Summary
holding that it was inappropriate for an expert to opine on the credibility of evidence
Summary of this case from Victor G. Reiling Associates v. Fisher-Price, Inc.Opinion
No. 00 Civ. 7242 (SAS)
July 15, 2002
Irving B. Levinson, Esq., Joseph G. Finnerty, Jr., Esq., Michael R. Hepworth, Esq., Piper Rudnick LLP, New York, NY, for Plaintiff.
Steven M. Bierman, Esq., Sidley Austin Brown Wood, New York, NY, Richard J. O'Brien, Esq., Paul E. Veith, Esq., Sidley Austin Brown Wood, Chicago, IL, for Defendant.
OPINION AND ORDER
In September 2000, LinkCo brought this action against Fujitsu for (1) misappropriation of trade secrets, (2) conversion, (3) unfair competition, (4) intentional interference with certain contractual relations, and (5) violations of Massachusetts state law. See LinkCo, Inc. v. Fujitsu Ltd., No. 00 Civ. 7242, 2002 WL 237838, at *1 (S.D.N.Y. Feb. 19, 2002). After the parties conducted discovery, Fujitsu moved for summary judgment. This Court denied that motion on February 19, 2002. See id.
Familiarity with the facts and allegations as discussed in that opinion is presumed.
At trial, LinkCo intends to offer the testimony of Bruce Webster as an expert witness on its claim of misappropriation of trade secrets. LinkCo also intends to offer the testimony of Aron Levko on the damages that LinkCo suffered as a result of Fujitsu's alleged misdeeds. In turn, Fujitsu seeks to rebut this testimony on damages by offering its own expert, Larry Evans. The parties now move in limine to exclude each other's witnesses from testifying.
I. LEGAL STANDARD
In our adversarial system, the judge instructs the jury on what the law is, and the jury then applies this law to the facts as it has determined them. Given this division of duties, an expert's role in this process is necessarily limited. "[E]very circuit has explicitly held that experts may not invade the court's province by testifying on issues of law." In re Initial Pub. Offering Secs. Litig., 174 F. Supp.2d 61, 64 (S.D.N.Y. 2001) (collecting cases). Furthermore, expert testimony is not "admissible when it addresses `lay matters which a jury is capable of understanding and deciding without the expert's help.'" Grdinich v. Bradlees, 187 F.R.D. 77, 82 (S.D.N.Y. 1999) (quoting Andrews v. Metro North Commuter R. Co., 882 F.2d 705, 708 (2d Cir. 1989)).
See also Media Sport Arts s.r.l. v. Kinney Shoe Corp., No. 95 Civ. 3901, 1999 WL 946354, at *3 (S.D.N.Y. Oct. 19, 1999) (excluding expert testimony as outside expert's area of expertise and "unnecessary for the edification of the jury" when the testimony of participants in events would be "far more appropriate").
Expert testimony is only admissible if it helps the jury understand facts that are outside common understanding. Under the Federal Rules of Evidence:
If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise.
Fed.R.Evid. 702. In addition, "a judge assessing a proffer of expert scientific testimony under Rule 702 should also be mindful of other applicable rules [under the Federal Rules of Evidence]." Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 595 (1993). For example, even if an expert's testimony is admissible under Rule 702, it must be excluded "if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury." Fed.R.Evid. 403.
II. DISCUSSION
A. Bruce Webster
Webster is "a Consultant to the Dispute Analysis Investigations group at PicewaterhouseCoopers LLP." Initial Expert Report and Disclosure of Bruce F. Webster ("Webster Report") at 7. "[His] areas of expertise include software engineering, software architecture and design, object-oriented development, IT project management and failure, and IT intellectual property." Id. at 8. At LinkCo's request, Webster reviewed "documents, computer documents, computer files, deposition transcripts and exhibits, and other relevant sources of information." Id. at 4. LinkCo has offered Webster's expert testimony to help the jury understand various technical issues in the case. Webster's testimony is excluded for three reasons.
First, a review of the report shows that it does not address technical questions that may be difficult for a juror to comprehend. Instead, it contains arguments and conclusory statements about questions of fact masquerading behind a veneer of technical language. A few examples should suffice. Webster purports to have reviewed computer files, but his report does not appear to contain any explanation or conclusions based on that review. 10/24/01 Bruce F. Webster Deposition ("Webster Dep.") at 72-79.
Likewise, Webster's report makes assertions about the technical qualifications of the Fujitsu developers to demonstrate that they were not capable of independently developing DisclosureVision, a product that LinkCo alleges incorporates its trade secrets. Instead of contrasting the developers' technical abilities with those required to develop DisclosureVision, Webster merely cites deposition testimony from the Fujitsu employees to support generalizations regarding their lack of experience. See Webster Report at 28-38. Nowhere does Webster seek to explain complex technical issues. An expert who "does not reveal how he has made use of his extensive qualifications . . . [and] fails to articulate industry customs or standards for consideration by the jury. . . . has failed to establish a basis for his opinion." Primavera Familienstifung v. Askin, 130 F. Supp.2d 450, 529 (S.D.N.Y. 2001) (citations omitted).
Second, Webster's report "is based on an independent examination of documents, computer files, deposition transcripts and exhibits and other relevant sources of information." Webster Report at 4. Yet, testimony by fact witnesses familiar with those documents would "be far more appropriate . . . and renders [the expert witness'] secondhand knowledge unnecessary for, the edification of the jury." Media Sport, 1999 WL 946354 at *3. Webster's report "does no more than counsel for [plaintiff] will do in argument, i.e., propound a particular interpretation of [defendant]'s conduct. This is not justification for the admission of expert testimony." Primavera, 130 F. Supp.2d at 530.
Third, Webster's report is filled with conclusions that are the exclusive province of the jury to decide. For example, Webster begins his report by stating: "Based on my investigation, it is my expert opinion that Fujitsu, Ltd. (`Fujitsu') misappropriated trade secrets that originated at LinkCo, Inc. (`LinkCo') Webster Report at 4. "While an expert may provide an opinion to help a jury or a judge understand a particular fact, `he may not give testimony stating ultimate legal conclusions based on those facts.'" In re Initial Pub. Offering Secs. Litig., 174 F. Supp.2d at 64 (quoting United States v. Bilzerian, 926 F.2d 1285, 1294 (2d Cir. 1991)). It is also inappropriate for Webster to opine on the credibility of evidence. It may (or may not) be true that "[s]worn testimony by key Fujitsu personnel as to who within Fujitsu actually originated these concepts, technologies, and strategies is, unclear and at times contradictory," but this is not a topic for expert testimony. Webster Report at 6.
See also Webster Report at 5 ("I reached my conclusion that Fujitsu relied upon trade secrets, rather than having conceived its own intellectual property independently. . . . based on the following observations. . . .).
B. Aron Levko
Levko is the "Leader of [PricewaterhouseCoopers'] Intellectual Asset Management Practice in the Americas Theatre." Initial Expert Report and Disclosure of Aron Levko ("Levko Report") at 1. He has "assisted in numerous licensing negotiations" and "analyzed in detail numerous issues including valuation of intellectual property, reasonable royalties and licensing practices." Id. LinkCo offers Levko's opinion about how to properly apply the "reasonable royalty" approach in calculating damages. Having reviewed Levko's report, I conclude that his testimony is inadmissible because (1) it addresses issues of law and because (2) it fails to assist the jury "to determine a fact in issue" that is outside common understanding.
"Although the amount of recoverable damages also is a question of fact, the measure of damages upon which the factual computation is based is a question of law." U.S. for Use of N. Maltese and Sons, Inc. v. Juno Const. Corp., 759 F.2d 253, 255 (2d Cir. 1985) (emphasis added). LinkCo proposes a theory of "reasonable royalty" damages, "a common form of award in both trade secret and patent cases." Vermont Microsystems, Inc. v. Autodesk, Inc., 138 F.3d 449, 450 (2d Cir. 1998). "A reasonable royalty award attempts to measure a hypothetically agreed value of what the defendant wrongfully obtained from the plaintiff. By means of a `suppositious meeting' between the parties, the court calculates what the parties would have agreed to as a fair licensing price at the time that the misappropriation occurred." Vermont Microsystems, Inc. v. Autodesk, Inc., 88 F.3d 142, 151 (2d Cir. 1996).
"In fashioning a reasonable royalty, `most courts adjust the measure of damages to accord with the commercial setting of the injury, the likely future consequences of the misappropriation, and the nature and extent of the use the defendant put the trade secret to after misappropriation.'" Vermont Microsystems, 88 F.3d at 151 (quoting University Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 518, 538 (5th Cir. 1974)).
Levko presumes that the Court will charge the reasonable royalty theory of damages and addresses each element of such damages in his report. In essence, Levko anticipates the Court's instructions on matters of law. Regardless of whether he correctly anticipates the Court's instructions, Levko gives impermissible opinions on issues of law.
For examples of conclusions in Levko's report that instruct jurors on how to decide an issue of law, see Levko Report at 10 (characterizing the measure of damages under the reasonable royalty as "lump-sum fair market value"); Levko Report at 11 (stating that a "hypothetical negotiation assumes that LinkCo and Fujitsu . . . each [had] reasonable knowledge of all relevant facts.").
Levko's testimony is also inadmissible because he fails to assist the jury "to determine a fact in issue" that is outside common understanding. In particular, Levko's opinions are inadmissible because they (1) address evidence and issues that are within the understanding of the jury, or (2) address issues requiring specialized knowledge which may assist the jury, but are based on unsubstantiated references to Levko's experience, "without benefit of citation to research, studies, or other generally accepted support for expert testimony." Primavera, 130 F. Supp.2d at 529.
Two examples demonstrate the expert's proffer of opinions in areas where the jury needs no expert assistance. Levko concludes that "Fujitsu recognized the importance of entering the electronic disclosure market" based on his review of the deposition testimony and a timeline he constructed by reviewing documents produced during discovery. See Levko Report at 4-7. Levko also concludes that Fujitsu would have reaped significant profits by being the first in the Japanese market to use the technology found in LinkCo's alleged trade secrets. But this conclusion is only supported by the testimony of Fujitsu executives. See id. at 17.
One further example addressing an issue clearly within the common understanding of jurors is Levko's recommendation of a term for a hypothetical license agreement. His recommended term is based solely on documents in the record. See Levko Report at 11.
Of course, counsel may present the testimony of Fujitsu executives as well as the documents Levko reviewed to the jury, which will then determine how much weight, if any, to give them.
When Levko addresses issues of fact where his specialized knowledge could help the jury, he supports his opinions with references to his "experience" but without explaining how he reached his conclusions. For instance, Levko supports his conclusion that "the 25% profit split, as a starting point for negotiations . . . should be increased to 30%" for calculating LinkCo's damages with "[his] prior experience in intellectual property matters," but neglects to explain how his experience supports his conclusion. Id. at 22. Likewise, Levko asserts that using the average annual prime rates to calculate LinkCo's lost opportunity costs is "a very conservative view," but offers no justification for this conclusion. Id. at 26. In short, Levko's report does not employ actual licensing agreements for comparison, articles, studies or anecdotal evidence to support or explain his conclusions. "While it is permissible for [an expert] to base his opinion on his own experience, he must do more than aver conclusorily that his experience led to his opinion." Primavera, 130 F. Supp.2d at 530.
For further examples of instances where Levko's specialized knowledge could help the jury if he were to explain how he reached his conclusions, see Levko Report at 13 (multiplying expected profit rate by 25%, "an accepted profit split method,." without explaining the method); id. at 16 (concluding without explanation that the hypothetical agreement would be for a co-exclusive agreement).
The Supreme Court has explained that the relaxation of the common law requirement of firsthand knowledge for expert witnesses is "premised on an assumption that the expert's, opinion will have a reliable basis in the knowledge and experience of his discipline." Daubert, 509 U.S. at 592 (citations omitted). Relevant experience can qualify a witness to testify but:
[i]f the witness is relying solely or primarily on experience, then [he] must explain how that experience leads to the conclusion reached, why that experience is a sufficient basis for the opinion, and how that experience is reliably applied to the facts. The trial court's gatekeeping function requires more than simply "taking the expert's word for it."
Fed.R.Evid. 702 Advisory Committee's Note.
Thus, a court cannot permit experts to "offer credentials rather than analysis." Primavera, 130 F. Supp.2d at 529 (quoting Minasian v. Standard Chartered Bank, PLC, 109 F.3d 1212, 1216 (7th Cir. 1997) (citations omitted)). If experts are permitted to testify on an issue of fact, they must provide some explanation for their conclusions, rather than referring generally to their experience. Without good explanations, courts cannot assess the reliability of any conclusion drawn by an expert, even if he possesses relevant experience. "[N]othing in either Daubert or the Federal Rules of Evidence requires a district court to admit opinion evidence that is connected to existing data only by the ipse dixit of the expert." General Elec. Co. v. Joiner, 522 U.S. 136, 146 (1997). Levko has not supported his opinion with references to his experience and explained how the specifics of that experience led to his conclusions.
C. Larry Evans
Fujitsu has offered Larry Evans, a technology licensing expert, to rebut Levko's testimony. Evans' testimony is inadmissible for many of the same reasons that require the exclusion of Levko's testimony.
For an example of an opinion on an issue of law, see Evans Report ¶ 36 (arguing that the jury should not be able to consider certain information).
For an example of an opinion within the common understanding of jurors, see Evans Report ¶¶ 25, 30, 35 (reciting facts Evans believes Levko overlooked in reaching his conclusions).
For an example of an opinion requiring specialized knowledge which may assist the jury, but based on unsubstantiated references to Evans's experience, see Evans Report ¶ 32 (discussing a proposed royalty rate and a cap on that royalty based on the commercial circumstances of the parties without discussing standard industry practice that might justify his conclusion).
D. Further Proceedings
The parties should brief the issue of the appropriate measure of damages prior to trial. In those submissions, the parties may rely on the reports of their respective experts or seek a hearing at which their experts may testify. See In re Initial Pub. Offering Secs. Litig., 174 F. Supp.2d at 69 ("[Experts] are free to consult with the moving defendants, sign their brief, or both. They may attend the conferences and argue on their behalf."). At the end of the day, however, this Court must decide how to instruct the jury on the measure of damages.
When the parties submit briefs on the appropriate measure of damages, they should carefully distinguish those elements of the damages calculation that are questions of law from factual issues to be decided by the jury. Moreover, in their expert reports, they must distinguish those factual issues that are within the understanding of the jury from issues about which "specialized knowledge will assist the trier of fact." Fed.R.Evid. 702. An attorney can explain ordinary factual issues; an expert witness should be used to help the jury with issues that go beyond common understanding.
For example, on the issue of damages, expert knowledge of industry practice may prove indispensable to the jury in deciding a number of questions of face necessary to calculating damages, including (1) whether a company in Fujitsu's position would have agreed to an upfront, lump-sum payment for LinkCo's technology; (2) the relevance of LinkCo's financial situation to these negotiations; (3) the duration of a technology license negotiated under these circumstances; (4) the appropriate royalty rate to apply to profits; (5) the future profit margins; and (6) the future revenue growth rates. Expert testimony on these issues may be helpful to the jury, but experts must provide this help based on their expertise and analysis, not on their qualifications and review of the record.
III. CONCLUSION
For the reasons discussed above, defendant's motion to exclude the expert testimony of Bruce Webster is granted. The parties' motions to exclude the testimony of each other's damages experts, in their current form, are granted.
Both parties are ordered to submit briefs on how the Court should instruct the jury on the measure of damages. Plaintiff's brief is due on July 29, 2002; defendant's brief in response is due August 9, 2002; and plaintiff's reply brief is due August 16, 2002.
The parties are further ordered to revise Levko and Evans's expert reports in accordance with this opinion and the Court's decision on the measure of damages, and to resubmit those reports two weeks after this Court has issued its decision on the measure of damages.