.

C. Zlateski Joins NMI

Shavit and Matveev hired Zlateski as the company's first employee in March 2018. Id. at 499-500. His employment contract (the "NMI Contract") included non-disclosure and noncompetition provisions. Id. at 500. Regarding confidentiality, the NMI Contract required that Zlateski would:

not at any time, whether during or after the termination of [his] engagement by [NMI], reveal to any person or entity any of the trade secrets or confidential, proprietary or other non-public information concerning the organization . . . including but not limited to information related to [NMI] inventions, research, testing, manufacturing, production, marketing, supplies, suppliers, consultants, strategic partners, products, designs, methods, know-how, technique, systems, processes, software programs and/or code, works of authorship, customer and collaborate lists, projects, plans, proposals, any Developments . . ., and the notes, memoranda, reports, lists, records, drawings, sketches,

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