September 10, 2019 Articles

Death by a Thousand Cuts—Using Pretrial Motions to Gain Trial Advantage in Trade Secrets Litigation

In trade secret misappropriation cases, parties should consider using pretrial motions as a tool to advance their case through favorable rulings.

By Travis S. Hunter and Alexandra M. Ewing

In the English language, the phrase “death by a thousand cuts” is an idiom that refers to a series of bad events, none of which is devastating on its own but, when added together, result in disaster. In many large trials, this idiom is an appropriate metaphor for the use of pretrial motions. This is particularly true in trade secrets cases, which are often high-stakes or bet-the-company litigation involving numerous witnesses and mountains of evidence. Although pretrial motions are often overlooked as the last step before a big trial, pretrial motions such as motions in limine and Daubert motions can offer parties a chance to streamline the trial, limit evidence, and perhaps win the case.

Clarify the Elements of the Claim

Depending on the claims at issue, pretrial motions can offer an opportunity to clarify the elements of proof prior to trial. This is true particularly for trade secret misappropriation claims, where, as at least in Delaware, there are no pattern jury instructions for such claims and there are limited authorities addressing the specific elements of such claims. In Delaware, preparation of the pretrial stipulation or the proposed jury instructions submitted prior to trial offers a last opportunity to clarify and further refine what must be proven at trial.

In Total Care Physicians, P.A. v. O’Hara, C.A. No. 99C-11-201-JRS (Del. Super. Ct. 2003), the parties sought guidance from the court in advance of the trade secrets trial on the plaintiff’s burden to prove causation in connection with trade secret misappropriation. In Total Care, the defendant argued that Delaware’s Uniform Trade Secrets Act does not define “causation” but dictates that a plaintiff seeking damages must establish either “the actual loss . . . [and/or] the unjust enrichment caused by [the] misappropriation.” 6 Del. Code § 2003(a) (emphasis added). Accordingly, there was a question as to whether causation was an element in a trade secrets claim, and the defendant sought the court’s guidance on this novel issue.

The defendant argued, and the court ultimately concluded, that statutory construction and deductive reasoning meant that a plaintiff must prove proximate causation under the Trade Secrets Act. Total Care serves as an important example of how parties can use pretrial motions to clarify the elements of a claim prior to trial.

Challenge the Expert

In trade secret misappropriation cases, parties also can use pretrial motions effectively to undermine or even exclude expert witnesses. This is particularly true in trade secrets cases in which an expert fails to apportion damages among different trade secrets. For example, in a case involving five trade secrets, a defendant may move for, and ultimately obtain, summary judgment on three of the five “secrets.” Such a holding means that only two secrets would proceed to trial. However, if the plaintiff’s expert included only a lump sum in his or her report associated with misappropriation of the five original secrets, another motion may be in order following summary judgment to preclude the plaintiff’s expert for failure to apportion damages among the “secrets” remaining for trial. Stated differently, an expert with a lump-sum opinion may have no basis to opine as to the value of individual secrets.

This stratagem is reinforced by a number of authorities holding that expert witnesses should apportion damages on a trade-secret-by-trade-secret basis if the expert wishes to offer testimony on the value of specific trade secrets. For example, in LivePerson, Inc. v. [24]7.AI, Inc., No. 17-01268-JST (N.D. Cal. Nov. 30 2018), the court granted the plaintiff’s motion to exclude the testimony of the defendant’s damages expert. The court concluded that the expert’s opinion “must be excluded because he does not apportion trade secret misappropriation damages among particular alleged trade secrets, and offers no methodology for the jury to calculate trade secret misappropriation damages on fewer than all of the 28 alleged trade secrets in the case.” The court stated that it was particularly problematic in the upcoming bellwether trial, where only 15 of the 28 alleged trade secrets would be at issue. Thus, “the jury’s verdict w[ould] necessarily encompass fewer than all the alleged trade secrets.”

Similarly, in Waymo v. Uber Techs., Inc., No. C 17-00939 WHA (N.D. Cal. Nov. 2, 2017), the defendants moved to exclude the plaintiff’s damages expert. The court granted the defendant’s motion because the damages expert’s opinions and methodology failed to pass muster under Federal Rule of Evidence 702 and Daubert, as well as being unduly prejudicial under Federal Rule of Evidence 403. The court excluded the expert because of a “glaring problem” in his analysis; namely, his failure to “apportion the alleged acceleration of [the defendant]’s development timeline between legitimate benefits and trade secret misappropriation.”

Alternatively, a plaintiff may use pretrial motions effectively to undermine or exclude experts by challenging areas that are outside the knowledge of an expert. A potentially fruitful area is testimony by a defense expert on the inadequacy of the measures taken by a company to prevent the misappropriation of trade secrets. Such testimony may be improper under Federal Rule of Evidence 702 and Daubert if it is not based on any “specialized knowledge,” contains impermissible legal conclusions on governing law, or falls within the province of the jury.

By challenging the methodology of damages experts in trade secret litigation, parties may be able to exclude an expert’s testimony in its entirety or otherwise limit evidence of damages.

Finally, even in trade secrets cases in which a party cannot use the pretrial motion phase to win the case short of trial, pretrial motions offer an opportunity to raise evidentiary issues in an effort to exclude unfavorable evidence.

It is particularly important for a plaintiff to seek to eliminate potential unfavorable evidence that undermines damages, including evidence that suggests a trade secret has diminished value or no value. Assume, for example, that a plaintiff alleging trade secret misappropriation subsequently discloses the alleged secret in a publication after accusing the defendant of misappropriation. On its face, such disclosure could be powerful evidence that the alleged secret had no independent economic value and really was not a trade secret at all. There is a question, however, as to whether such evidence is relevant or should be excluded as unduly prejudicial and confusing. This issue of subsequent disclosure is often hotly debated, and there appears to be no clear-cut answer. Because of this, it is an issue worth raising by the plaintiff.

Courts appear particularly skeptical of the admissibility of a subsequent disclosure if publishing post-dates what the court considers the “relevant time period.” See Beard Research, Inc. v. Kates, C.A. No. 1316-VCP (Del. Ch. Apr. 23, 2010); Merck & Co., Inc. v. SmithKline Beecham Pharm. Co., C.A. No. 15443-NC (Del. Ch. Aug. 5, 1999). Thus, a plaintiff should seek to differentiate as much as possible between the time of the alleged misappropriation and any subsequent disclosures. Plaintiffs should analogize cases involving the alleged misappropriation of trade secrets that subsequently are disclosed in patent applications. See Turnkey Sols. Corp. v. Hewlett Packard Enter. Co., C.A. No. 15-1541-CMA-CBS (D. Colo. Aug. 9, 2017). Although plaintiffs may lose trade secret protection over material following publication (and gain potential patent protection), courts have held consistently that publication does not affect a defendant’s liability for the period before the patent application is published. Further, in Turnkey, the court determined that the damages award should not be limited by subsequent disclosure, because publication did not necessarily absolve the defendant of all post-publication damages that could result from the alleged misappropriation.

Conclusion

Pretrial motion practice is an essential tool to potentially win a case or earn favorable evidentiary rulings, particularly in high-stakes litigation like trade secret misappropriation cases. Parties should use the pretrial process effectively to clarify elements of a claim, challenge experts, and eliminate unfavorable evidence.

Travis S. Hunter is a director and Alexandra M. Ewing is an associate of Richards, Layton & Finger, P.A. in Wilmington, Delaware. 


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