The Tenth Circuit came out today with an opinion that affirms the jury's role as final arbiter of damages awards. The decision also ventured into questions of whether patent law preempts state trade secrets claims and the availability of prejudgment interest for the period between verdict and entry of judgment. Russo v. Ballard Medical Products, No. 07-4090 (10th Cir. Dec. 18, 2008).
The plaintiff in the case, an inventive fellow by the name of Ronald D. Russo, disclosed trade secrets to Ballard Medical Products, which made catheters, under a Confidential Disclosure Agreement. Without Russo's permission, Ballard later used the trade secrets, which involved removing debris from endotracheal ventilator tubes, to develop a longer-lasting product.
The jury awarded the plaintiff $17 million on the trade secrets claim (in the nature of unjust enrichment damages) plus $3 million for breach of the CDA. The company challenged the damages award on appeal, and the plaintiff cross-appealed because the district judge refused to award him pre-judgment interest for the time (about four months) between the verdict and the court's entry of judgment.
Ballard's first point on appeal — that the Federal Circuit had exclusive appellate jurisdiction due to the intersection of Russo's state law claims with patent law — foundered on the fact that the claims didn't require decision of any question of patent law. Yes, Russo's complaint did mention that Ballard used his trade secrets to take out patents. But "the fact that patents may be used as evidence in aid of a trade secret claim is not the same thing as raising a substantial (or really, any) question of federal patent law." Russo, slip op. at 10.
Ballard's attempt to parlay patent law into a preemption defense against Russo's substantive claims and his award of damages met a similar fate. Ballard argued (1) that patent law preempts all state law claims if, as Ballard had done, the trade secret misappropriator discloses the invention by taking out a patent on it and (2) that it precludes an award of damages that equals the entire value of the invention itself. The court rejected both arguments, holding that Ballard's improper disclosure of Russo's trade secrets to the U.S. Patent and Trademark office didn't put the trade secrets into the public domain such that only patent law could protect the erstwhile trade secrets and that the jury awarded only damages that Ballard's wrongful conduct caused, not the whole value of the invention itself.
As for damages, the court concluded that sufficient evidence supported the jury's $20 million award. Expert testimony put damages for misappropriation of trade secrets at up to $32 million, which the jury cut to $17 million. "When the damages awarded by the jury fall within the range permitted by the evidence admitted at trial (and whose admission is unchallenged on appeal), we may not second guess the award." Russo, slip op. at 29. And, although Russo's expert pegged damages for breach of the CDA at $2.751 million, the expert also said that small adjustments to his "conservative" assumptions would yield a higher number. That sufficed, the court held, to sustain the $3 million award.
The final issue — about prejudgment interest — posited that the district court erred in declining to compensate Russo for the four months that intervened between rendition of the verdict and the district court's entry of judgment. The panel harkened to Utah law. Finding it less than pellucid on the question but probably against Russo's position, the court accordingly affirmed.
