Bianco MD vs Globus Medical Inc

Filing 402

MEMORANDUM OPINION AND ORDER. Signed by Judge William C. Bryson on 9/6/2017. (ch, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION

SABATINO BIANCO, M.D.,
Plaintiff,
v.
GLOBUS MEDICAL, INC.,
Defendant.

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Case No. 2:12-CV-00147-WCB

MEMORANDUM OPINION AND ORDER
The plaintiff in this case, Sabatino Bianco, M.D., has moved to have the defendant,
Globus Medical, Inc., held in civil contempt for failing to comply with a portion of the Court’s
judgment. This order is entered in connection with an upcoming hearing in the civil contempt
proceeding. Before the Court is Dr. Bianco’s motion in limine seeking to exclude evidence
disputing the existence of Dr. Bianco’s trade secret and its misappropriation. Dkt. No. 384. The
Court GRANTS the motion in part and DENIES the motion in part.
Dr. Bianco’s motion is directed to a report prepared by Dr. John Peloza, an expert for
Globus, and the testimony that Dr. Bianco expects Dr. Peloza will offer at the contempt hearing.
Dr. Bianco complains that a significant portion of Dr. Peloza’s report (and thus his expected
testimony) addresses issues that were previously resolved in this litigation and are not properly
before the Court in the present proceeding.

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BACKGROUND
Dr. Bianco, a spinal surgeon, filed suit against Globus in 2012. In his complaint, Dr.
Bianco raised a number of claims stemming from his dealings with Globus in connection with
Dr. Bianco’s idea regarding a device that could be used in spinal surgery. The idea was directed
to a continuously and reversibly expandable spacer, or implant, that could be placed between
adjacent vertebrae in a patient’s spine after diseased disc material had been removed from the
inter-vertebral space.

The height of the device, according to Dr. Bianco’s idea, could be

manipulated so that it could be lowered during insertion and then raised to the desired height
after placement, thereby maintaining the proper distance between the two adjacent vertebrae. Dr.
Bianco’s idea included various other features of the inter-vertebral spacer as well.
Following a five-day trial, the jury returned a verdict in Dr. Bianco’s favor on his claim
of trade secret misappropriation. The jury entered a verdict for $4,295,760 in damages, and the
Court entered judgment on that verdict. In addition, the Court entered an order respecting
ongoing royalties, since the jury’s verdict assessed liability only up to the date of trial. The
Court’s judgment imposed an ongoing royalty of 5% of the net sales of the three products that
were at issue—Globus’s Caliber, Caliber-L, and Rise devices. The judgment required Globus to
make royalty payments on those products for a period of 15 years from June 30, 2007. In
addition, the judgment provided that the 5% ongoing royalty obligation would apply to “products
that are not colorably different from those products.” Dkt. No. 315, at 2.
The Court subsequently denied Globus’s motion for judgment as a matter of law. Dkt.
No. 338. On Globus’s appeal, the Federal Circuit affirmed the judgment without opinion. 610

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F. App’x 1032 (2015). Globus petitioned for a writ of certiorari, and the Supreme Court denied
the petition. 136 S. Ct. 2489 (2016).
The parties arranged to make the requisite royalty payments on a quarterly basis
beginning as of October 1, 2014. In 2016, however, a dispute arose as to whether Globus was
liable for royalty payments on the sales of two of its other products, the Rise-L spacer and the
Altera spacer.

When counsel for Dr. Bianco protested to Globus regarding the failure of

payment for those products, Globus filed suit in the United States District Court for the Eastern
District of Pennsylvania, seeking a declaratory judgment that it was not liable for those payments
under this Court’s judgment. Dr. Bianco then filed a motion with this Court seeking an order to
show cause why Globus should not be held in civil contempt for failing to abide by the terms of
this Court’s judgment. Meanwhile, the Pennsylvania court requested briefing from the parties as
to why it should not transfer the declaratory judgment suit to the Eastern District of Texas.
Following briefing of the transfer issue, the Pennsylvania court stayed the declaratory judgment
action pending resolution of the contempt proceeding before this Court. An evidentiary hearing
in the contempt proceeding is now scheduled for September 11, 2017.
The parties have recently informed the Court that they have resolved their dispute
regarding the Rise-L device. Thus, only the royalties relating to the Altera device remain in
dispute.
DISCUSSION
In his motion in limine, Dr. Bianco seeks to exclude any evidence, including testimony
from Dr. Peloza, that is related to the existence or misappropriation of Dr. Bianco’s trade secret.
Those issues, Dr. Bianco argues, have already been conclusively decided, and the contempt

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proceeding is not an appropriate forum in which to seek to relitigate those issues. In response,
Globus contends that it is not seeking to relitigate issues settled by the judgment in this case, but
that it intends to offer evidence, including testimony from Dr. Peloza, that is relevant to the issue
of contempt. In particular, Globus argues that the evidence in question, including “state of the
art” evidence, is admissible for three reasons: (1) it will provide context to identify “colorable
differences” in technology; (2) it will bear on the question whether Dr. Bianco’s trade secret
remained protected and protectable at the time of a subsequent use; and (3) it is relevant to
equitable issues such as mitigating circumstances, Globus’s good faith, and the appropriate
remedy if contempt is found. Dkt. No. 395, at 1.
Because the contempt proceeding will be held before the Court and without a jury, the
Court will be liberal in allowing the parties to introduce evidence, subject to the Court’s later
determining whether that evidence is relevant and helpful in resolving the issue before the Court,
which is whether the Altera device is or is not more than colorably different from the Caliber,
Caliber-L, and Rise devices that were adjudicated during the trial. 1 With that said, and for the

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Dr. Bianco has noted the Court’s use, in the judgment, of the phrase “products that are
not colorably different from” the adjudicated products, and has suggested that the Court intended
to use the phrase “products that are ‘not more than colorably different.’” Dkt. No. 357, at 1 n.1.
The Court recognizes that different courts have used the term “colorable” in different ways in
making the same point—that a prohibition applicable to a particular object extends to objects that
are not meaningfully different from that object. A number of courts have used the same verbal
formulation used in the judgment in this case—“not colorably different.” See Power
Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., 843 F.3d 1315, 1325 (Fed. Cir. 2016)
(quoting a district court order); Nichia Corp. v. Everlight Elecs. Co., No. 2;13-cv-702, 2016 WL
3110142, at *2 (E.D. Tex. Jan. 25, 2016); VirnetX Inc. v. Apple Inc., No. 6:13-cv-211, 2014 WL
12672822, at *5 (E.D. Tex. Mar. 6, 2014); Fractus, S.A. v. Samsung Elecs. Co., No. 6:09-cv203, 2013 WL 1136964, at *2 (E.D. Tex. Mar. 15, 2013); Mondis Tech. Ltd. v. Chimei Innolux
Corp., No. 2:11-cv-378, 2012 WL 1554645, at *2 (E.D. Tex. Apr. 30, 2012); Synqor, Inc. v.
Artesyn Techs., Inc., No. 2:07-cv-497, 2011 WL 3624957, at *16 (E.D. Tex. Aug. 17, 2011);
Soverain Software LLC v. Newegg Inc., 836 F. Supp. 2d 462, 484 (E.D. Tex. 2010); see also Eli
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guidance of the parties, however, the Court will make the following observations regarding the
proper uses for which the evidence at the contempt hearing may be offered.
1. Context
Globus first argues that Dr. Peloza’s evidence regarding the state of the art will be useful
in providing the context for deciding whether the Altera device is merely a colorable imitation of
the Caliber, Caliber-L, and Rise products. Dkt. No. 395, at 7-8. The Court will allow evidence
that is relevant for that purpose, with the caveat discussed below.
It may be that evidence regarding devices available from Globus and other
manufacturers, as well as technology available to the industry but not incorporated into any
commercial devices, will be helpful to the Court in determining whether the Altera device is not
more than colorably different from the Caliber, Caliber-L, and Rise products. When determining
whether two products are similar, it is frequently useful to consider other art in the field to assist
Lilly & Co. v. Perrigo Co., 202 F. Supp. 3d 918, 1029 (S.D. Ind. Aug. 22, 2016); Arcelor Mittal
USA LLC v. AK Steel Corp., No. 13-685, 2016 WL 1588492, at *4 (D. Del. Apr. 19, 2016);
Jerry Harvey Audio Holding, LLC v. 1964 Ears, LLC, No. 6:14-cv-2083, 2016 WL 7177548
(M.D. Fla. Mar. 28, 2016); Arnold v. Scales, No. 3:15-cv-45, 2016 WL 6155173, at *1 (M.D.
Ga. Feb. 5, 2016); M-I LLC v. FPUSA, LLC, No. 15-cv-406, 2015 WL 6738823, at *17 n.8
(W.D. Tex. Nov. 4, 2015); Asetek Danmark A/S v. CMI USA, No. 13-cv-457, 2015 WL
5568360, at *20 (N.D. Cal. Sept. 22, 2015); CTE Global, Inc. v. Novozymes A/S, No. 15-C 181,
2015 WL 2330223, at *3 (N.D. Ill. May 14, 2015); Server Tech., Inc. v. Am. Power Conversion
Corp., No. 3:06-cv-698, 2015 WL 1308617, at *5 (D. Nev. Mar. 31, 2014). Other courts,
including the Federal Circuit in the patent context, have used the terms “colorable imitation,”
“not more than colorably different,” and “no more than a colorable difference” to capture the
same concept. See, e.g., Pac. Coast Marine Windshields, Ltd. v. Malibu Boats, LLC, 739 F.3d
694, 700 (Fed. Cir. 2014); TiVo Inc. v. Echostar Corp., 646 F.3d 869, 881-82 (Fed. Cir. 2011)
(en banc); Abbott Labs. v. TorPharm, Inc., 503 F.3d 1372, 1381 (Fed. Cir. 2007). Justice Story,
an authority always worth paying attention to, used the term in the latter fashion, writing in the
patent context: “Mere colorable alterations of a machine are not sufficient to protect the
defendant.” Odiorne v. Winkley, 18 F. Cas. 581, 582 (1814). In this order, the Court will follow
Justice Story’s lead regarding the verbal formulation of the principle. The Court notes, however,
that the language in the judgment was designed to convey the same concept and have the same
effect as the “no more than colorable” or “not merely colorable” formulations.
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in the comparison process. See, e.g., Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665, 67678 (Fed. Cir. 2008) (en banc) (“Particularly in close cases, it can be difficult to answer the
question whether one thing is like another without being given a frame of reference.”).
Importantly, however, the use of such evidence to provide context does not authorize its use to
contravene findings already made by the jury as to the existence of Dr. Bianco’s trade secret and
Globus’s misappropriation of that trade secret.
Globus argues that because there was “no definitive prior ruling explaining what Dr.
Bianco’s trade secret was, nor how exactly that trade secret was specifically incorporated into
Caliber, Caliber-L, and Rise,” Dkt. No. 395, at 8, clarification of the meaning of “colorable
difference” is needed. It cannot be sufficient, Globus argues, that any Globus implant that is
continuously and reversibly expandable is merely a colorable imitation of Caliber, Caliber-L, and
Rise, “no matter what the specific differences and advancements in technology are.” The state of
the art, according to Globus, will show that “the public domain contained numerous designs for
such an implant before 2007 and certainly before 2012.” Id. at 9. That passage in Globus’s brief
suggests that Globus intends to argue that continuously and reversibly expandable implants were
found in the prior art, and that such evidence will establish that Dr. Bianco’s trade secret has
either ceased to be a trade secret, that his trade secret can no longer be held to have been
misappropriated by Globus, or that the trade secret was never so broad as to encompass any
continuously and reversibly expandable implant.
The Court rejects that argument.

The jury’s verdict established that Globus

misappropriated Dr. Bianco’s trade secret and used it in developing the Caliber, Caliber-L, and
Rise spacers. It was therefore appropriate for the royalty remedy to extend to those products,

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regardless of whether there were other similar designs available to Globus at the time. As for the
extension of the remedy to products that were merely colorable imitations of the three
adjudicated products, that provision was necessary to avoid evasion of the decree. It was not a
separate ground of liability that, when applied, needed to be predicated on a separate finding that
Dr. Bianco’s trade secret continued to exist and that Globus misappropriated it. Thus, even if
continuously and reversibly expandable spacers were commonplace by 2012 (or even if they
were known in 2007), that would not affect Globus’s liability for sales of products that were
merely colorable versions of Caliber, Caliber-L, and Rise, the products for which Globus was
found to have used Dr. Bianco’s trade secret. And finally, the question of the scope of Dr.
Bianco’s trade secret is not pertinent in this contempt proceeding. The question before the Court
is not whether the Altera device would have given rise to liability if it had been at issue at the
trial, but whether the Altera device is merely a colorable imitation of the three adjudicated
products.
2. Subsequent Changes in the State of the Art
Globus next makes the closely related argument that, in a trade secret case,
“developments in the state of the art occurring after an alleged disclosure of confidential
information directly impact the ongoing viability of a trade secret,” and therefore are relevant to
contempt. Dkt. No. 395, at 9. As authority for that proposition, Globus cites the district court
opinion in In re Wilson, 248 B.R. 745 (M.D.N.C. 2000).
Globus reads the Wilson case to stand for the proposition that a defendant found liable
for trade secret misappropriation can avoid contempt by showing “that the adjudicated trade
secret had entered the public domain by the time it was used in connection [with] a subsequent

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product,” and “that the defendant had obtained the information used in the subsequent product
through lawful means.” Dkt. No. 395, at 9. Applying that principle in this case, Globus argues
that it is entitled to defend against the charge of contempt by showing that the concept of a
continuously and reversibly expandable implant was publicly available and was actually known
to Globus from independent sources, months before Altera’s development began.

A close

reading of the Wilson case, however, shows that the case does not support Globus’s
characterization of it.
The district court in Wilson observed that there had been an initial finding that the
defendant had illegally appropriated the plaintiff’s trade secrets and an injunction against further
use of the trade secrets. Although by the time of the contempt proceeding, the processes in
question were “readily available in the public domain, and therefore were no longer trade
secrets,” 248 B.R. at 749, that finding did not provide a complete defense to the contempt
charge, because there was “no finding that [the defendant’s] present use of the processes is not
simply a continuation of the misappropriation and, therefore, a violation of the bankruptcy
court’s original injunction,” id. at 749-50. The court explained:
Once a process has been adjudicated a trade secret, the law protects that secret
from those who obtain it illegally. This is the essence of misappropriation, which
is defined as the “acquisition, disclosure, or use of a trade secret of another . . .
unless such trade secret was arrived at by independent development, reverse
engineering, or was obtained from another person with a right to disclose the trade
secret.”
248 B.R. at 750. The defendant could avoid a contempt finding, the court ruled, only if it could
show that the process in question “was (1) no longer a trade secret and (2) [the defendant] had
obtained the process lawfully.” Id. Quoting with approval from an Indiana case, the court added
that “it is no defense to claim that one’s product could have been developed independently of
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plaintiff’s, if in fact it was developed by using plaintiff’s proprietary designs.” Id. (quoting
Amoco Prod. Co. v. Laird, 622 N.E.2d 912, 918 (Ind. 1993)).
The burden described by the Wilson court is a heavy one that requires the defendant to
prove that it did not use the plaintiff’s original trade secret in the products that are the subject of
the contempt proceedings. It is not a defense for the defendant simply to show that the original
trade secrets are now in the public domain. The defendant must further show that it developed
its accused products without using the plaintiff’s original trade secrets.
In any event, the defense described by the court in Wilson does not apply in this case.
Instead of an injunction against the use of the adjudicated trade secret, the Court in this case
adopted a remedy that was narrower in one respect and broader in another. It was narrower in
that there was no general injunction against use of the adjudicated trade secret, but only a royalty
for sales of the adjudicated products. It was broader in that it covered not only those products,
but also merely colorable imitations of those products. In effect, the Court’s judgment began
with the proposition that Globus had committed actionable trade secret misappropriation with
respect to the adjudicated products. The judgment then conclusively presumed that products
only colorably different from those products were the result of the same trade secret
misappropriation. Thus, in this setting the option discussed in the Wilson case of proving that
the new products were not produced by exploiting the misappropriated trade secret is not
available to Globus. What is available to Globus is the defense that the Altera device is not
merely a colorable imitation of the adjudicated products.

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3. Ongoing Use of a Protected Trade Secret
Based on authority from the patent law context, Globus argues that before finding Globus
in contempt of the Court’s order, “there must be a second finding that the new product uses a
trade secret.” Dkt. No. 395, at 11. In making that argument, Globus relies on TiVo Inc. v.
Echostar Corp., where the Federal Circuit held that in order to prove contempt in a patent case,
the patentee must show not only that the product in question is merely a colorable version of the
product previously held to infringe, but also that the new product infringes the patent. 646 F.3d
at 883. In the patent law context, an injunction against infringement obviously requires proof
that the new product infringes. The ongoing royalty order entered in this case, however, did not
premise liability on proof of further misappropriation. As noted above, the purpose of the
“colorably different” clause in the order was to ensure that, for a period of 15 years from July 1,
2007, Globus would have a royalty obligation to Dr. Bianco with regard to the three named
products and any other products that are no more than trivially different from those products.
Thus, proof of an ongoing trade secret and proof of further misappropriation is not relevant in
this case.
4. Equitable Considerations
While the Court is skeptical that the evidence of other technologies will be of substantial
value in assessing equitable considerations that might apply to any sanction imposed upon a
finding of contempt, the Court will nonetheless consider the evidence offered by Globus to the
extent that it bears on any such equitable issues.

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In sum, Dr. Bianco’s motion in limine is granted in part, to the extent that the evidence
targeted by Dr. Bianco’s motion is admissible only for the limited purposes authorized in this
order.
IT IS SO ORDERED.
SIGNED this 6th day of September, 2017.

_____________________________
WILLIAM C. BRYSON
UNITED STATES CIRCUIT JUDGE

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