Alifax Holding Spa v. Alcor Scientific Inc.

Citation: 387 F. Supp. 3d 170Docket: C.A. No. 14-440 WES

Court: District Court, D. Rhode Island; April 30, 2019; Federal District Court

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Defendants filed a motion to exclude expert witness Christopher J. Bokhart's opinions regarding damages related to Plaintiffs' claims of patent infringement, copyright infringement, and trade secret misappropriation. The Court granted in part and denied in part this motion earlier, subsequently bifurcating the trial into liability and damages phases. As the trial progressed, the case narrowed significantly, eliminating the copyright claim and resulting in a judgment for Defendants on the patent infringement claim. The remaining allegations involve trade secret misappropriation and breach of a confidential relationship. Following a jury verdict on April 30, 2019, which found Defendants liable for willful misappropriation of three trade secrets, the Court addressed Bokhart's opinions on damages related to trade secret misappropriation. Bokhart proposed two theories: (1) that Alifax should recover all earned revenue from the sale of Alcor's iSED analyzers as unjust enrichment damages, and (2) that Alifax should receive "head start" damages due to a temporal advantage gained from misappropriating a specific trade secret related to software and firmware. However, the Court ultimately excluded all of Bokhart's opinions on damages for trade secret misappropriation, determining that Alifax’s earlier theory concerning the acquisition of source code was not sufficiently supported by evidence during the trial. The Court emphasized its role in ensuring that expert testimony meets the standards of relevance and reliability under Rule 702 of the Federal Rules of Evidence, as established in Daubert v. Merrell Dow Pharmaceuticals, Inc.

In Morris v. Rhode Island Hospital, the court evaluated the reliability of expert testimony in the context of damages for trade secret misappropriation. It emphasized that while methodology is central to a Daubert inquiry, trial judges must also assess whether the data backing an expert's opinions is sufficient to establish reliability. The court highlighted that damages must be proven with "reasonable certainty" and must be based on sound economic and factual foundations.

Mr. Bokhart's opinion that Alifax is entitled to all revenue from Alcor's iSED-related sales was deemed flawed and excluded. The court found that his methodology lacked a solid factual basis connecting the alleged misappropriation to the claimed damages. Bokhart relied on a discussion with a technical expert, Dr. Bryan Bergeron, who did not assert that any specific trade secret enabled the iSED to produce results in 20 seconds. The court noted that Bergeron's testimony was limited to identifying information as trade secrets without establishing a direct causal link to the competitive advantage claimed by Alifax.

As a result, the court concluded that Bokhart's opinion was unsupported by adequate factual data, rendering it unreliable under Rule 702. The lack of a foundation for his claims meant that his testimony could not be accepted, reinforcing the principle that expert opinions must be grounded in sufficient factual evidence to be considered credible.

Mr. Bokhart's analysis exhibits a significant flaw due to his disregard for substantial changes in the factual context of the case. Initially, he reported that Alifax identified nearly a dozen misappropriated trade secrets, but by trial, only four were presented to the jury. Despite this reduction, Bokhart did not adjust his damages calculation or justify the lack of adjustment, rendering his "all earned revenue" opinion disconnected from the actual harm and subject to exclusion.

Regarding the "head start" damages, Bokhart claims Alifax is entitled to unjust enrichment from the temporal advantage Alcor gained by misappropriating one trade secret related to software and firmware. This assertion relies on Dr. Bergeron’s estimate that Alcor's use of the trade secret provided at least one month of development time advantage. However, Bokhart fails to provide a direct citation from Bergeron's report to substantiate this claim. Bergeron stated that programming specific features would take a skilled engineer at least one month, but did not estimate the time required for other programming tasks.

Bokhart extrapolates that the one-month delay would delay the iSED's launch by a year, thus claiming Alcor unjustly benefited from an additional year of revenue as "head start" damages. The Defendants contend this opinion should be excluded due to inadequate initial disclosure and its speculative nature. Notably, Bokhart's initial report did not mention "head start" damages, which only appeared in a footnote in a lengthy supplemental report.

Typically, such a lack of timely disclosure would warrant exclusion under Fed. R. Civ. P. 26, yet the Court retains discretion, especially since the Defendants were aware of the related concepts prior to the trial. Ultimately, despite the partial disclosure, Bokhart's opinion is deemed flawed due to its reliance on Bergeron’s specific opinion, which does not broadly support the claim of misappropriation as asserted.

The one-month advantage cited was specifically related to programming the instrument's signal acquisition features and did not pertain to the trade secret identified by the jury, which was the source code for converting photometric measurements. No evidence regarding signal acquisition was presented during the trial's liability phase; all evidence related to the conversion algorithm. This distinction is crucial, as the jury was not instructed on signal acquisition due to a lack of supporting evidence. Consequently, Mr. Bokhart's conclusions about the head start were based on a rejected trade secret theory, rendering them unreliable and inadmissible. The Court granted in part the Defendants' Motion to Exclude Mr. Bokhart's opinions on trade secret misappropriation damages, excluding them entirely while allowing his input on patent infringement damages. The Court will address the Plaintiffs' argument about revenue apportionment and the burden of proof in a separate ruling. The jury concluded that only Frappa misappropriated Alifax's "anemia factor" trade secret. Confusion arises regarding Dr. Bergeron's testimony about the time required to develop a conversion algorithm, as it was not disclosed in his report, and the Court lacked full access to Mr. Bokhart's deposition. Under Federal Rule of Civil Procedure 26 and Rule 37(c), the Court will not allow Mr. Bokhart to present opinions based on elements introduced for the first time during trial.