Russo v. Ballard Medical Products
No summary available for this case.
Opinions
FILED United States Court of Appeals Tenth Circuit
PU B L ISH December 18, 2008 Elisabeth A. Shumaker U N IT E D STA T E S C O U R T O F A PPE A L S Clerk of Court
T E N T H C IR C U IT
RONALD D. RUSSO ,
Plaintiff-Appellee/Cross- Appellant ,
v. Nos. 07-4090 & 07-4102
BALLARD M EDICAL PRODUCTS ,
Defendant-Appellant/Cross- Appellee .
A ppeal from the U nited States D istrict C ourt for the D istrict of U tah (D .C . N o. 05-C V -59-T C )
Constantine L. Trela, Jr., Sidley Austin LLP, Chicago, IL (M ichael B. Apfeld, Godrey & Kahn, S.C., M ilwaukee, W I and M arcy G. Glenn, Holland & Hart, LLP, Denver, CO, with him on the briefs), for Defendant-Appellant/Cross-Appellee .
Richard D. Burbidge (Jefferson W . Gross and Robert J. Shelby with him on the briefs) Burbidge M itchell & Gross, Salt Lake City, UT, for PlaintiffAppellee/Cross-Appellant .
Before M cC O N N E L L , SE Y M O U R , and G O R SU C H , Circuit Judges.
G O R SU C H , Circuit Judge. M edical device inventor Ronald Russo brought this lawsuit against Ballard
M edical Products contending that the company misappropriated his trade secret
and breached the parties’ confidentiality agreement by incorporating certain of his
innovations into one of its popular medical devices without his consent. After a
seven-day trial, a jury found for M r. Russo and awarded him $20 million in
damages. On appeal, Ballard argues primarily that M r. Russo’s state law claims
are preempted by federal patent law. M r. Russo cross-appeals, submitting that the
district court erred in declining to add post-verdict, pre-judgment interest to his
award. Finding none of the parties’ various arguments for reversal persuasive, we
affirm.
I
A
In 1983 Ballard introduced its flagship product, the Trach Care 24 catheter,
a closed-suction catheter designed to remove debris from endotracheal ventilator
tubes without having to disconnect patients from the ventilators on which they
depend for oxygen.1 Before the Trach Care 24, medical professionals relied on an
open-suction process, in which they had to disconnect the patient from the
ventilator, insert a catheter into the patient’s airway to suction accumulated
1 Given the presence of a jury verdict in M r. Russo’s favor, we review (and here recount) the evidence before us in the light most favorable to him.
-2- mucus, and then remove the catheter before reconnecting the ventilator – a
process that not only involved temporarily removing the patient from the
ventilator, but also a non-trivial risk of infection from the cleaning process.
M r. Russo is an independent medical device designer. In 1992, Ballard
retained M r. Russo in a consulting role with the aim of improving various aspects
of its Trach Care catheter. After completing this project, M r. Russo continued
working independently on tracheal suction devices, while Ballard also worked on
its own to improve its product. In particular, Ballard focused on enhancing the
useful life span of its catheter. As its name implies, the Trach Care 24 is
approved by the United States Food and Drug Administration (“FDA”) for only 24
hours’ continuous use. After that period, even Ballard’s design is insufficient to
prevent bacteria from developing to the point of unduly risking patient infection.
In 1997, after several failed attempts to extend the life span of the
Trach Care 24, Ballard again sought M r. Russo’s help. M r. Russo agreed and,
building on his independent work, he devised various improvements to the Trach
Care 24, all memorialized in a series of drawings and a prototype. These
improvements included a vented “duckbill” valve that isolated the patient-side of
the catheter assembly from the catheter cleaning chamber – an innovation that
allowed mucus to be more effectively cleaned from the catheter in the cleaning
chamber while minimizing back flow to the patient. M r. Russo’s improvements
-3- also included an additional “wiper” seal to wipe the catheter clean, which allowed
the tip of the catheter to be withdrawn past the wiper seal into the cleaning
chamber, leaving secretions in the cleaning chamber. In combination, M r.
Russo’s modifications created a more effective method for cleaning Ballard’s
catheter, which he expected would improve the device’s safety and, consequently,
its useful life span.
In early 1998, M r. Russo agreed to meet with Ballard to discuss his
improvements, but conditioned any meeting on the parties executing a
confidential disclosure agreement (“CDA”). Ballard assented to this condition,
sending M r. Russo a proposed CDA for his consideration. M r. Russo signed the
document and, in April 1998, the parties met in New York City to discuss M r.
Russo’s research. In preparation for the meeting, but after signing the CDA, M r.
Russo forwarded a binder of materials to Ballard disclosing his innovations, and
he brought additional drawings and a prototype to the meeting itself. During the
course of the conference, M r. Russo gave the drawings to Ballard engineers,
showed them the prototype, explained his various improvements, and answered “a
million questions.” Aplt. App. at 1211.
Before the meeting concluded, Ballard asked M r. Russo how much it would
cost to license his innovations. M r. Russo replied with a request for $50,000,
plus a 5% annual royalty with a guaranteed annual minimum payment of $50,000,
-4- but the parties concluded the meeting without reaching any agreement on terms.
Over the next few months, the parties continued to negotiate, during which time
M r. Russo dropped his request to a 3% annual royalty with a $50,000 guaranteed
annual minimum. Eventually, Ballard agreed to a 3% royalty rate, but still would
not acquiesce to an annual minimum payment and, in August 1998, negotiations
ended without a meeting of the minds.
Shortly after the parties broke off negotiations, M r. Russo asked Ballard’s
General Counsel, Paul Hess, to return the confidential materials he had shared
with Ballard pursuant to the CDA. M r. Hess promised that he would secure the
return of M r. Russo’s materials, but M r. Russo received nothing. W hen M r.
Russo brought this to M r. Hess’s attention and renewed his request in September
1998, M r. Hess represented that Ballard was unable to locate M r. Russo’s
materials.
Unknown to M r. Russo at the time, Ballard made use of his work to secure
two patents and introduce a new product to market. In September 1998, Ballard
submitted a patent application embodying the innovations M r. Russo disclosed at
the parties’ New York meeting; though that application was denied, the Patent
and Trademark Office subsequently issued Ballard two patents based on its 1998
application, patent nos. 6,227,200 (the ’200 patent) and 6,543,451 (the ’451
patent). Both contained the essential innovations embodied in M r. Russo’s
-5- prototype and drawings. The only difference between M r. Russo’s work and
Ballard’s patents was the substitution of a flap valve for a duckbill valve –
although the patent allowed for either kind of valve to be used. Otherwise, the
designs were “exactly the same” as the ones M r. Russo proposed. Id. at 1230-32.
Ballard’s patents allowed it to introduce a new device, the Trach Care 72, which
the company began selling in 2001. As its name suggests, Trach Care 72 is
approved by the FDA for 72 hours’ continuous use. At the heart of the product
are M r. Russo’s designs ensuring a superior cleaning process, delaying the build
up of potentially infectious bacteria, and thus allowing Ballard’s product to be
safely employed for an extended period.
B
Believing that Ballard misappropriated his trade secret and violated the
parties’ CDA, M r. Russo filed suit in Rhode Island Superior Court. Ballard
removed the action to federal court based on diversity jurisdiction and, pursuant
to a forum selection clause in the CDA, the case was transferred to the District of
Utah. At the trial that followed, the district court submitted two claims to the
jury: (1) misappropriation of M r. Russo’s trade secret, and (2) breach of contract
(viz., the CDA). Both claims turned on M r. Russo’s allegation that, in derogation
of the CDA, Ballard misappropriated his drawings and prototype by using them in
its Trach Care 72 product. For his trade secret claim, M r. Russo sought unjust
-6- enrichment damages, and asserted that those damages were properly measured by
the net profit the company expected to secure from its Trach Care 72 product over
the life of the ’200 and ’451 patents. W ithout his innovations, M r. Russo
claimed, Ballard simply could not have created its new product and would have
been forced to continue offering only its 24-hour product. M r. Russo’s expert
estimated the present value of Ballard’s expected net profits from the Trach Care
72 product over the 17-year life of its patents to be $32.3 million. M r. Russo also
sought compensatory damages for his actual loss under the breach of contract
claim. M r. Russo argued that, but for Ballard’s breach, the parties would have
agreed on at least a 3% royalty rate and a $50,000 minimum annual payment.
Using several “conservative” assumptions, M r. Russo’s expert testified that this
would have amounted to royalty payments over the life of Ballard’s patents with a
net present value of at least $2.751 million.
For its part, Ballard contended that M r. Russo never, at the New York City
meeting or otherwise, disclosed any design containing the innovations found in
Ballard’s Trach Care 72 product. Instead, Ballard submitted, its engineers
independently developed all of the innovations embodied in its product.
Additionally, Ballard argued that M r. Russo’s state tort claims were preempted by
federal patent law. Ballard further challenged M r. Russo’s damages evidence and
presented its own damages expert who opined that, even if Ballard did
-7- misappropriate M r. Russo’s innovations, his losses were much smaller than he
claimed.
Ultimately, the jury found in favor of M r. Russo, awarding him $17
million in unjust enrichment damages for his trade secret misappropriation claim
and $3 million in damages for his breach of contract claim. The district court
entered judgment for M r. Russo in the amount of $20 million and denied all of the
parties’ various post-trial motions. Ballard now appeals, asking us to hold M r.
Russo’s suit preempted by federal patent law and, alternatively, seeking to
overturn the jury’s damage awards on a variety of other grounds. For his part,
M r. Russo cross-appeals the district court’s denial of post-verdict, pre-judgment
interest.
II
Before reaching the merits of the parties’ appeals, we must pause to address
a jurisdictional question. M r. Russo asserts that our jurisdiction arises under 28
U.S.C. § 1291, and that the district court had jurisdiction over this dispute based
on diversity of citizenship, pursuant to 28 U.S.C. § 1332. Ballard concurs in this
analysis, but identifies a potential wrinkle. Ballard draws our attention to the fact
that the Federal Circuit has exclusive jurisdiction pursuant to 28 U.S.C. § 1295
over appeals from district court judgments predicated on 28 U.S.C. § 1338, a
provision that gives the district court original jurisdiction over any “civil action
-8- arising under any Act of Congress relating to patents, plant variety protection,
copyrights and trademarks.” Id. Ballard assures us that neither of these
provisions pertains to this case but nonetheless flags them for our independent
consideration because, it says, they would, if applicable, divest us of subject
matter jurisdiction over this dispute.
It is our obligation always to be certain of our subject matter jurisdiction.
See, e.g., Adams v. Reliance Standard Life Ins. Co., 225 F.3d 1179, 1182 (10th
Cir. 2000). In fulfilling our obligation in this case, we are guided by the Supreme
Court’s instruction that the Federal Circuit’s exclusive jurisdiction arises under
sections 1295 and 1338 if, but only if, “federal patent law creates the cause of
action or . . . the plaintiff’s right to relief necessarily depends on resolution of a
substantial question of federal patent law, in that patent law is a necessary
element of one of the well-pleaded claims.” Christianson v. Colt Indus.
Operating Corp., 486 U.S. 800, 809 (1988). In answering this question, we are
told to look only to the face of the plaintiff’s complaint, not the manner in which
the case was tried: “If on the face of a well-pleaded complaint there are reasons
completely unrelated to the provisions and purposes of the patent laws why the
plaintiff may or may not be entitled to the relief it seeks, then the claim does not
‘arise under’ those laws.” Id. at 810 (internal citation, quotation marks, and
brackets omitted). “Thus, a claim supported by alternative theories in the
-9- complaint may not form the basis for § 1338(a) jurisdiction unless patent law is
essential to each of those theories.” Id. (internal citations, quotation marks, and
brackets omitted). See also AT&T Co. v. Integrated Network Corp., 972 F.2d
1321, 1324 (Fed. Cir. 1992).
M r. Russo’s claims for relief do not meet this restrictive test. Neither of
his two state law claims for relief was created by federal patent law. And neither
“necessarily depends on resolution of a substantial question of federal patent
law.” Christianson, 486 U.S. at 809. In his trade secret claim, M r. Russo asserts
that he disclosed a trade secret to Ballard, that Ballard misappropriated that secret
by using it to develop the Trach Care 72 product without his knowledge or
consent, and that Ballard’s actions harmed him. Under Utah’s trade secret statute,
this is all M r. Russo had to prove to prevail. See U.C.A. 1953 § 13-24-1, et seq.
To be sure, Ballard’s patents are mentioned in M r. Russo’s complaint as evidence
showing how Ballard misappropriated his designs. 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. See Uroplasty, Inc. v.
Advanced Uroscience, Inc., 239 F.3d 1277, 1280 (Fed. Cir. 2001) (trade secret
complaint does not implicate exclusive Federal Circuit jurisdiction because, while
plaintiff may use defendant’s patent to show misappropriation, and the patent thus
- 10 - “may be evidence in support of [plaintiff’s misappropriation] allegations . . . the
mere presence of the patent does not create a substantial issue of patent law”).
W hat holds true for M r. Russo’s trade secret claim also holds true for his
breach of contract claim. To secure damages for the latter claim, M r. Russo had
to show only that he disclosed materials to Ballard pursuant to the CDA, that
Ballard then disclosed those materials to others, that M r. Russo was harmed by
this act and suffered damages, and that this result was reasonably foreseeable to
Ballard. Here, again, the fact that Ballard used M r. Russo’s ideas to secure
patents is surely relevant evidence suggesting a breach occurred, but it does not
implicate any question of federal patent law. See id. (discussing breach of
contract claim as well as trade secret misappropriation claim); cf. U.S. Valves,
Inc. v. Dray, 212 F.3d 1368, 1372 (Fed. Cir. 2000) (when breach of contract claim
requires a showing that defendant infringed patents, patent law is a necessary
element of the breach of contract claim).
III
W ith our jurisdiction confirmed, we turn to the merits of Ballard’s appeal.
First and primarily, the company asserts that, while the nature of the claims
presented in M r. Russo’s complaint did not necessarily implicate patent law (and
thus invest the Federal Circuit with exclusive jurisdiction), the case M r. Russo
actually presented at trial was “irreconcilable” with federal patent law and so
- 11 - preempted by it. Because Ballard’s preemption argument – pressed in a variety of
ways before the district court, including by motions for summary judgment,
directed verdict, and judgment as a matter of law (or, in the alternative, a new
trial) – is a legal argument, we review it de novo. 2 W e begin by outlining the
principles that control our preemption analysis, and then turn to assess their
application in M r. Russo’s case.
A
The Supremacy Clause of the Constitution provides that federal law trumps,
or preempts, contrary state laws. U.S. Const. art. VI, cl. 2. W hile a seemingly
simple rule, preemption takes a number of guises, known variously as explicit,
field, and conflict preemption. The first two of these species of preemption do
not bear on our current problem. Federal patent law does not explicitly preempt
state trade secret laws. See 35 U.S.C. §§ 1-376 (2000). Neither has Congress
evinced an intent to occupy exclusively the entire intellectual property field
associated with inventions. Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 478-
79 (1974). Our only concern in this case is thus narrowed to conflict preemption.
Conflict preemption arises when state law “stands as an obstacle to the
2 See M eshwerks, Inc. v. Toyota M otor Sales U.S.A., Inc., 528 F.3d 1258, 1262 (10th Cir. 2008) (summary judgment reviewed de novo); Williams v. W.D. Sports, N.M ., Inc., 497 F.3d 1079, 1086 (10th Cir. 2007) (judgment as matter of law reviewed de novo); Weese v. Schukman, 98 F.3d 542, 547 (10th Cir. 1996) (motion for new trial reviewed de novo when it turns on a question of law).
- 12 - accomplishment and execution of the full purposes and objectives of Congress,”
as expressed in this case in the Patent Act. Id. at 479 (citations omitted). W hen it
comes to assessing this question, two particular doctrinal strands bear upon our
analysis, one illustrated by Kewanee Oil, the other by Bonito Boats, Inc. v.
Thunder Craft Boats, Inc., 489 U.S. 141 (1989).
1
In Kewanee Oil, the Supreme Court confronted the question whether the
Patent Act preempted a claim for violation of Ohio’s trade secret law, a law
substantively identical for our purposes to the Utah trade secret statute under
which M r. Russo sought relief in this case. At the outset, the Court readily
acknowledged that good arguments could be mustered for preempting traditional
state trade secret claims.3 Even so, the Court ultimately took the view that such
claims do not fatally conflict with federal patent law. Kewanee Oil Co., 416 U.S.
at 484-491; see also Aronson v. Quick Point Pencil Co., 440 U.S. 257, 262-63
(1979) (same holding with respect to contract claims for breach of a royalty
agreement).
3 As have commentators who take issue with Kewanee Oil’s analysis. See, e.g., Sharon K. Sandeen, Kewanee Revisisted: Returning to First Principles of Intellectual Property Law to Determine the Issue of Federal Preemption, 12 M arq. Intell. Prop. L. Rev. 299 (2008) (noting that Kewanee did not address the trade secret laws of all states and that there have been significant changes in patent law since 1974).
- 13 - In reaching its conclusion, the Kewanee Oil Court stressed that traditional
state trade secret laws and federal patent law usually serve complementary, not
conflicting, purposes. Both create incentives to invention, after all, and plainly
“[i]n this respect the two systems are not and never would be in conflict.” 416
U.S. at 484. Trade secret serves this shared purpose, moreover, in arenas “where
patent law does not reach,” thus mitigating the potential for conflict between the
two systems of law. Id. at 485. Trade secret laws operate only to protect those
ideas held in secret, while patent law affords the exclusive means of protecting
the right to an invention only after it is disclosed to the public. Id. Similarly,
trade secret law applies to innovations that may not ever be amenable to patent,
given patent law’s strict requirements of novelty, utility, and non-obviousness.
Id. The Kewanee Oil Court also emphasized the social costs associated with
preempting state trade secret laws. W ithout trade secret protection, the Court
observed, the holders of trade secrets would be discouraged from sharing their
ideas with potential manufacturers who, in such a regime, could not be bound to
pay a license fee or protect any secret. Id. at 486. Such a rule of law would serve
to encourage the “hoard[ing] rather than [the] disseminat[ion]” of knowledge,
requiring trade secret holders to “engage in the time-consuming and economically
wasteful enterprise of constructing duplicative manufacturing and marketing
mechanisms” to get their ideas to market. Id. at 486-87. Such inefficiencies
- 14 - would deter the development and dissemination of scientific and technological
innovations, causing “society, as a whole, [to] suffer,” id. at 486, a result, the
Court emphasized, that “cannot be justified by reference to any policy that the
federal patent law seeks to advance,” id. at 487. Indeed, if anything, such a
regime would be inimical to patent law’s primary purpose, embodied in our
Constitution, of “promot[ing] the Progress of Science and the useful Arts.” U.S.
Const. Art. I, sec. 8, cl. 8.
At the same time, the Kewanee Oil Court was not blind to costs and
considerations on the other side of the ledger. Though not all trade secrets are
amenable to patent, many are, and the potential for conflict between state and
federal law is, for these secrets, at its “peak.” Id. at 489. Federal law expresses a
strong interest in seeing that patentable innovations do not stay bottled up in
secret but are instead shared with the public in order to promote social progress.
This interest is most obviously embodied in patent law’s bargain of providing
inventors with many years of monopoly rents in return for the public’s
opportunity to use and enjoy their ideas. Id. But even for this class of trade
secrets – those amenable to patent and thus for which there is a strong interest in
their public dissemination – the Court ultimately declined to preempt traditional
state trade secret laws. It did so reasoning that, even here, trade secret laws pose
“no reasonable risk” of deterring inventors with patentable ideas from sharing
- 15 - their work with the world through the patent process. Id. Trade secret laws, after
all, provide “far weaker protection” than patent law in critical respects. Id. at
489-90. W hile proof of inventorship under patent law operates “‘against the
world,’ forbidding any use of the invention for whatever purpose for a significant
length of time,” and affording monopoly rents during that period, trade secret
laws do nothing to foreclose others from discovering the trade secret holder’s idea
(either independently or by means of reverse engineering) and exploiting it for
profit publicly. Id. at 490. So, “[w]here patent law acts as a barrier, trade secret
law functions relatively as a sieve,” and a rational inventor would have every
reason to choose the barrier over the sieve. Id. at 490. Of course, there is the
possibility that the occasional “rare inventor” will choose trade secret protection
over patent protection, even where a patent is available. Id. But this, the Court
held, is no cause for (serious) concern. Patent law’s objective of encouraging
scientific and technological progress is not likely to be significantly impeded
because, “[i]f something is to be discovered at all very likely it will be discovered
by more than one person.” Id. As the Court put it, “[i]f W atson and Crick had
not discovered the structure of DNA it is likely that Linus Pauling would have
made the discovery soon.” Id. at 490, n.19. So, “[e]ven were an inventor to keep
his discovery completely to himself, something that neither the patent nor trade
- 16 - secret laws forbid, there is a high probability that it will be soon independently
developed.” Id. at 490-91. 4
Under the arrangement contemplated by the Court in Kewanee Oil, then,
inventors have a choice. They may keep their ideas secret with the protection of
state law but run the risk of potential independent discovery by others. Or they
may disclose their ideas and enjoy the ensuing legal monopoly afforded by federal
patent law. See Bonito Boats, 489 U.S. at 149 (“[I]t is a condition upon the
inventor’s right to a patent that he shall not exploit his discovery competitively
after it is ready for patenting; he must content himself with either secrecy or legal
monopoly.”) (quoting M etallizing Eng’g Co. v. Kenyon Bearing & Auto Parts Co.,
153 F.2d 516, 520 (2d Cir.) (L. Hand, J.), cert denied, 328 U.S. 840 (1946)).
2
To say that traditional trade secret claims can peacefully coexist with patent
law, however, is not to say that states may freely regulate the dissemination of
potentially patentable innovations. Far from it. The Court in Kewanee Oil
cautioned that, if “a State, through a system of protection, were to cause a
substantial risk that holders of patentable inventions would not seek patents, but
rather would rely on the state protection, we would be compelled to hold that such
4 See also id. at 490 (citing for support Singletons and M ultiples in Science (1961), in R. M erton, The Sociology of Science 343 (1973); J. Cole & S. Cole, Social Stratification in Science 12-13, 229-230 (1973); Ogburn & Thomas, Are Inventions Inevitable?, 37 Pol.Sci.Q 83 (1922)).
- 17 - a system could not constitutionally continue to exist.” 416 U.S. at 489. This
warning anticipated and was amplified by the Court’s holding fifteen years later
in Bonito Boats.
In Bonito Boats, the Court faced a Florida statute that made it “unlawful for
any person to use the direct molding process to duplicate for the purpose of sale
any manufactured vessel hull or component part of a vessel made by another
without the written permission of that other person.” 489 U.S. at 144-45. In
essence, the Florida law afforded vessel hull designers who had already made
their designs publicly known (by manufacturing and selling boats embodying their
designs) with protections different from, and more extensive than, federal patent
law. Plainly, Florida sought to protect its highly prized boat design industry from
what it considered to be undesirable competition.
The Court had no difficulty holding Florida’s statute preempted by federal
patent law, explaining that states “may not offer patent-like protection[s]” to
publicly disclosed ideas because “the ultimate goal of public disclosure and use
which is the centerpiece of federal patent policy” is contravened by “[a] state law
that substantially interferes with the enjoyment of an unpatented utilitarian or
design conception which has been freely disclosed by its author to the public at
large.” Id. at 156-57. Simply put, once an idea is in the public domain, federal
patent law controls; states may not further insulate their inventors from (or expose
- 18 - them to) competition. Still, the Court in Bonito Boats took pains to reaffirm
Kewanee Oil, and underscore the compatibility of its holdings. The Court
explained that, so long as “the veil of secrecy” continues to shroud an idea, it
remains “private” property amenable to state trade secret laws. Id. at 149.
Federal law requires only, but significantly, that, once that veil is lifted, an
inventor must choose between “the protection of a federal patent or the dedication
of his idea to the public at large,” by placing it in the public domain. Id.
B
W ith this guidance in hand, we turn to the specifics of Ballard’s preemption
argument, which itself divides into two parts. First, Ballard submits that the
liability case M r. Russo tried was “irreconcilable with the presumption of
inventorship arising from Ballard’s patents.” Appellant’s Br. at 5. Second, even
if M r. Russo’s liability case is consistent with federal patent law, Ballard argues
that the damages he sought are not. In Ballard’s view, the district court intruded
on Ballard’s patents by instructing the jury to award, or allowing M r. Russo to
seek and obtain, the full value of Ballard’s invention per se, rather than the value
of his misappropriated trade secret. W e address each of these preemption claims
in turn.
- 19 - 1
Ballard complains that, at trial, M r. Russo cast himself as the “true
inventor” of the Trach Care 72, and that any question of inventorship must be
established under federal patent law standards. In Ballard’s words, “Russo’s
claims depended upon establishing that he, and not [Ballard’s engineers], was the
true inventor of the subject matter of Ballard’s patents.” Appellant’s Br. at 45.
And any such claim, Ballard submits, “is irreconcilable with Ballard’s patents.”
Id. at 46.
W e do not agree. As was true of his complaint, see supra Part II, no
question of federal patent law was raised by M r. Russo’s trial. He did not seek to
be proclaimed the inventor of Ballard’s patents, or seek any of the rights
associated with inventorship of a patent (e.g., right to exclude the public from
exploiting the ideas embodied in those patents). Instead, like any other plaintiff
proceeding under traditional trade secret laws, M r. Russo simply sought to
establish that he had a valid trade secret; that he disclosed his secret to Ballard
under terms precluding the company from making use of the secret without his
consent; that Ballard violated that trust; and that Ballard’s conduct caused him
harm. Indeed, the court’s instructions to the jury on the elements necessary to
find liability tracked precisely the elements of Utah trade secret law, and did not
- 20 - call upon the jury to decide any question falling within patent’s domain.
Compare Jury Inst. 18 & 20 with U.C.A. 1953 § 13-24-1, et seq.
Exactly the same can be said of M r. Russo’s CDA claim. At trial, M r.
Russo sought simply to establish, consistent with entirely unremarkable breach of
contract jury instructions, that Ballard breached the terms of its written promise to
maintain M r. Russo’s confidences. The jury in this case was asked to decide
whether Ballard disclosed M r. Russo’s secret, as he alleged, “by some ‘improper
means’” and in violation of the parties’ agreement, or whether the company
discovered his idea independently “by fair and honest means,” a question
Kewanee Oil has held may be tried under state law without running afoul of
federal patent law. 416 U.S. at 475-76. 5
To be sure, M r. Russo pointed at trial, precisely as he did in his complaint,
to Ballard’s patents as evidence of how Ballard misappropriated his secret and
breached the CDA. But this bare fact does not necessarily mean that his trial
raised any question of federal patent law, as we have already noted, see supra Part
5 In fact, M r. Russo testified that he had no ability to manufacture catheters and, precisely because of this fact, wanted to ensure his idea’s secrecy until he could secure a licensing agreement with a company that had the necessary manufacturing capacity. This, of course, is exactly one of the purposes trade secret law serves in harmony, not at odds, with federal patent law. See Kewanee Oil, 416 U.S. at 493 (patent and trade secret law do not conflict in part because “[t]rade secret law promotes the sharing of knowledge, and the efficient operation of industry; it permits the individual inventor to reap the rewards of his labor by contracting with a company large enough to develop and exploit it”); see also supra Part III.A.1.
- 21 - II, let alone suggest that M r. Russo sought rights associated with being a patent’s
inventor. As our sister circuit explained in the face of an identical challenge,
“[t]he fact that [the defendant] improperly secured [a] patent and used this patent
to obtain incremental profits” can be properly used as evidence to show
misappropriation of a trade secret and the extent of the plaintiff’s resulting
damages without suggesting that “[t]he right involved here . . . is . . . ‘patent-like’
at all.” Univ. of Colorado Found., Inc. v. American Cyanamid, 342 F.3d 1298,
1306 (Fed. Cir. 2003). W ere the law otherwise, it would be incongruous indeed.
Any defendant could (and would have a significant incentive to) insulate itself
from a trade secret misappropriation claim simply by patenting the stolen idea.
And Kewanee Oil’s holding that trade secret and patent law can coexist would be
significantly impaired because patent law would preempt many (if not most) trade
secret claims.
Ballard’s arguments from precedent undermine, rather than bolster, its
cause. The company relies heavily on University of Colorado Foundation Inc. v.
American Cyanamid, 196 F.3d 1366 (Fed. Cir. 1999), in asserting that federal
inventorship standards should have been used to determine if M r. Russo was
entitled to his relief. In American Cyanamid, two University of Colorado
research physicians helped American Cyanamid reformulate a prenatal
multivitamin/mineral supplement, sharing a confidential manuscript with the
company. W ithout the doctors’ knowledge, however, the company eventually
- 22 - patented a new formula using their research. The doctors and the university sued
alleging, among other things, that the company wrongfully used its confidential
materials, failed to list them as inventors on the patent, and failed to disclose the
patent application to them. In a holding Ballard highlights, the Federal Circuit
held that some of the claims implicated the question of inventorship and the right
to exclude the public from using their invention and, accordingly, had to be
decided under federal, not state, law. Id. at 1372.
But this tells only half the story. W hile some of the doctors’ claims
involved patent law issues that had to be decided under federal law, the Federal
Circuit went on to hold that not every claim brought by the doctors did so,
explaining that “federal patent law does not preempt . . . state law claims” for
unjust enrichment for “wrongful use of the Doctors’ research results.” Id. at
1371-72. Ballard also neglects to mention that, after the case was remanded and
eventually returned to it, the Federal Circuit reaffirmed this point, holding that the
doctors’ unjust enrichment claim was properly adjudicated under state law. As
our sister circuit explained, the doctors’ unjust enrichment claim “is not ‘patent-
like’ at all, . . . [but springs] from Cyanamid’s alleged wrongful use of the
Doctors’ research results. . . . [T]he Doctors’ claim of unjust enrichment is a legal
claim to remedy the breach of contract implied in law for disclosure of their
confidential manuscript in exchange for a promise not to disseminate the idea
without the Doctors’ consent.” American Cyanamid, 342 F.3d at 1306. The line
- 23 - drawn by the Federal Circuit in American Cyanamid is thus the very same line we
have drawn here, and the same one drawn by the Supreme Court in Kewanee Oil
and Bonito Boats, between those claims, like M r. Russo’s, that arise from the
misappropriation of a trade secret, which generally may be tried under state law,
and those that seek to exclude others from employing a publicly disclosed idea,
which must be tried under federal patent law. 6
2
Liability aside, Ballard submits that the district court’s jury instructions
wrongly authorized the jury to give M r. Russo the full benefit of its
Trach Care 72 product per se. As Ballard puts it, “the district court should have
limited Russo’s recovery to damages appropriate to misappropriation” of a trade
6 Ballard’s citation to Ultra-Precision M fg., Ltd. v. Ford M otor Co., 411 F.3d 1369, 1382 (Fed. Cir. 2005), is no more helpful to its cause. There, the Federal Circuit faced a claim by a Ford M otor Company supplier, Ultra-Precision, that Ford took its idea for decreasing noise and vibration in car air conditioning systems without appropriate compensation. Although Ultra-Precision had not patented the technology used by Ford, “‘one of ordinary skill in the art’ could readily glean the concept” from two of Ultra-Precision’s existing patents. Id. at 1380. The Federal Circuit held the claim preempted. In doing so, the court emphasized that Ultra-Precision expressly disclaimed any clam associated with exploitation of a trade secret – it “never alleged that it enjoyed a confidential relationship with Ford or that its technical information enjoyed trade secret protection.” Id. Instead, Ultra-Precision sought damages only for the unauthorized use of its publicly available information. Id. The court held simply and sensibly that, while state law can surely protect trade secrets, the protection of publicly disclosed ideas is the exclusive domain of federal patent law. Id. By its terms, this holding has no application to a traditional trade secret case like the one now before us.
- 24 - secret, but “[i]nstead, the court allowed the jury to award Russo damages for the
value of the invention per se.” Appellant’s Br. at 53. The district court’s award,
Ballard complains, “represents a value protected exclusively by patent law,” id.,
and, to avoid any interference with patent law, the court should have limited M r.
Russo’s damages to the “incremental profits derived from use of [his] idea, rather
than total profits from selling [a] product incorporating [that] idea.” Id. at 54.
Alternatively, Ballard submits that, even if the district court correctly instructed
the jury that M r. Russo was entitled only to the incremental value his trade secret
added to Ballard’s product, M r. Russo tried his case in a way that allowed him to
evade the district court’s instructions and recoup the full value of Ballard’s
patents per se. Id. at 55. As a matter of fact, Ballard contends, M r. Russo asked
the jury “to award, and [the jury] did award, Russo damages for the value of the
invention per se.” Id. at 56.
W e do not necessarily disagree with the premise undergirding Ballard’s
arguments. It may be that a state law claim automatically (or per se) guaranteeing
a plaintiff the full value of a defendant’s patents could interfere with federal
patent law. But that simply is not the sort of claim we have before us. In any
trade secret or breach of a CDA trial, a properly instructed jury may award the
plaintiff only those damages it has suffered, or the amount the defendant has been
enriched, by virtue of the defendant’s misconduct. By dint of this required causal
link between the defendant’s misconduct and the plaintiff’s recovery, the plaintiff
- 25 - is precluded from obtaining any earnings the defendant received, or value it
derived, from other causal factors, including its own innovative work.
Recognizing just these points, the district court in this case never required or
permitted M r. Russo to recover the value of Ballard’s product or patents per se.
Instead, in describing the scope of M r. Russo’s permissible damages in
connection with his trade secret claim, the court instructed the jury to award only
those damages “caused by [Ballard’s] violation [of Utah’s trade secret law]. . . .
Damages for misappropriation of a trade secret may include the actual loss to M r.
Russo caused by the misappropriation. But damages may also include any unjust
enrichment flowing to the party that misappropriated the trade secret. In this
context, unjust enrichment is defined as the reasonable value of the benefit that
the party who misappropriated the trade secret has gained from disclosing or
using the trade secret.” Jury Inst. 26. Similarly, the court instructed that damages
for breach of the CDA had to be limited to those that Ballard “had reason to
foresee, at the time the contract was made, as a probable result of that contract.”
Jury Inst. 27.
W ith respect to both claims, then, the district court properly informed the
jury that M r. Russo could recoup only amounts causally attributable to Ballard’s
misconduct, not to other factors, including Ballard’s own hard work. In this way,
our case again parallels American Cyanamid, where the Federal Circuit held that
the plaintiffs could and did, without impinging on federal patent law interests,
- 26 - recoup the “incremental profits” earned by the defendant company that were
“attributable to its misconduct” when it improperly secured a patent using the
plaintiffs’ confidential manuscript. 342 F.3d at 1311. W e concur, and so did the
district court, which recognized just these points and correctly instructed the jury
to abide them in this case. 7
To be sure, M r. Russo suggested that Ballard was able to extend the useful
life of its product, and thus offer the Trach Care 72, only because of its
exploitation of his trade secret. That is, in M r. Russo’s view, all of Ballard’s net
profits on its Trach Care 72 were causally attributable to its misappropriation of
his ideas rather than any other source. But in pursuing this line of argument, M r.
Russo did not suggest that a trade secret violation automatically and per se
entitled him to the full value of the patents Ballard later secured. Rather, M r.
Russo argued that, on the facts of this particular case, the evidence showed the
incremental value his trade secret added to Ballard was to transform the useful
life span of its Trach Care product from 24 to 72 hours. Ballard cites no authority
7 W hile now arguing that the district court failed to link M r. Russo’s damages to Ballard’s misconduct, at trial Ballard quite happily argued on the basis of the district court’s instructions that M r. Russo’s damages should be minimal because its own innovative hard work was responsible for the bulk of its profits on the Trach Care 72 product. See Aplt. App. at 2449 (arguing that M r. Russo admitted “his alleged trade secret contribution to this product would not have exceeded 20 percent” and what M r. Russo is “providing is a single trade secret. You cannot trump all that other invented intellectual property for other patents.”).
- 27 - suggesting that this is an impermissible theory under trade secret law, or that it
somehow impermissibly trenches on federal patent law, and we are aware of none.
See generally C&F Packing Co., Inc. v. IBP, Inc., 224 F.3d 1296, 1304 (Fed. Cir.
2000) (the jury was free to decide whether defendant’s misappropriation was
responsible for 100% of its profits on a particular product, as plaintiff claimed the
evidence suggested, or 30% , as defendant claimed). Of course, Ballard contests
whether sufficient evidence exists in the trial record from which a reasonable jury
could find that the incremental value added by M r. Russo accounts for the full
difference between Ballard’s Trach Care 24 and 72 products, and we recognize
the viability of this argument and take it up in earnest shortly, see infra Part IV.
But, for our current purposes, the dispositive point is that Ballard has identified
no legal impediment in patent law to M r. Russo’s right to recover the full
incremental value added by his misappropriated trade secret, whatever that may
be, and in these circumstances we are unable to reverse the jury’s award. 8
8 Ballard voices a similar complaint when it contends that the Utah trade secret statute allows a plaintiff to recoup only damages arising from his or her contributions wrongly taken by the defendant, not from the defendant’s independent contributions. Appellant’s Br. at 62 (arguing that M r. Russo failed to apportion damages). And this is surely a fair view of Utah law. Utah Code Ann. 1953 § 13-24-4(1) (“Damages can include both the actual loss caused by misappropriation and the unjust enrichment caused by misappropriation that is not taken into account in computing actual loss.”) (emphasis added). But, again, this legal principle simply was not in dispute at trial. Indeed, the district court’s jury instructions tracked the pertinent statutory language. At trial, the parties’ dispute focused on the simple factual question whether and to what degree the Trach Care (continued...)
- 28 - IV
As we have foreshadowed, Ballard’s legal arguments bleed into a factual
one, with the company next contending that the $20 million in damages the jury
awarded exceeded what the record evidence could support. W e may, of course,
reverse a jury’s award for lack of a sufficient evidentiary basis when, but only
when, viewing the evidence in the light most favorable to the prevailing party, the
amount of damages awarded is “clearly erroneous, or there is no evidence to
support it.” Hudson v. Smith, 618 F.2d 642, 646 (10th Cir. 1980); Bitler v. A.O.
Smith Corp., 391 F.3d 1114, 1128 (10th Cir. 2004).
Those circumstances do not pertain here. W ith respect to the jury’s $17
million unjust enrichment award, the parties presented competing evidence about
the incremental value added by M r. Russo’s contributions to Ballard’s Trach Care
72 product. M r. Russo took the position and presented evidence suggesting that
the only material difference between Ballard’s Trach Care 24 and 72 products
stemmed from its exploitation of his trade secrets; accordingly, in his view, he
was entitled to the present value of Ballard’s expected net profits on its Trach
Care 72 product, or $32 million. Critically, Ballard does not now contest the
admission of M r. Russo’s evidence suggesting that he was solely responsible for
8 (...continued) 72 product owed its existence to M r. Russo’s contributions versus Ballard’s. And on that question, the jury was free to choose any amount supported by the evidence.
- 29 - the innovations contained in Ballard’s Trach Care 72 product; instead, it points us
to, and asks us to credit, its contrary evidence suggesting that M r. Russo’s
contributions added nothing, or very little of value, to its independent work. As
is often the case, the jury found the truth to lie somewhere in between the
extremes suggested by the evidence received at trial, returning an award that
represented 53% of the damages M r. Russo sought. W hen 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.
See C&F Packing Co., 224 F.3d at 1304 (“In setting damages, the jury’s function
is to weigh contradictory evidence, to judge the credibility of the witnesses, and
to resolve factual disputes.”); Hudson, 618 F.2d at 646; Bitler, 391 F.3d at 1128.
M uch the same holds true for M r. Russo’s breach of contract claim.
Ballard stresses that M r. Russo’s own expert estimated that the 3% royalty the
parties discussed would yield $2.751 million over the life of Ballard’s patents, not
the $3 million awarded by the jury. But M r. Russo’s expert testified that his
$2.751 million estimate was “conservative” because, among other things, it
employed a 5% annual sales growth figure when Ballard achieved a 42% growth
rate in the period 2001 to 2005 and a 17% growth rate in the period 2004 to 2005.
Aplt. App. at 1679. In addition, the expert calculated royalties only through the
life of the patent (because after such time, anyone could access the technology),
- 30 - even though he testified such products often have a “very long life.” Id. at 1683.
M r. Russo’s expert testified that modest changes in any of the assumptions he
employed would yield a significantly greater award. Ballard does not contest that
the evidence could support changes in the expert’s assumptions, or that such
changes supported by the evidence could yield damages in excess of $3 million.
Accordingly, we again are in no position to say that the jury’s award was “clearly
erroneous, or [that] there is no evidence to support it.” Hudson, 618 F.2d at 646.
V
W hile we have addressed Ballard’s central arguments, it presents a flurry of
additional, but significantly less developed arguments for overturning the jury’s
damages award. W e address the most colorable of these claims here, but find
none persuasive.
First, Ballard asserts that M r. Russo’s unjust enrichment and royalty
damages should be limited to, and not extend beyond, the two-year contract
period discussed in the CDA. This argument, however, depends on a
misconstruction of the CDA and a selective view of the evidence. W hile the CDA
indicated that Ballard’s obligations to keep M r. Russo’s secrets only extended for
two years, it imposed no limit on the damages M r. Russo could seek in the event
Ballard chose to breach the agreement. To be sure, Ballard argues that it was free
to make use of the information disclosed by M r. Russo after the CDA expired.
- 31 - But it could do so lawfully only if neither M r. Russo nor anyone else secured
patents covering M r. Russo’s innovations during the CDA’s two-year term.
Ballard strains to suggest that the evidence at trial, as a matter of law,
demonstrates that this surely would have been the case. But a strain it is. Ballard
points only to the fact that M r. Russo had not patented or licensed his ideas to
another company by the time of its breach. M eanwhile, competing record
evidence shows that M r. Russo was no stranger to the patent process, having
patented other ideas previously, and thus that he was presumably able to patent
his latest innovations, too. In fact, M r. Russo testified that the only reason he had
not yet incurred the expense of patenting his catheter improvement ideas was
because of the parties’ confidentiality agreement protecting against Ballard’s use
of his ideas. M r. Russo further testified that he was still anticipating that
Ballard’s demonstrated interest in his ideas would lead it, “sooner or later,” to
license them before the CDA expired. Aplt. App. at 1228; see also id. (“Ballard
was the largest manufacturer of closed trach suction systems in the world. . . . I
knew what I had. They already offered me a substantial amount of money, and I
felt that sooner or later they would come back to me.”). Plainly, the jury was free
to conclude on the basis of these facts that M r. Russo had a valid reason for
waiting to patent his idea and that, in the event the parties’ negotiations did not
yield a licensing agreement within two years, he was able and ready to secure
- 32 - appropriate patents that would have foreclosed Ballard’s use of his ideas without
his consent.
Second, Ballard argues that its misappropriation of M r. Russo’s trade
secrets at most only gave the company a “head start” to a result it would have
eventually achieved on its own, and that the district court should have given its
proffered jury instruction underscoring this point. Under the so-called “head
start” or “lead time” rule, adopted in some jurisdictions, a trade secret defendant’s
damages may be limited to the time the defendant saved in getting a product to
market by virtue of its misappropriation. See Uniform Trade Secrets Act §§ 2-3
cmts. Ballard has failed to point us to a single Utah case adopting the head start
rule, but even side-stepping this deficiency and assuming Utah embraces the rule,
we discern no reversible error in the district court’s jury instructions. The jury
was instructed that unjust enrichment “is defined as the reasonable value of the
benefit that the party who misappropriated the trade secret has gained from
disclosing or using the trade secret,” and that it “may only award damages for a
time period equal to the amount of time (1) you find that M r. Russo’s trade secret
would be entitled to protection, plus (2) any additional period, if any, that you
find that the trade secret afforded the particular Defendant a competitive
advantage.” Jury Inst. 26. One may well be able to improve on these instructions
as an enunciation of the head start principle. However, as the district judge made
- 33 - clear in its discussions with counsel, see Aplt. App. at 2112, Ballard was free to
argue, consistent with these instructions, that its misappropriation of M r. Russo’s
trade secrets only benefitted it by the time period in which the misappropriation
afforded the company a head start to market. Not only does Ballard concede that
it made just such an argument to the jury, see Aplt. Reply Br. at 43, but the jury’s
ultimate award of unjust enrichment, which, again, amounted to only 53% of what
M r. Russo’s expert calculated Ballard’s net profits from the lifetime of the patents
to be, is consistent with the adoption of Ballard’s argument. In these
circumstances taken as a whole, we cannot say that the district court’s failure to
give Ballard’s proffered instruction amounted to an abuse of discretion, or that its
instructions failed to inform the jury fairly of the governing law. See Brown v.
Wal-M art Stores, Inc., 11 F.3d 1559, 1564 (10th Cir. 1993) (we “consider all that
the jury heard and, from [the] standpoint of the jury, decide not whether the
charge was faultless in every particular but whether the jury was misled in any
way and whether it had [an] understanding of the issues and its duty to determine
those issues”) (quotations omitted); United States v. Holly, 488 F.3d 1298, 1302
(10th Cir. 2007) (W e “review a district court’s decision to give [or decline to
give] a particular jury instruction for an abuse of discretion and consider the
instructions [as given] as a whole de novo to determine whether they accurately
informed the jury of the governing law.”).
- 34 - Third, and finally, Ballard argues that unjust enrichment damages are
inappropriate as a matter of law for the misappropriation of a trade secret where,
as here, the plaintiff was willing to license his or her idea. Appellant’s Br. at 58.
Elsewhere in its brief, Ballard returns to this theme, suggesting that, because M r.
Russo had no independent means of bringing his idea to market, “the only way
Russo could have profited” from his idea without licensing it to Ballard would
have been to license it to another party such that his innovations would no longer
be secret. Appellant’s Br. at 68.9 Given these circumstances, Ballard submits,
the district court should have allowed M r. Russo to recoup only royalty, not
unjust enrichment, damages.
W e cannot agree. In Ballard’s view, unjust enrichment damages are
appropriate only when the defendant has used a misappropriated trade secret to
compete with the plaintiff, because there the defendant’s profits serve as a proxy
for the plaintiff’s lost profit. See Appellant’s Br. at 59 (citing M id-M ichigan
Computer Sys., Inc. v. M arc Glassman, Inc., 416 F.3d 505, 510 (6th Cir. 2005));
see also Restatement (Third) of Unfair Competition § 45, cmt. d (noting that one
measure of monetary relief for misappropriation is the award of plaintiff’s profit
9 W hile afforded its own heading, Ballard devotes only 10 lines to this argument in its brief. W e believe it is a related and further refinement of the first line of argument concerning M r. Russo’s willingness to license the technology to Ballard, but any misapprehension on this score must be attributable to the argument’s lack of development. See W.D. Sports, 497 F.3d at 1095; United Transp. Union v. Dole, 797 F.2d 823, 827 (10th Cir. 1986).
- 35 - loss). W hile perhaps a plausible position as a policy matter, the problem with
Ballard’s argument is that the Utah legislature has rejected it. Under Utah Code
Ann. § 13-24-4(1), a plaintiff has the express choice of seeking unjust enrichment
damages to remedy trade secret misappropriation. See supra n.8 (quoting
statutory language). Apparently, it was the Utah legislature’s desire to ensure that
misappropriators are not allowed to keep ill-gotten gains from their unlawful acts
of misappropriation.
Neither is Utah alone in its judgment. The Restatement recognizes that
unjust enrichment awards can in these circumstances serve a legitimate deterrent
function, see Restatement (Third) of Unfair Competition § 45, cmt. g (“Since the
imposition of a reasonable royalty requires the defendant to pay only the amount
it would have paid had it fairly bargained for use of the plaintiff’s secret, it may
not adequately discourage the appropriation of trade secrets.”), and the Supreme
Court has acknowledged that one of the functions of trade secret law is to ensure
that “industrial espionage is [not] condoned or . . . made profitable,” Bonito
Boats, 489 U.S. at 155. Unlike a standard breach of contract claim, after all, a
misappropriation claim involves an allegation of theft, and it is not unknown to
require a thief to return not only what was stolen, but any additional
consequential profits he or she reaped as a result of his or her wrongful actions.
W hile it is true that the unjust enrichment award put M r. Russo in a much better
- 36 - position than if he had entered a licensing agreement with Ballard, under Utah
law, Ballard, as the party that acted wrongfully, must assume the risk it took by
misappropriating rather than licensing M r. Russo’s secret. Neither are we free to
substitute our judgment for that of the Utah legislature on this score. See also
American Cyanamid, 342 F.3d at 1311 (rejecting materially identical argument
under Colorado law). 1 0
VI
10 Relatedly, Ballard fleetingly suggests that the Utah Trade Secrets Act prohibits the award of both unjust enrichment damages and royalty. But the royalty awarded by the jury was not associated with M r. Russo’s claim under the trade secrets statute. Instead, it was associated with a separate contract claim for breach of the CDA and represented his estimated actual loss based on the parties’ actual history of negotiations. Ballard offers no reason or authority suggesting that the Act serves to limit damages obtained in a separate contract action. In fact, even under the Act itself damages “can include both the actual loss caused by misappropriation [including as measured by royalty] and the unjust enrichment caused by misappropriation that is not taken into account in computing actual loss.” U.C.A. 1953 § 13-24-4. See also Water & Energy Sys. Tech., Inc. v. Keil, 48 P.3d 888, 894 (Utah 2002) (under Utah law, plaintiff can recover both actual damages and unjust enrichment as long as the awards are not duplicative). Of course, this is not to say that a party may receive the same damages twice simply by seeking two forms of relief or invoking two different causes of action. See M orrison Knudsen Corp. v. Ground Improvement Techniques, Inc., 532 F.3d 1063, 1080 (10th Cir. 2008) (when it is clear that duplication occurred the “court must . . . reduce the verdict by the amount duplicated”). But Ballard has presented to us no complaint about duplicative awards, and it would be difficult to see how it could. Even if M r. Russo’s request for $32 million in unjust enrichment damages overlapped with the approximately $3 million he sought in royalty payments, a fact neither argued to us nor clear from the record, the jury awarded only 53% of the requested $32 million in unjust enrichment damages, leaving ample room for a non-duplicative $3 million royalty award.
- 37 - Having exhausted Ballard’s appeal, we must still confront M r. Russo’s
cross-appeal. M r. Russo contends that the district court erred in denying his
motion for interest on his damages award for the period between the issuance of
the jury verdict and the entry of the judgment, a period of approximately four
months in this case.
W hether post-verdict, pre-judgment interest is recoverable in diversity
cases is a question of state law. See Chesapeake Operating, Inc. v. Valence
Operating, Inc., 193 F.3d 1153, 1156 (10th Cir. 1999). M r. Russo argues that the
plain language of Rule 54(e) of the Utah Rules of Civil Procedure requires the
issuance of post-verdict interest in every civil case. That Rule provides in
relevant part that
[t]he clerk must include in any judgment signed by him any interest on the verdict or decision from the time it was rendered, and the costs, if the same have been taxed or ascertained. The clerk must, within two days after the costs have been taxed or ascertained, in any case where not included in the judgment, insert the amount thereof in a blank left in the judgment for that purpose.
As M r. Russo reads the Rule, the term “the same” refers only to “costs”; thus, in
his view, the Rule requires the clerk to add interest on the verdict as a matter of
course, and to add costs only if they have already been “taxed or ascertained.”
W e do not question that M r. Russo’s interpretation of the Rule is at least a
plausible one, particularly given that the comma following “rendered” sets apart
the references to interest and costs such that the subordinate clause, “if the same
- 38 - have been taxed or ascertained” appears to modify only “costs.” W ithout that
comma, the “same” would have more clearly referenced both interest and costs.
Notably, too, the term “taxed or ascertained” appears again in the second
sentence, and there applies only to costs, making no reference to interest. W e
also acknowledge that states with similar rules sometimes do authorize post-
verdict, pre-judgment interest, just as M r. Russo seeks here. 1 1
The difficulty with M r. Russo’s reading of the Rule, as Ballard points out,
is that, if it were correct, post-verdict, pre-judgment interest would be an
everyday matter in Utah. Yet, M r. Russo cites to us not a single Utah case
adopting his view of Rule 54(e). And while the Rule is no model of clarity,
Ballard notes that it does not unavoidably suggest that “the same” refers to both
“interest” and “costs.” It is at least possible, Ballard stresses, that only interest
and costs “taxed or ascertained” by the trial court should be added to a verdict
amount before its final entry as a judgment; and because the trial court did not tax
or ascertain any interest here, none was properly included in the judgment.
11 See, e.g., Simmons v. New York City Transit Auth., No. CV-02-1575, 2008 W L 3251391, at (E.D.N.Y. July 31, 2008) (under New York law, postverdict, pre-judgment interest should always be entered to “indemnify successful plaintiffs for the nonpayment of what is due to them . . .”); M gmt. Computer Servs., Inc. v. Hawkins, Ash, Baptie & Co., 592 N.W .2d 279, 282 (W is. Ct. App. 1998) (W isconsin law provides that “interest at the rate of 12% per year from the time of verdict, decision or report until judgment is entered shall be computed by the clerk and added to the costs”); see also 1 ALR2d 479, Date of Verdict or Date of Entry of Judgment Thereon as Beginning of Interest Period on Judgment (discussing diverging state views on this subject).
- 39 - Perhaps more persuasively still, Ballard draws our attention to Bailey-Allen
Co. v. Kurzet. There, the Utah Court of Appeals expressly held that, at least
where a claim is considered unliquidated before trial, as in the case of a claim
arising in equity or (as here, with respect to M r. Russo’s primary cause of action)
for unjust enrichment, interest should run “from the date the . . . judgment is
entered, rather than orally rendered” because an oral ruling liquidating damages is
“subject to change before entry.” 876 P.2d 421, 427 n.4 (Utah Ct. App. 1994).
The Bailey court proceeded to cite with favor a W yoming case declining to
authorize post-verdict, pre-judgment interest on the basis that a “verdict is not
final liquidation of sum due until judgment.” Id. (citing Pure Gas & Chem. Co. v.
Cook, 526 P.2d 986, 993 (W yo. 1974)). Bailey also cited in support of its
conclusion Utah Rule of Appellate Procedure 32, which provides that, “[u]nless
otherwise provided by law, if a judgment for money in a civil case is affirmed,
whatever interest is allowed by law shall be payable from the date the judgment
was entered.” Id.
In light of this authority, we are unable to conclude that Utah law
definitively authorizes post-verdict, pre-judgment interest in all cases, as M r.
Russo’s line of argument suggests. The decision whether to do so is a matter for
the legislature and courts of Utah, not us, and, accordingly, we believe it proper
to leave any further development of the law on this point to those authorities. Cf.
- 40 - Kaiser Aluminum v. Bonjorno, 494 U.S. 827, 835 (1990) (in “the absence of
legislative intent to the contrary, we conclude that postjudgment interest properly
runs from the date of the entry of judgment[,]” not from the date of the entry of a
verdict).
***
The judgment of the district court is affirmed.
- 41 -