BladeRoom Group Limited et al v. Facebook, Inc., No. 5:2015cv01370 - Document 942 (N.D. Cal. 2018)

Court Description: ORDER denying 898 Motion for Judgment as a Matter of Law. Signed by Judge Edward J. Davila on 8/3/2018. (ejdlc1S, COURT STAFF) (Filed on 8/3/2018)

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1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 NORTHERN DISTRICT OF CALIFORNIA 9 SAN JOSE DIVISION 10 BLADEROOM GROUP LIMITED, et al., 11 Case No. 5:15-cv-01370-EJD United States District Court Northern District of California Plaintiffs, 12 ORDER DENYING DEFENDANTS’ MOTION FOR JUDGMENT AS A MATTER OF LAW v. 13 EMERSON ELECTRIC CO, et al., 14 Re: Dkt. No. 898 Defendants. 15 16 I. INTRODUCTION A jury returned a verdict in favor of BladeRoom Group Ltd. and Bripco (UK) Ltd. 1 on its 17 18 claims against Emerson Electric Co., Emerson Network Power Solutions, Inc. and Liebert 19 Corporation (collectively, “Emerson”) for misappropriation of trade secrets and breach of contract. 20 Dkt. No. 867. The jury awarded BladeRoom $10 million in lost profits damages, $20 million in 21 unjust enrichment damages, and found by clear and convincing evidence that Emerson’s 22 misappropriation of trade secrets was willful and malicious. Emerson now moves for judgment as a matter of law pursuant to Federal Rule of Civil 23 24 Procedure 50(b). Dkt. No. 898. BladeRoom opposes the motion. Having carefully considered the 25 parties’ arguments in light of the trial record, the court finds no legitimate basis to overturn any 26 27 28 1 In this order, “BladeRoom” refers to both BladeRoom Group Ltd. and Bripco (UK) Ltd. Case No.: 5:15-cv-01370-EJD ORDER DENYING DEFENDANTS’ MOTION FOR JUDGMENT AS A MATTER OF LAW 1 1 2 portion of the verdict. Thus, Emerson’s motion will be denied for the reasons explained below. II. LEGAL STANDARD Federal Rule of Civil Procedure 50 permits a district court to grant judgment as a matter of 3 law when “the evidence, construed in the light most favorable to the nonmoving party, permits 5 only one reasonable conclusion, and that conclusion is contrary to that of the jury.” Estate of Diaz 6 v. City of Anaheim, 840 F.3d 592, 604 (9th Cir. 2016) (internal quotations omitted). The Ninth 7 Circuit has described this standard as “very high” and imposing a “high hurdle.” Costa v. Desert 8 Palace, Inc., 299 F.3d 838, 859 (9th Cir. 2002). To that end, the district court “can overturn the 9 jury’s verdict and grant [] a [Rule 50(b)] motion only if “‘there is no legally sufficient basis for a 10 reasonable jury to find for that party on that issue.’” Id. (quoting Reeves v. Sanderson Plumbing 11 United States District Court Northern District of California 4 Prods., Inc., 530 U.S. 133, 149 (2000)). Conversely, a verdict must be upheld when supported by 12 substantial evidence, even if a contrary conclusion is possible. Janes v. Wal-Mart Stores, Inc., 279 13 F.3d 883, 888 (9th Cir. 2002). “Substantial evidence is ‘such relevant evidence as reasonable 14 minds might accept as adequate to support a conclusion.’” Mockler v. Multnomah Cnty., 140 15 F.3d 808, 815 n.8 (9th Cir. 1998); Pavao v. Pagay, 307 F.3d 915, 918 (9th Cir. 2002). 16 The court must “disregard all evidence favorable to the moving party that the jury is not 17 required to believe.” Reeves, 530 U.S. at 151. Functionally, this means “the court should give 18 credence to the evidence favoring the nonmovant as well as that ‘evidence supporting the moving 19 party that is uncontradicted and unimpeached, at least to the extent that evidence comes from 20 disinterested witnesses.’” Id. (quoting 9A C. Wright & A. Miller, Federal Practice and Procedure 21 § 2529, p. 300 (2d ed.1995)). However, the court may not make credibility determinations, weigh 22 the evidence, or draw inferences therefrom. Id. at 150. 23 III. DISCUSSION 24 A. 25 Emerson argues BladeRoom failed to prove a cause of action for misappropriation of trade 26 Misappropriation of Trade Secrets secrets because it needed to present expert testimony to prove the claim. Not so. 27 28 Case No.: 5:15-cv-01370-EJD ORDER DENYING DEFENDANTS’ MOTION FOR JUDGMENT AS A MATTER OF LAW 2 i. 1 Governing Authority To sustain a claim for misappropriation of trade secrets under the California Uniform 2 3 4 Trade Secrets Act (“CUTSA”), a plaintiff must prove: “(1) the plaintiff owned a trade secret, (2) the defendant acquired, disclosed, or used the plaintiff’s trade secret through improper means, and (3) the defendant’s actions damaged the plaintiff.” Cytodyn, Inc. v. Amerimmune Pharms., Inc., 5 160 Cal. App. 4th 288, 297 (2008). 6 7 8 “Misappropriation” includes the “[a]cquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means,” as well as the “[d]isclosure or use of a trade secret of another without express or implied consent” by a 9 person who acquired the trade secret through improper means. Cal. Civ. Code § 3426.1(b); 10 United States District Court Northern District of California 11 12 Silvaco Data Sys. v. Intel Corp., 184 Cal. App. 4th 210, 222 (2010) (“Under CUTSA, misappropriation of a trade secret may be achieved through three types of conduct: ‘[a]cquisition,’ ‘[d]isclosure,’ or ‘[u]se.’ ”). “Improper means” includes “theft, bribery, misrepresentation, breach 13 or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other 14 means” but excludes “[r]everse engineering or independent derivation alone.” Cal. Civ. Code § 15 3426.1(a). 16 17 18 ii. Application a. Existence of Trade Secrets The jury found that BladeRoom proved by a preponderance of the evidence that it owned 19 20 two trade secrets, Trade Secret 1 and Combination Trade Secret 8. Emerson’s challenge to the jury’s ownership finding boils down to one contention: it is unsustainable in the absence of 21 technical expert testimony. This contention, however, is both legally erroneous and unpersuasive 22 when compared to the record. 23 Initially, the court must dispel the notion that a plaintiff can never prove ownership of a 24 trade secret without expert testimony. Information need not be complex, novel or outside the 25 understanding of a layperson to constitute a trade secret. See Sinclair v. Aquarius Elecs., Inc., 42 26 Cal. App. 3d 216, 222 (1974) (holding that “[n]ovelty and invention are not requisite for a trade 27 28 Case No.: 5:15-cv-01370-EJD ORDER DENYING DEFENDANTS’ MOTION FOR JUDGMENT AS A MATTER OF LAW 3 1 secret as they are for patentability” and explaining that “a trade secret in the broad sense consists 2 of any unpatented idea which may be used for industrial and commercial purposes”); see also 3 Yield Dynamics, Inc. v. TEA Sys. Corp., 154 Cal. App. 4th 547, 562 (2007) (raising doubt that 4 California law requires a trade secret to be unique or novel); see also Kewanee Oil Co. v. Bicron 5 Corp., 416 U.S. 470, 476 (1974). “Rather, the value of a trade secret arises from its secrecy and 6 the ability to control whether, how and to whom it is disclosed.” BladeRoom Grp. Ltd. v. 7 Facebook, Inc., No. 5:15-cv-01370-EJD, 2018 WL 452111, *3 (N.D. Cal. Jan. 17, 2018) (citing 8 DVD Copy Control Assn., Inc. v. Bunner, 31 Cal. 4th 864, 880-81 (2003)). This measure of value 9 is reflected in CUTSA’s definition of what can constitute a “trade secret,” which makes no reference to novelty or complexity. Instead, a trade secret is “information, including a formula, 11 United States District Court Northern District of California 10 pattern, compilation, program, device, method, technique, or process, that: (1) Derives 12 independent economic value, actual or potential, from not being generally known to the public or 13 to other persons who can obtain economic value from its disclosure or use; and (2) Is the subject 14 of efforts that are reasonable under the circumstances to maintain its secrecy.” Cal. Civ. Code § 15 3426.1(d). 16 CUTSA’s broad definition may explain why Emerson was unable to cite one decision 17 applying California law purporting to require expert testimony to prove a trade secret. Emerson 18 did cite out-of-circuit and out-of-state cases, but none of these support a sweeping expert 19 testimony requirement when it comes to trade secret existence or ownership. In Joseph v. Rassi, 20 58 Misc. 3d 1207 (N.Y. Sup. Ct. Jan. 4. 2018), the New York state trial court relied on the 21 Delaware Superior Court’s reasoning in ELENZA, Inc. v. Alcon Laboratories Holding 22 Corporation, No. N14C-03-185 MMJ CCLD (Del. Super. Ct. Apr. 20, 2017), to announce that 23 “[a]n expert witness is necessary to prove the presence of a trade secret.” A close review of 24 ELENZA reveals, however, that the Joseph court overstated its significance. ELENZA simply 25 does not stand for an unqualified expert testimony requirement in trade secret cases. This court, 26 therefore, does not imply from Joseph the same rule that Emerson does. 27 28 In Trident Products and Services, LLC v. Canadian Soiless Wholesale, Ltd., 859 F. Supp. Case No.: 5:15-cv-01370-EJD ORDER DENYING DEFENDANTS’ MOTION FOR JUDGMENT AS A MATTER OF LAW 4 1 2d 771 (E.D. Va. 2012), the plaintiff essentially alleged that a former customer disclosed its 2 formula for a chemical soil additive to another manufacturer, which manufacturer then began to 3 supply a competing product. Because the parties disagreed about the extent of the products’ 4 similarity, the district court held the plaintiff needed expert testimony to explain issues outside the 5 common knowledge of a juror, including “the commonalities of the formulae, the likelihood that 6 [plaintiff’s] microbes would wind up in another manufacturer’s product, and the inventive process 7 by which a competitor would have created its product.” 859 F. Supp. 2d at 776. Rather than 8 embodying a per se rule, Trident Products merely indicates that the need for expert testimony to 9 prove a trade secret is determined on a case-by-case basis, like any other case arising under any other area of law. See Fed. R. Civ. P. 702 (providing that expert testimony is admissible if it “will 11 United States District Court Northern District of California 10 help the trier of fact to understand the evidence or to determine a fact in issue”); see also United 12 States v. Seschillie, 310 F.3d 1208, 1212 (9th Cir. 2002) (holding that expert testimony is not 13 required where the subject does not need expert “illumination” and the proponent is otherwise able 14 to elicit testimony about the subject). The particular trade secret at issue in Trident Products - a 15 chemical formula - and the conduct alleged to constitute misappropriation - the copying of the 16 formula - make it understandable why a jury would need assistance from an expert to compare the 17 two products; a visual comparison of the additive’s components was impossible, and most jurors 18 are not chemical engineers. 19 With no expert testimony requirement, the real question for this case becomes whether the 20 evidence submitted by BladeRoom to prove trade secret ownership was so far beyond the common 21 knowledge of a layperson that the jury required the assistance of expert testimony? The answer to 22 that question is no, because BladeRoom proved it owned Trade Secret 1 and Combination Trade 23 Secret 8 with testimony from fact witnesses. 24 BladeRoom’s CEO, Paul Rogers, identified the trade secrets in their asserted forms and 25 recounted at length how his experience with modular building techniques eventually led 26 BladeRoom to develop “throughout the course of 2011” the technology that became BladeRoom’s 27 proprietary construction methods and designs for a warehouse-sized data center, including the 28 Case No.: 5:15-cv-01370-EJD ORDER DENYING DEFENDANTS’ MOTION FOR JUDGMENT AS A MATTER OF LAW 5 1 subassemblies known as the “chassis” and the “service cassette.” Tr., Vol. 2, at 377:8-437:21; Tr., 2 Vol. 3, 546:8-550:9. The assessment of whether Rogers was capable of creating these methods 3 and designs is not outside the experience of a layperson. The jury, therefore, permissibly found 4 that BladeRoom satisfied the predicate element of Civil Code § 3426.1(d) by showing it owned 5 “information, including a formula, pattern, compilation, program, device, method, technique, or 6 process” without expert testimony. 7 Testimony from Rogers and Barnaby Smith, one of BladeRoom’s directors, also permitted 8 the jury to find in BladeRoom’s favor on the other two elements of Civil Code § 3426.1(d), and 9 neither required expert testimony. On the topic of confidentiality, Rogers stated that BladeRoom maintains secrecy by using “employment contracts . . . written to protect [] confidential 11 United States District Court Northern District of California 10 information;” non-disclosure or confidentiality agreements with clients, suppliers, and distributors; 12 and a computer system with password protection. Tr., Vol. 3, at 550:12-24. He also stated that 13 BladeRoom does not maintain all of its confidential information “in the same place,” limits access 14 to the business (“We don’t just let anybody just wander into our business normally.”), and marks 15 documents “to be treated in confidence.” Id. at 550:24-551:16. Smith testified that BladeRoom 16 protects the details of its product with non-disclosure agreements with clients and curates the 17 amount of information disclosed on its website. Tr., Vol. 6, at 1285:16-1287:18. 18 As to economic value, Rogers testified that no other company provides a similar data 19 center product, and that the development of its confidential technology increased BladeRoom’s 20 sales from just under $50 million to just under $400 million. Tr., Vol. 3, at 552:19-553:4. In 21 addition, Rogers identified several partners and clients who have utilized BladeRoom’s 22 confidential technology or purchased data centers incorporating the technology, including 23 Metronade, Ark, and Mercedes Benz. Id. at 551:17-552:8. Crediting the testimony of 24 BladeRoom’s witnesses as true, the jury’s finding on trade secret ownership is supported by 25 substantial evidence. 26 Emerson’s arguments to the contrary do not alter this outcome. Most of them are improper 27 invitations for the court to reweigh or determine the credibility of evidence presented to the jury. 28 Case No.: 5:15-cv-01370-EJD ORDER DENYING DEFENDANTS’ MOTION FOR JUDGMENT AS A MATTER OF LAW 6 1 For example, Emerson argued at trial that BladeRoom’s trade secrets were disclosed in patents. 2 See, e.g., Tr., Vol. 20, at 4170:23-24 (“There is a mountain of patents, and we’ll go through those 3 later.”); 4233:23-4234:4 (“Every phrase, and these are page after page, the patents of BladeRoom 4 system, protected by key patents, a patented revolutionary air cooling system. All of it is 5 protected by this large stack of patents. All of their information that they’ve been talking about in 6 this case that they claim are trade secrets is right in there, and it was their burden to show you it 7 wasn’t in there.”). The jury was apparently unpersuaded by Emerson’s argument. Furthermore, Emerson implies an extra burden requiring a trade secret plaintiff to disprove 9 public disclosure as part of a prima facie case. But Emerson cites no authority for this contention, 10 and relevant California law is against it. The secrecy element of a misappropriation claim required 11 United States District Court Northern District of California 8 BladeRoom to make a prima facie showing on which the jury could find it made efforts that were 12 “reasonable under the circumstances.” Cal. Civ. Code § 3426.1(d); see Sargent Fletcher, Inc. v. 13 Able Corp., 110 Cal. App. 4th 1658, 1667 (2003) (“To prevail, the party bearing the burden of 14 proof on the issue must present evidence sufficient to establish in the mind of the trier of fact or 15 the court a requisite degree of belief (commonly proof by a preponderance of the evidence).”); see 16 also Jury Instructions, Dkt. No. 849, at Nos. 29, 30. BladeRoom did so here, triggering Emerson’s 17 burden to produce evidence that BladeRoom’s efforts were not reasonable or that its trade secrets 18 were not, in fact, secret. See Sargent Fletcher, 110 Cal. App. 4th at 1668 (holding that once a 19 party “produces evidence sufficient to make its prima facie case, the burden of producing evidence 20 shifts to the other party to refute the prima facie case”). Though Emerson presented evidence in 21 support of a public disclosure theory, the verdict shows the jury was seemingly unmoved by it. 22 Because substantial evidence supports the jury’s finding that BladeRoom owned Trade 23 Secret 1 and Combination Trade Secret 8, Emerson’s challenge to that portion of the verdict is 24 rejected. 25 26 b. Disclosure or Use by Improper Means In a similar argument, Emerson believes the jury’s misappropriation verdict is 27 unsupportable without “[e]xpert evidence comparing the alleged trade secrets to what Emerson 28 Case No.: 5:15-cv-01370-EJD ORDER DENYING DEFENDANTS’ MOTION FOR JUDGMENT AS A MATTER OF LAW 7 1 2 designed and built.” This argument fares no better than the preceding one. Much like the ownership question, BladeRoom’s burden was to admit sufficient evidence 3 on which the jury could find in its favor on the issue of misappropriation; that is, BladeRoom 4 needed to show to the jury’s satisfaction that Emerson disclosed or used its trade secrets by way of 5 improper means. See Cytodyn, Inc., 160 Cal. App. 4th at 297 (2008); see also Sargent Fletcher, 6 110 Cal. App. 4th at 1669 (“The plaintiff’s proof that another party used plaintiff’s trade secret, to 7 which that party gained access (properly, for a limited purpose, or otherwise), and that the party’s 8 identical or similar product incorporates the same design, is a prima facie showing that the party 9 did not independently derive or reverse engineer the product.”); see also Final Jury Instructions, Dkt. No. 849, at Nos. 34-36. BladeRoom could do so with circumstantial evidence because direct 11 United States District Court Northern District of California 10 evidence of misappropriation is rare. UniRAM Tech., Inc. v. Taiwan Semiconductor Mfg. Co., 12 617 F. Supp. 2d 938, 944 (N.D. Cal. 2007). Comments by another district court on this topic are 13 particularly relevant to this case: 14 It is well recognized with respect to trade secrets that: 15 [m]isappropriation and misuse can rarely be proved by convincing direct evidence. In most cases plaintiffs must construct a web of perhaps ambiguous circumstantial evidence from which the trier of fact may draw inferences which convince him that it is more probable than not that what plaintiffs allege happened did in fact take place. Against this often delicate construction of circumstantial evidence there frequently must be balanced defendants and defendants’ witnesses who directly deny everything. 16 17 18 19 20 Q-Co Indus., Inc. v. Hoffman, 625 F. Supp. 608, 618 (S.D.N.Y. 1985) (quoting Greenberg v. 21 Croydon Plastics Co. Inc., 378 F. Supp. 806, 814 (E.D. Pa. 1974)). 22 Misappropriation through disclosure occurs “if a person knew or had reason to know at the 23 time of a trade secrets disclosure that his or her knowledge of the trade secret was ‘[a]cquired 24 under circumstances giving rise to a duty to maintain its secrecy or limit its use.’” BladeRoom 25 Group Ltd. v. Facebook, Inc., No. 5:15-cv-01370-EJD, 2018 WL 514923, at *7 (N.D. Cal. Jan. 23, 26 2018) (quoting Cal. Civ. Code § 3426.1(b)(2)). Here, BladeRoom presented substantial evidence 27 in support of a misappropriation by disclosure theory. The agreement between BladeRoom and 28 Case No.: 5:15-cv-01370-EJD ORDER DENYING DEFENDANTS’ MOTION FOR JUDGMENT AS A MATTER OF LAW 8 1 Emerson “giving rise to a duty to maintain secrecy” and limiting the use of confidential 2 information was admitted. Trial Ex. No. 2; Tr., Vol. 2, at 375:4-20. The agreement permitted 3 Emerson to use BladeRoom’s information “only for the purpose of internal evaluation of whether 4 to enter into a business relationship.” BladeRoom’s Rogers testified how Emerson obtained his company’s confidential 5 6 information: teams from Facebook and Emerson visited BladeRoom’s facilities in the United 7 Kingdom during the same week in 2012, and Rogers shared with Emerson’s team information and 8 several documents depicting the methods and designs underlying a BladeRoom modular data 9 center. Tr., Vol. 3, Dkt. No., at 575:10-14; 577:5-578:16; 582:11-586:13; 599:14-600:24. In addition, the Emerson team toured a factory where the chassis was in production, and viewed a 11 United States District Court Northern District of California 10 “live” data center where prototypes of the service cassette and the chassis were displayed. Id. at 12 586:14-588:8. Fred Rebarber, who was a member of the visiting Emerson team, confirmed the 13 exchange of information. Tr., Vol. 13, at 2794:10-2796:1. The evidence also revealed a collection of instances from which the jury could permissibly 14 15 infer that Emerson failed to observe its contractual duty by disclosing BladeRoom’s confidential 16 information. First, BladeRoom’s Rogers stated that despite efforts to keep the teams from 17 Facebook and Emerson apart during their visits, he received a subsequent email from Emerson’s 18 David Gerhart indicating the two teams nonetheless met while in the United Kingdom. Tr., Vol. 19 3, at 590:12-17. In fact, the meeting was arranged in advance, unbeknownst to Rogers. Trial Ex. 20 No. 919; Tr., Vol. 9, at 1962:16-21. According to Emerson’s Rebarber, one purpose of this 21 meeting was to understand Facebook’s “level of interest and engagement in BladeRoom.” Tr., 22 Vol. 13, at 2808:7-9; Trial Ex. No. 880. Rebarber wrote in his notes, along with technical 23 information describing BladeRoom’s technology: This is facebook’s second visit to BladeRoom. Tim2 Tse mentioned a potential four BladeRooms in Sweden. Tim commented that they could get the BladeRooms manufactured, installed and in operation 24 25 26 27 28 2 The court understands Rebarber to reference Facebook’s Tin Tse, rather than another individual named Tim Tse. Case No.: 5:15-cv-01370-EJD ORDER DENYING DEFENDANTS’ MOTION FOR JUDGMENT AS A MATTER OF LAW 9 1 2 3 4 5 much earlier than the current planned structures would be available which has been in planning for a year with DPR and Fortis Construction . . . . Although Facebook says they are still evaluating BladeRoom, BladeRoom commented that they are in the quotation stage. Tim also mentioned that technically they are satisfied with BladeRooms approach and they are confident that BladeRoom could make some changes that facebook requires (potential elimination of DX back-up, ceiling height, cable tray management). Second, Facebook’s Tin Tse testified about a meeting between Facebook and Emerson in 6 St. Louis in July, 2012. Tse agreed that though Emerson was “starting from scratch” with a 7 modular data center product at the time, the purpose of the meeting was to determine whether 8 Emerson could build a data center comparable to BladeRoom’s product. Tr., Vol. 7, at 1448:7-9; 9 1449:10-15. Tse later wrote an email to his supervisor, Jay Park, on July 27, 2012, about his 10 United States District Court Northern District of California 11 12 13 14 15 upcoming goals. Tse wrote, in pertinent part: I am dropping the indirect solution with Bladeroom and will put it on Emerson’s plate . . . . 5) Work with Emerson to help them develop modular solution similar to Bladeroom . . . . Trial Ex. No. 1456. Tse testified that consistent with his July 27th email, he worked closely with Emerson 16 between August and December 2012 to develop a modular data center solution and used 17 BladeRoom’s terminology during his communications with Emerson. Tr., Vol. 7, at 1467:3-9; 18 1468:19-20. In one email from Emerson’s Wilcox to Tse and others at Facebook from this time 19 period, Wilcox specifically references “the approach taken by others in the modular solution 20 business (UK) that has the air-handler located at the end of the data halls to allow for stacked 21 solutions.” Trial Ex. No. 1662. 22 Third, Tse testified that teams from Facebook and Emerson participated in a “design 23 charrette” in August, 2012, the purpose of which was to help Emerson understand how to meet 24 Facebook’s need for a modular data center. Tr., Vol. 7, at 1473:18-1474:7. The evidence showed 25 that during the charrette, Tse presented the “BladeRoom Solution,” which presentation included 26 parts of the proposal that BladeRoom made to Facebook for the construction of Lulea 2. Trial Ex. 27 Nos. 895, 2034. Emerson’s Wilcox wrote in notes from the meeting in reference to BladeRoom: 28 Case No.: 5:15-cv-01370-EJD ORDER DENYING DEFENDANTS’ MOTION FOR JUDGMENT AS A MATTER OF LAW 10 1 2 3 4 5 6 7 8 9 Not moving forward beyond technology approach due to business constraints/concerns. (Trial Ex. No. 895; Tr., Vol. 10, at 2062:192063:5); Concerns with Bladeroom overall container size due to 28 cabinet building block. (Trial Ex. No. 895); Looking for a merger of Emerson’s and Bladeroom best practices of design. (Trial Ex. No. 895); Facebook Psychometric chart is now driven as a sacred cow - not yet up for discussion . . . . Mentioned that the stage control from Bladeroom is significantly ahead of Facebook concepts - this is an area we must focus in our presentation to show we have value. (Trial Ex. No. 895). Fourth, on September 19, 2012, Emerson’s Wilcox emailed Facebook’s Tse requesting a “short write-up or more detail” about Facebook’s concerns regarding the media used for air 11 United States District Court Northern District of California 10 cooling. Trial Ex. No. 995. Tse responded there were three ways to control the media capacity, 12 including “[s]taging and By-pass dampers (the other vendor in the UK).” Id. Tse confirmed he 13 was referring to BladeRoom as the “other vendor in the UK.” Tr., Vol. 7, at 1470:5-8. 14 Fifth, Emerson presented its modular data center design for Lulea 2 to Facebook on 15 October 30, 2012. Tr., Vol. 10, at 2086:9-2088:9. Emerson’s Jon Carr emailed notes from the 16 presentation meeting to Wilcox on October 31, 2012, which included the entry: “Do not use the 17 word ‘Cassette’ - This is Bladeroom terminology.” Trial Ex. No. 945. The notes also included 18 this entry: “Blade Room back draft damper - take a look at it. Marco likes it . . .” Id. In addition, 19 Emerson’s Michael Rockwell emailed Wilcox that same day about Facebook’s request for a copy 20 of Emerson’s presentation and Emerson’s concerns about providing it. Trial Ex. No. 1114. 21 Rockwell wrote: “I agree with this concern, especially given the Bladeroom related disclosures 22 from facebook yesterday . . . .” Id. 23 Moreover, the jury could find based on the evidence that Emerson disclosed BladeRoom’s 24 trade secrets in patent applications. BladeRoom’s Rogers stated that after receiving BladeRoom’s 25 information, Emerson applied for patents based on BladeRoom’s technology. Tr., Vol. 3, at 26 623:23-624:12. Emerson’s Wilcox confirmed that Emerson’s patents cover inventive aspects of 27 Lulea 2, including the Unit I.T. and the sectional modularized air handling unit. Tr., Vol. 10, at 28 Case No.: 5:15-cv-01370-EJD ORDER DENYING DEFENDANTS’ MOTION FOR JUDGMENT AS A MATTER OF LAW 11 1 2 2126:16-2127:6; Trial Ex. No. 1260. Emerson’s challenge to the misappropriation verdict - focused solely on improper use - 3 collapses against the disclosure evidence, all of which independently supports the jury’s finding. 4 The jury’s examination of disclosure by improper means did not require the assistance of an 5 expert, and Emerson does not argue otherwise in this motion. 6 In any event, the jury was also capable of analyzing evidence of improper use without 7 technical expert testimony. The court has previously explained that a plaintiff need not undertake 8 a patent infringement analysis to prove an improper use claim, because “‘use’ is not such an 9 inflexible term when it comes to trade secret misappropriation.” BladeRoom Group Ltd., 2018 WL 514923, at *8. Indeed, “the actor need not use the trade secret in its original form,” and 11 United States District Court Northern District of California 10 “unauthorized use need not extend to every aspect or feature of the trade secret; use of any 12 substantial portion of the secret is sufficient to subject the actor to liability.” Restatement (Third) 13 of Unfair Competition § 40 cmt. c (1995). “[A]n actor is liable for using the trade secret with 14 independently created improvements or modifications if the result is substantially derived from the 15 trade secret.” Id.; accord Mangren Res. & Dev. Corp. v. Nat’l Chem. Co., Inc., 87 F.3d 937, 944 16 (7th Cir. 1996) (“[I]f trade secret law were not flexible enough to encompass modified or even 17 new products that are substantially derived from the trade secret of another, the protections that 18 law provides would be hollow indeed.”). 19 The technical aspects of the trial evidence were not so complex that the jury was unable to 20 validly find that Emerson’s design for Lulea 2 was substantially derived from BladeRoom’s trade 21 secrets. A layperson is able to compare Rogers’ recitation of the trade secrets with the evidence 22 describing Emerson’s design and construction of Lulea 2 and determine whether Lulea 2 was 23 “substantially derived” from the trade secrets, given Emerson’s access to BladeRoom’s 24 confidential information and its prior lack of experience with a modular data center solution. See, 25 e.g., Tr., Vol. 10, at 2088:10-2113:17; Tr., Vol. 14, at 3029:23-3036:3. 26 Finally, Emerson’s argument that BladeRoom failed to prove any element of a 27 misappropriation or breach of contract claim neglects the substantial evidence recited above, all of 28 Case No.: 5:15-cv-01370-EJD ORDER DENYING DEFENDANTS’ MOTION FOR JUDGMENT AS A MATTER OF LAW 12 1 which the jury could have used to establish the requisite elements. Emerson also invites the court 2 to accept evidence it finds convenient to its position, reject contrary evidence, and draw inferences 3 from the evidence in Emerson’s favor. The court cannot do so on this motion. See Reeves, 530 4 U.S. at 151 5 In sum, the absence of expert testimony does not undermine the substantial evidence 6 supporting the jury’s misappropriation verdict, all of which was within the reach of a layperson. 7 Thus, Emerson is not entitled to relief under Rule 50(b). 8 B. 9 The jury found that Emerson’s misappropriation of trade secrets was a substantial factor in Causation causing harm to BladeRoom. Emerson argues the evidence is insufficient to support this finding 11 United States District Court Northern District of California 10 because it does not show that BladeRoom would have been awarded the Lulea 2 contract but for 12 Emerson’s conduct. Emerson’s argument is misplaced as both a legal and factual matter. 13 14 i. Governing Authority The court instructed the jury regarding causation under California law, which is the same 15 for both contract and tort claims. See Ortega v. Kmart Corp., 26 Cal. 4th 1200, 1205 (2001) 16 (holding that “substantial factor” causation is a factual question for the jury unless the facts 17 regarding causation are undisputed); see also Tribeca Cos., LLC v. First Am. Title Ins. Co., 239 18 Cal. App. 4th 1088, 1103 (2015). 19 “‘The test for causation in a breach of contract . . . action is whether the breach was a 20 substantial factor in causing the damages.’” Id. (quoting US Ecology v. California, 129 Cal. App. 21 4th 887, 909 (2005)). “Similarly, in tort cases, ‘California has definitively adopted the substantial 22 factor test.’” Id. (quoting Rutherford v. Owens-Illinois, Inc., 16 Cal. 4th 953, 968-69 (1997)). 23 Under that test, “‘a cause in fact is something that is a substantial factor in bringing about the 24 injury.’” Id. (quoting Rutherford, 16 Cal.4th at 968-69). 25 “The term ‘substantial factor’ has not been judicially defined with specificity, and indeed it 26 has been observed that it is ‘neither possible nor desirable to reduce it to any lower terms.’” 27 Rutherford, 16 Cal. 4th at 696. The California Supreme Court has suggested, however, that 28 Case No.: 5:15-cv-01370-EJD ORDER DENYING DEFENDANTS’ MOTION FOR JUDGMENT AS A MATTER OF LAW 13 1 “[u]ndue emphasis should not be placed on the term ‘substantial.’” Id. But at the same time, “a 2 force which plays only an ‘infinitesimal’ or ‘theoretical’ part in bringing about injury, damages or 3 loss is not a substantial factor.” Id. 4 5 ii. Application Emerson argues that in a case like this one involving the loss of a contractual opportunity, BladeRoom needed to show it would have obtained the contract for Lulea 2 from Facebook had 7 Emerson not breached the confidentiality agreement or misappropriated its trade secrets. That 8 framing is not completely accurate under California law, however, because it is not consistent with 9 the cause-and-effect language of the substantial factor test. BladeRoom’s burden was not to 10 affirmatively prove it would have otherwise obtained the Lulea 2 contract, but rather to admit 11 United States District Court Northern District of California 6 sufficient evidence upon which the jury could find that Emerson’s conduct was a substantial factor 12 in causing BladeRoom to lose or not be awarded the Lulea 2 contract. Though subtle, the 13 distinction is important because the record shows that BladeRoom satisfied its burden under that 14 standard. 15 Facebook’s Park testified that BladeRoom and Emerson were the only two companies 16 being considered for the construction of Lulea 2. Tr., Vol. 9, at 1858:7-10. Moreover, the jury 17 could reasonably infer from the testimony of Facebook’s witnesses, Tse and Marco Magarelli, that 18 only BladeRoom satisfied all of Facebook’s design preferences, that Facebook was willing to 19 work with BladeRoom’s proposal submitted on July 20, 2012, and that Facebook was “probably 20 going to use BladeRoom for Lulea 2.” Tr., Vol. 7, at 1525:23-1526:19; Tr., Vol. 12, at 2578:11- 21 2579:1; Trial Ex. No. 1455. The jury could also infer from the evidence - including the short 22 timeframe in which Emerson developed a modular solution and the subsequent, ongoing 23 interactions between Facebook and Emerson after meeting with BladeRoom in the United 24 Kingdom - that Emerson would not have otherwise been able to compete against BladeRoom in 25 the two-business race for Lulea 2, and could not have submitted a winning proposal in October, 26 2012, had Emerson not misappropriated BladeRoom’s confidential information. In sum, 27 substantial evidence in the record supports the jury’s finding that Emerson’s conduct was a 28 Case No.: 5:15-cv-01370-EJD ORDER DENYING DEFENDANTS’ MOTION FOR JUDGMENT AS A MATTER OF LAW 14 1 2 substantial factor in causing BladeRoom to lose the Lulea 2 contract. Emerson’s argument to the contrary is unpersuasive. For the most part, it employs a 3 backwards Rule 50(b) analysis by citing to causation evidence in its favor but ignoring the 4 evidence supporting the jury’s verdict. As an example, Emerson relies on evidence suggesting 5 Facebook was considering BladeRoom only for the data hall portions of Lulea 2, but overlooks 6 that the jury could permissibly find that Emerson could not have competed with BladeRoom at all 7 unless it submitted a design similar to BladeRoom’s product for that portion of the data center. 8 Trial Ex. No. 926; Tr., Vol. 8, at 1708:17-20. And because of that evidence and the inferences 9 reasonably drawn therefrom, Emerson’s challenge to the amount of the unjust enrichment award falls apart. As Emerson itself recognizes, it was Emerson’s burden to prove any portion of its 11 United States District Court Northern District of California 10 earnings from Lulea 2 not attributable to BladeRoom’s trade secrets. See Restatement (Third) of 12 Unfair Competition § 45 cmt. f (1995). To the extent Emerson presented evidence for the jury to 13 parse its earnings between the data hall and other portions of that project, the jury was free to 14 disbelieve it. It apparently did in some form, instead accepting evidence that Emerson would not 15 have been compensated for Lulea 2 had it not used BladeRoom’s trade secrets. 16 Emerson also argues that BladeRoom “terminated its longshot play” for Lulea 2. But as 17 the embellishment suggests, Emerson supports the argument with its own interpretation of cherry- 18 picked evidence. The evidence was not undisputed on this point. 19 Finally, Emerson argues it could not have used BladeRoom’s confidential information in 20 its proposal for Lulea 2 because, in its view, any contractual confidentiality restrictions expired on 21 August 17, 2013. The court rejected that interpretation of the contract in an order filed during trial 22 (Dkt. No. 839) and finds no reason to reconsider that issue for this motion. 23 24 Because the jury’s causation verdict is supported by substantial evidence, Emerson’s Rule 50(b) motion on that topic must be denied. 25 C. 26 Emerson’s challenge to the jury’s willful and malicious finding requires little discussion The Willful and Malicious Finding 27 because it rests upon issues already decided by the court. Emerson argues BladeRoom “never 28 Case No.: 5:15-cv-01370-EJD ORDER DENYING DEFENDANTS’ MOTION FOR JUDGMENT AS A MATTER OF LAW 15 1 gave Emerson clear or fair notice regarding what precisely were the trade secrets.” The court, 2 however, found otherwise at summary judgment. Dkt. Nos. 493, 494. Nothing new is asserted 3 now. 4 Furthermore, Emerson’s representation of “massive differences between [BladeRoom’s] 5 standard offering and what Facebook asked Emerson to design and build” does not cut against the 6 verdict for two reasons. First, that statement embodies an evidentiary inference by Emerson 7 adding no value to this motion. Second, it reflects a narrow approach to the types of evidence that 8 can prove trade secret misappropriation. But as the court has explained, the jury could permissibly 9 find misappropriation based on inferences drawn from the evidence, including inferences drawn from circumstantial evidence, even if Emerson’s design for Lulea 2 was not an exact reproduction 11 United States District Court Northern District of California 10 of BladeRoom’s trade secrets. See Restatement (Third) of Unfair Competition § 40 cmt. c (1995). 12 13 Accordingly, the court will not disturb the finding that Emerson engaged in willful and malicious misappropriation of trade secrets. 14 D. 15 Emerson argues the jury’s damages awards are unsustainable because (1) the jury was not Damages 16 asked to apportion damages among the trade secrets, (2) the evidence of future lost profits was 17 speculative, and (3) the amount of unjust enrichment is either a double-recovery or based on 18 speculative evidence. These bases are each unpersuasive. 19 The court has already considered, and rejected, the first basis. Dkt. No. 738. Relevant 20 California authority does not require an apportionment of damages. In the absence of such a rule, 21 BladeRoom’s theory was not legally improper in the context of this case; that is, BladeRoom 22 could argue that since its trade secrets encompass the designs and methods used to create parts of a 23 unified structure, the misappropriation of any of the asserted trade secrets would have caused all of 24 the damages it sought. 25 The second basis is equally unavailing. Emerson’s argument focuses only on problems 26 with the evidence of future lost profits, not the evidence of actual lost profits. Since the verdict 27 does not specify which type of profits the jury awarded, and since the latter type could 28 Case No.: 5:15-cv-01370-EJD ORDER DENYING DEFENDANTS’ MOTION FOR JUDGMENT AS A MATTER OF LAW 16 1 independently support the verdict, there is nothing gained from examining the sufficiency of the 2 future lost profits evidence. 3 The third basis similarly fails. Like lost profits, the jury was not asked to specify the basis 4 for the amount of unjust enrichment damages it awarded. As such, Emerson can only speculate 5 exactly how the jury measured unjust enrichment, and certainly cannot show with any reasonable 6 certainty that the jury double-counted “Emerson’s supposed operating profit” from Lulea 2. 7 Furthermore, the court disagrees that BladeRoom’s unjust enrichment evidence “is 8 contrary to the basic foundation of disgorgement damages in trade secret misappropriation 9 matters.” As the court explained: 10 While the sale of Emerson Network Power may represent a unique form of unjust enrichment damages - it is not “sales” in the classic sense - no authority provides that an award cannot be made based on the sale of a business so long as causation and the fact of existing damages are proven. Furthermore, Emerson is in the better position to show any portion of the sale not attributable to the trade secret, which observation conforms to the purpose of the burden shifting occurring when unjust enrichment damages are at issue. United States District Court Northern District of California 11 12 13 14 15 16 Dkt. No. 850. The unpublished opinion cited by Emerson, Litton Systems, Inc. v. Ssangyong Cement 17 Industrial Co., Ltd., 107 F.3d 30 (Fed. Cir. 1997), does not provide reasons to alter that analysis. 18 There, the Federal Circuit understandably found the calculation of unjust enrichment damages 19 “unsupported in the law of unfair competition” because the district court based it on an expected 20 stream of income. Here, the unjust enrichment evidence described realized profits from the sale of 21 Emerson Network Power. 22 23 In short, Emerson has not shown an entitlement to judgment as a matter of law on any portion of the damages award. 24 E. 25 The standing of BladeRoom Group Ltd. is challenged for a third time. Addressing this 26 issue twice before (Dkt. Nos. 191, 493), the court determined that BladeRoom Group Ltd. has 27 standing since it possesses confidential information that could be misappropriated. Emerson raises 28 Case No.: 5:15-cv-01370-EJD ORDER DENYING DEFENDANTS’ MOTION FOR JUDGMENT AS A MATTER OF LAW 17 Standing 1 nothing new, and its argument for judgment on this issue is rejected. 2 IV. 3 4 ORDER Based on the foregoing, Emerson’s Motion for Judgment as a Matter of Law (Dkt. No. 898) is DENIED. 5 6 7 8 9 IT IS SO ORDERED. Dated: August 3, 2018 ______________________________________ EDWARD J. DAVILA United States District Judge 10 United States District Court Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case No.: 5:15-cv-01370-EJD ORDER DENYING DEFENDANTS’ MOTION FOR JUDGMENT AS A MATTER OF LAW 18

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