By Brian Craig, J.D.
A jury verdict finding misappropriation of trade secrets used to test blood samples is contrary to the clear weight of the evidence.
In a case involving alleged misappropriation of trade secrets used to test blood samples where a jury awarded $6.5 million in damages, the federal district court in Providence, Rhode Island has granted a new trial. The court concluded that the jury verdict in favor of plaintiff Alifax Holding SpA, which produces instruments used in testing human blood samples, was against the clear weight of the credible evidence. The court also concluded that a new trial was warranted because an expert witness improperly used summary testimony in support of unjust enrichment damages (Alifax Holding SpA v. Alcor Scientific Inc., September 5, 2019, Smith, W.).
Alifax Holding produces automated clinical instruments that are used to determine the erythrocyte sedimentation rate ("ESR") of human blood samples. ESR is a common clinical test that is used to detect non-specific inflammation. An employee of an Alcor Scientific Inc. subsidiary departed the company and began working with Alcor, a Rhode-Island based competitor. Within a year, Alcor debuted a new instrument with rapid analytical capabilities comparable to Alifax devices. Alifax then sued Alcor for misappropriation of trade secrets in violation of the Rhode Island Uniform Trade Secrets Act ("RIUTSA"). On April 30, 2019, a jury concluded that Alcor and the former employee misappropriated two of Alifax’s trade secrets. In finding that the defendants acted willfully and maliciously, the jury awarded Alifax $6.5 million in unjust enrichment damages attributable to Alcor’s misappropriation of Alifax’s source-code related trade secret. Following the jury verdict, Alcor filed a renewed motion for judgment as a matter of law and, in the alternative, a motion for a new trial or remittitur.
Judgment as a matter of law. The court first granted, in part, Alcor’s renewed motion for judgment as a matter of law regarding the claim of using a clear, plastic capillary photometer sensor ("CPS") in an automated ESR analyzer in violation of the RIUTSA. Alifax failed to introduce sufficient evidence that using a CPS in an ESR analyzer was a protectable trade secret under the RIUTSA. Thus, the jury’s verdict regarding this theory of liability had to be vacated and judgment entered for the defendants.
New trial on misappropriation. As to liability for misappropriation of Alifax’s conversion algorithm, the court also found that the clear weight of the credible evidence was inconsistent with the jury’s verdict. While the court concluded that legally sufficient evidence supported the verdict that Alifax’s conversion algorithm was a trade secret, theverdict finding misappropriation of Alifax’s conversion algorithm was against the clear weight of the evidence, warranting a new trial. The jury verdict that the defendants misappropriated Alifax’s algorithm and thereby obtained a one-year head start in the market relied on extensive, inference-driven reverse engineering that was wafer thin. The court concluded that the jury rejected powerful expert testimony and a "motherload" of contrary evidence. Under these exceptional circumstances, the court exercised its discretion to order a new trial concerning whether the defendants willfully misappropriated Alifax’s proprietary conversion algorithm in violation of RIUTSA.
New trial on damages. Additionally, the court concluded that a new trial on damages was necessary because the summary testimony offered by Alifax’s expert witness resulted in unfair prejudice. A new trial would be required on damages even if the jury’s verdict on liability for misappropriation of the conversion algorithm survived. Alifax’s evidence of Alcor’s gross revenues allegedly attributable to its misappropriation unfairly transgressed the boundaries of Federal Rule of Evidence 1006. Under Rule 1006, a party may use a summary to prove the content of voluminous writings that cannot be conveniently examined in court. But the court recognized that Rule 1006 is not a backdoor for admitting otherwise impermissible opinions. The documents and materials the expert purported to summarize were not already competent evidence already before the jury. The expert’s testimony also necessarily reflected the application of his financial and accounting expertise to interpret the evidence. Permitting the jury’s damages award to stand would constitute a miscarriage of justice. Therefore, the court ordered a new trial on damages attributable to the alleged harm under the RIUTSA.
This case is No. 1:14-cv-00440-WES-LDA.
Attorneys: Christopher H. Little (Pierce Atwood LLP) for Alifax Holding SpA. Christine K. Bush (Hinckley Allen & Snyder LLP) for Alcor Scientific, Inc.
Companies: Alifax Holding SpA; Alcor Scientific, Inc.
MainStory: TopStory TradeSecrets RhodeIslandNews
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