Texas Advanced Optoelectronic Solutions, Inc. v. Intersil Corporation
Filing
800
MEMORANDUM OPINION AND ORDER. It is ORDERED that Plaintiff's motion to preclude Defendant from raising the "Green Color Filter defense" (Dkt. # 777 ) is hereby GRANTED. It is further ORDERED that Plaintiff's motion to preclude De fendant from asserting certain prior art as evidence of derivation (Dkt. # 776 ) is hereby GRANTED. It is further ORDERED that Defendant's motion for a new trial on exemplary damages (Dkt. # 782 ) is hereby DENIED. It is further ORDERED that Defendant's motions to Exclude Plaintiff's Technical Expert (Dkt. # 780 ) and Plaintiff's Financial Expert (Dkt. # 779 ) are hereby DENIED. Signed by District Judge Amos L. Mazzant, III on 3/30/2021. (rpc, )
United States District Court
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION
AMS
SENSORS USA
INC.
f/k/a §
TEXAS ADVANCED OPTOELECTRONIC §
§
SOLUTIONS, INC.
§
v.
§
§
RENESAS ELECTRONICS AMERICA INC. §
f/k/a INTERSIL CORPORATION
§
Civil Action No. 4:08-cv-00451
Judge Mazzant
MEMORANDUM OPINION AND ORDER
Several motions are pending before the Court. Plaintiff moved to preclude Defendant from
(1) raising the “Green Color Filter defense” (Dkt. #777) and (2) asserting certain prior art as
evidence of derivation (Dkt. #776). Defendant moved for a new trial on exemplary damages (Dkt.
#782) and to exclude Plaintiff’s experts (Dkt. #779, #780).
Having considered the parties’ detailed arguments over several letters and hearings, the
Court finds that Plaintiff’s motions should be GRANTED (Dkt. #777, #776) and Defendant’s
motions should be DENIED (Dkt. #782, #779, #780).
BACKGROUND
I.
The First Trial
The parties develop and sell ambient light sensors, which are used in electronic devices to
adjust screen brightness in response to incident light.
In the summer of 2004, the parties confidentially shared technical and financial information
during negotiations for a potential acquisition. 1 In August 2004, the parties went their separate
1
For simplicity’s sake, the Court refers to the parties as “Plaintiff” and “Defendant.” When quoting briefing or prior
rulings, the Court does not alter the quotations. As such, some quotations may refer to the parties by their current
names or former names, and sometimes a mix of both.
1
ways.
Soon after, Defendant Renesas Electronics America Inc. f/k/a Intersil Corporation
(“Renesas” f/k/a “Intersil”) released new sensors with the technical design Plaintiff AMS Sensors
USA Inc. f/k/a Texas Advanced Optoelectronic Solutions, Inc. (“AMS” f/k/a “TAOS”) disclosed
in the confidential negotiations. In January 2005, Plaintiff won a contract from Apple for the firstgeneration iPhone. In February 2005, Plaintiff released its product that contained the confidential
technology. In January 2006, Defendant reverse-engineered that product. In March 2008,
Defendant won a contract from Apple for the second-generation iPhone.
On November 25, 2008, Plaintiff sued for patent infringement, breach of contract, trade
secret misappropriation, and tortious interference with prospective business relations (Dkt. #1).
The trade secret claim asserted one technical trade secret and two financial trade secrets.
After a trial in early 2015, a jury returned a verdict for Plaintiff and awarded damages on
all four claims. The Court ruled on the parties’ post-trial motions and entered final judgment.
Both parties appealed.
II.
The Federal Circuit Mandate
The Federal Circuit wrote a lengthy opinion, affirming in part, reversing in part, vacating
in part, and remanding the case (Dkt. #614). Among its rulings, the Federal Circuit affirmed
liability for trade misrepresentation, but only on the technical trade secret. It identified the single
“asserted trade secret” (“ATS”) as “a structure that includes both a 1:1 ratio of shielded to
unshielded wells and interleaving of the wells in that ratio, i.e., repetition of the 1:1 ratio in an
alternating pattern (requiring more than one set of wells).” Tex. Advanced Optoelectronic Sols.,
Inc. v. Renesas Elecs. Am., Inc., 895 F.3d 1304, 1313 (Fed. Cir. 2018) (hereinafter “TAOS”)
(emphasis original). Liability for the two financial trade secrets was vacated.
2
The misappropriation damages were overturned for two independent reasons: (1)
Plaintiff’s expert “did not explain which of the trade secrets contributed to what amount of profit
to be disgorged” and (2) the ATS “was accessible to Intersil by proper means long before the time
of many of the sales included in TAOS’s request for monetary relief.” Id. at 1317. “On remand,
any determination of sales-based monetary relief for trade secret misappropriation requires
evidence and a determination of the time at which the trade secret became properly accessible to
Intersil and the duration of any head-start period.” Id. at 1318.
III.
On Remand
On remand, the parties dispute damages. On August 9, 2019, Judge Schell 2 transferred this
case to the undersigned (Dkt. #662).
On November 25, 2019, Plaintiff moved for Entry of Final Judgment (Dkt. #672). The
Court denied the motion on March 27, 2020 (Dkt. #682). Plaintiff moved for reconsideration (Dkt.
#686). The Court denied the motion and reiterated it was bound by the Federal Circuit’s opinion
(Dkt. #696). In the months before trial, the Court resolved numerous Daubert motions (Dkt. #736,
#737, #745).
IV.
The Present Motions
As trial approaches, the parties disagree how to interpret and apply the Federal Circuit’s
opinion. On March 22, 2021, the Court held a pretrial conference (Dkt. #771). On March 24,
2021, the Court continued the pretrial conference (Dkt. #783). A third continuation is scheduled
for March 31, 2021.
Over a few days, the parties filed nine letters with the Court. On March 23, 2021, Plaintiff
filed a trial brief on the so-called “green color filter defense” (Dkt. #777) and a supplemental
2
United States Senior District Judge Richard Schell assumed senior status on March 10, 2015.
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motion in limine on derivative products (Dkt. #776). The next day, Defendant opposed those
motions (Dkt. #781). Defendant also moved to exclude Plaintiff’s technical expert (Dkt. #780)
and financial expert (Dkt. #779), as well as a request for a new trial on exemplary damages (Dkt.
#782). Shortly thereafter, Plaintiff opposed the request for a new trial (Dkt. #787), replied in
support of its green color filter argument (Dkt. #788), and opposed the motions to exclude (Dkt.
#789). The Court addresses each dispute in turn.
LEGAL STANDARD
The law of the case doctrine provides that “an issue of law or fact decided on appeal may
not be reexamined either by the district court on remand or by the appellate court on a subsequent
appeal.” Vine v. PLS Fin. Servs., Inc., No. 4:18-CV-00450, 2019 WL 4257108, at *7 (E.D. Tex.
Sept. 9, 2019) (quoting Fuhrman v. Dretke, 442 F.3d 893, 896 (5th Cir. 1978)). “The duty of a
lower court to follow what has been decided at an earlier stage of the case comprehends things
decided by necessary implication as well as those decided explicitly.” Terrell v. Household Goods
Carriers’ Bureau, 494 F.2d 16, 19 (5th Cir. 1974).
ANALYSIS
I.
Plaintiff’s motion to preclude Defendant’s “green color filter defense”
Defendant intends to argue that the accused products do not misappropriate the trade secret
because the products contain a green color filter. The trade secret is a structure including, in part,
a 1:1 ratio of shielded to unshielded wells. TAOS, 895 F.3d at 1313. Defendant asserts that its
products do not use “unshielded” diodes because of an overlaying green color filter (See Dkt. #777,
Exhibit 1 (trial transcript)). Plaintiff asks the Court to preclude this so-called “green color filter
defense” because it contradicts the Federal Circuit’s opinion. The Court agrees.
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The parties are bound by the Federal Circuit’s factual findings on the ISL29001, one of the
accused products (See Dkt. #745). The Federal Circuit noted Plaintiff presented its ATS at trial as
“allegedly used by Intersil in modifying its products (the EL7903/ISL29001).” Id. at 1312. After
a thorough discussion, the Federal Circuit found “overwhelming evidence that Intersil learned of
TAOS’s design during the due diligence and changed its design soon after the negotiation fell
through” based on “Intersil’s lead engineer on the EL7903/ISL29001.” Id. at 1316. The engineer
“confirmed that, before the EL7903, he had never designed a structure with interleaved shielded
and exposed diodes,” as well as “documents show[ing] that Intersil changed the structure of the
EL7903 to incorporate the 1:1 interleaved diode array structure after the end of the due diligence
meetings in August 2004.” Id.
These findings demonstrate that Defendant’s EL7903/ISL29001 use the ATS. The Federal
Circuit separately defined the ATS as “a structure that includes both a 1:1 ratio of shielded to
unshielded wells and interleaving of the wells in that ratio, i.e., repetition of the 1:1 ratio in an
alternating pattern (requiring more than one set of wells).” Id. at 1313 (emphasis original). When
discussing the EL7903/ISL29001, the Federal Circuit repeated this language, indicating that the
product used the ATS. For example, the EL7903/ISL29001 contained “interleaved shielded and
exposed diodes” and “incorporate[d] the 1:1 interleaved diode array structure.” Id. at 1316. The
Federal Circuit contextualized these features as being incorporated “after the negotiation fell
through” and “after the end of the due diligence meetings in August 2004.” Id. These statements
reference the time of misappropriation. The Federal Circuit therefore found that Defendant’s
EL7903/ISL29001 used the ATS and Defendant may not contradict this.
The ISL29001 contains a green filter. Even though the ISL29001 has a green filter, the
Federal Circuit found the product used the trade secret. As the Federal Circuit found that the
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ISL29001 used the trade secret, the green filter does not absolve liability. In 2015, Defendant
vigorously argued that the accused products do not use the trade secret because of these green
color filters. Because the trade secret requires a structure containing both shielded and unshielded
cells, if the accused products do not contain unshielded cells then there is no misappropriation.
Defendant’s argument goes that if a cell contains a color filter, then it is a “shielded” cell. But this
argument was rejected by the first jury and the Federal Circuit. The Federal Circuit determined
by necessary implication that a green color filter over an otherwise unshielded diode does not
“shield” the diode. Defendant therefore cannot argue that a green color filter over an otherwise
unshielded diode renders it shielded.
On remand, Defendant raises the same argument about green color filters. Defendant tries
to thread the needle by asserting that the ISL29001 does not use the green color filter in the same
way as the other accused products:
The other products at issue don’t have, for example, a metallized layer which is part of the
ATS. They have stacked red and green filters on top of that. They were highly advanced
past the initial 29001. So the fact that a green filter was used in one product that had a 1:1
ratio does not mean other products which used other color filters over different parts of the
products that didn’t have a 1:1 ratio are bound by it.
(Dkt. #793 at 81:16-25). This muddles the issue. Of course, if an accused product does not have
the protected 1:1 structure, then it does not use the trade secret. The trade secret requires a specific
repeating structure that is either present or not. Instead, the issue is whether Defendant may
contradict the Federal Circuit’s narrow finding about green color filters. It may not.
Defendant may not argue that the green color filter renders a diode “shielded.” If the
Defendant were to do so, the implication would be that the ISL29001 does not use the trade secret.
As the Federal Circuit already determined the ISL29001 used the trade secret, green filter and all,
this argument is untenable.
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Thus, the Court grants Plaintiff’s request to preclude the green color filter defense.
Defendant may not contradict the Federal Circuit’s opinion, which implicitly includes a finding
that the “color filter” defense is inadequate.
II.
Plaintiff’s motion to preclude certain prior art as evidence of derivation
Plaintiff intends to argue that certain accused products are derived from the trade secret
and should therefore be included in damages (Dkt. #712, Exhibit 3 at ¶ 20). Under Texas law,
Defendant may argue that these “derivative” products are “derive[d] from other sources of
information” and so do not actually use the trade secret (Dkt. #737 at p. 19 (citing RESTATEMENT
(THIRD) OF UNFAIR COMPETITION § 40 (1995))). To do so, Defendant will rely on prior art that
was used in the first trial. Plaintiff asks the Court to exclude this prior art as contradicting the
Federal Circuit’s findings on liability and for being confusing to the jury. The Court agrees.
Back in 2015, Defendant used prior art as evidence that the trade secret was not secret.
This was unpersuasive to the jury, which found liability. The Federal Circuit affirmed this finding
for the ATS and determined “there was no evidence of Intersil’s independent design.” TAOS, 895
F.3d at 1316. To the contrary, the Federal Circuit recognized “overwhelming evidence that Intersil
learned of TAOS’s design during the due diligence and changed its design soon after negotiations
fell through.” Id.
Because of these findings, Defendant cannot argue that it derived its design from pre-2004
information. If there was “no evidence of Intersil’s independent design” because Defendant
“learned” of the trade secret from Plaintiff and “changed its design soon after,” then Defendant
did not derive those designs from the prior art. See id.
When the Federal Circuit affirmed liability, it affirmed the jury’s factual findings. This
includes finding Defendant acquired or discovered the trade secret improperly. Defendant argued
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at the first trial that the accused products were attributable to this prior art. The jury was not
persuaded, and this was implicitly affirmed by the Federal Circuit. As such, Defendant cannot
relitigate what was previously decided.
This includes a finding that, as of the time of
misappropriation, Defendant did not derive the trade secret from an independent source.
Accordingly, Defendant cannot argue that it derived the trade secret from an independent source
available back in 2004.
In addition to contradicting the Federal Circuit’s opinion, Defendant’s argument would
confuse the jury. See FED. R. EVID. 403. If Defendant argues it derived the trade secret from a
pre-2004 document, a reasonable juror may wrongly conclude the trade secret was not
misappropriated. Afterall, if Defendant derived the protected structure from public documents,
then the trade secret was not a secret at the time of misappropriation. Defendant’s prior art may
confuse the jury into thinking that the trade secret was properly accessible prior to the
misappropriation. As the trial requires determination of the date of proper accessibility, this type
of confusion would likely necessitate a retrial. The Court therefore finds the disputed pieces of
prior art are excluded as evidence of derivation.
III.
Defendant’s motion for a new trial on exemplary damages
Defendant asks the Court for a new trial on exemplary damages. Defendant argues it is
unclear whether the jury’s finding of fraud, malice, or gross negligence, was based on the ATS or
the vacated trade secrets. Because it is unclear, it is possible the jury’s finding was not based on
the ATS. Accordingly, Defendant argues that liability for punitive damages must be retried.
This argument overlooks the unambiguous verdict form. Question Five of the verdict form
asked:
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Did the Plaintiff prove by clear and convincing evidence that the Defendant’s
misappropriation of the Plaintiff’s trade secrets resulted from Defendant’s fraud, malice,
or gross negligence?
(Dkt. #511 at p. 3) (emphasis added). The jury answered “yes.” (Dkt. #511 at p. 3).
The verdict form lumped all three trade secret theories together. It did not ask if a trade
secret was misappropriated from Defendant’s fraud. Nor did it ask if a plurality of Plaintiff’s trade
secrets were misappropriated from Defendant’s fraud. Instead, the verdict form asked if “the”
“trade secrets” were misappropriated from fraud. By lumping the three theories together, the jury
could only answer “yes” if all trade secrets were misappropriated from Defendant’s fraud. The
jury’s finding is therefore applicable to each theory of trade secret, including the ATS.
The Federal Circuit did not disturb the jury’s finding of liability to each trade secret. The
entirety of the Federal Circuit’s opinion on exemplary damages stated: “The parties do not dispute
that, if the disgorgement award is vacated, the same disposition is appropriate for the jury’s award
of exemplary damages. We therefore vacate that award.” Id. at 1318 (emphasis added). The
Federal Circuit vacated the exemplary damages award, not the underlying finding of liability. On
remand, the jury’s liability finding stands.
Defendant’s arguments fall short. Defendant argues that the Federal Circuit “cannot
remand for a new trial solely on punitive damages.” (Dkt. #782 at p. 3). But the Federal Circuit
remanded for a new trial on the entire damages award, including damages beyond punitive.
Defendant also argues that retrying only exemplary damages would “run afoul of the Seventh
Amendment” which “guarantees that one jury will never reexamine the findings of another.” (Dkt.
#782 at p. 3). Again, the Court is not retrying only exemplary damages. And it is precisely because
“one jury” should “never reexamine the findings of another” that Defendant is precluded from
9
relitigating the underlying liability finding. The Court denies Defendant’s motion for a new trial
on trade secret misappropriation (Dkt. #782).
IV.
Defendant’s motion to exclude Plaintiff’s technical expert (Dkt. #780)
Defendant moves to exclude Joseph McAlexander’s Second Supplemental Report (Dkt.
#780). Defendant argues that Mr, McAlexander does not comply with this Court’s prior Daubert
ruling (See Dkt. #737).
As a threshold, Defendant’s supplemental Daubert motion is untimely. During a March
16, 2021 hearing, the Court permitted Plaintiff to supplement Mr. McAlexander’s report by 12
p.m. on March 19, 2021. “Defendant can raise objections at the pretrial conference on March
22nd.” (Dkt. #767 at 7:7-8). Instead, Defendant moved to exclude Mr. McAlexander on March 24,
2021. Two days may seem like a small delay. But the Court specifically chose the supplemental
schedule because of the impending trial date and this case’s plethora of complex pretrial issues.
Still, the Court considers Defendant’s arguments.
First, Defendant argues Mr. McAlexander does not explicitly reject prior portions of his
report that are problematic. But this is not necessary. As required, Mr. McAlexander confirms he
will comply with the Federal Circuit’s definition of the ATS. And Plaintiff assures the Court that
it “intends to comport with this Court’s rulings.” (Dkt. #789 at p. 3). This is sufficient.
Second, Defendant argues Mr. McAlexander’s opinion on the head-start period should be
excluded because he “does not opine on time to recreate the ATS into an existing product.” (Dkt.
#780 at p. 2). Instead, Mr. McAlexander’s “opinions are still based on full development of an
entire product.” (Dkt. #780 at p. 2). The Court rejected this argument the first time Defendant
raised it:
Texas precedence comports with the Federal Circuit’s opinion, which recognized that the
“limited head-start period . . . depend[s] upon the facts of each particular case.” TAOS, 895
10
F.3d at 1318 (citing Hyde, 158 Tex. at 589). The factfinder must determine the time
necessary for Defendant to “recreate” the ATS in its own product. This may include
additional time beyond strictly implementing the ATS, to account for the unfair “marketing
advantage” gained from misappropriation. Plaintiff argues it would take many months to
do so; Defendant argues it would be a snap. Neither argument is wrong as a matter of
law. As such, the motion is denied on this basis.
(Dkt. #737 at p. 12) (emphasis added). Defendant ignores this passage. 3 The Court does not.
V.
Defendant’s motion to exclude Plaintiff’s financial expert (Dkt. #779)
Finally, Defendant moves to exclude Dr. Keith Ugone’s Second Supplemental Report (Dkt.
#779). Defendant argues Dr. Ugone does not comply with this Court’s prior Daubert ruling (See
Dkt. #736).
As discussed, Defendant’s motion is untimely. During a March 16, 2021 hearing, the Court
permitted Defendant “to raise objections” to Dr. Ugone’s supplemental report “at the pretrial
conference on Tuesday the 22nd at that time.” (Dkt. #767 at 8:20-22). 4 Defendant moved to
exclude Dr. Ugone on March 24, 2021. Still, the Court considers Defendant’s arguments.
Defendant argues Dr. Ugone includes sales beyond the head-start period. The parties
dispute whether design win and supply contract sales should be included in damages when
payment did not occur until after the head-start period. During the March 24, 2021 hearing, the
Court resolved this issue:
I know there's a dispute among the parties whether the design win and the supply contract
sale should be included. I'm going to allow that evidence to come in. What I am going to
ask the plaintiff to do is segregate all of that in terms of damage calculations so the Court
can parse out that if I need to.
(Dkt. #793 at 94:2-8).
3
The Court’s Orders are not a rough draft, “subject to revision and reconsideration at a litigant’s pleasure.” A&C
Constr. & Installation, Co. WLL v. Zurich Am. Ins. Co., 963 F.3d 705, 709 (7th Cir. 2020).
4
At the March 16, 2021, the Court momentarily confused the parties. After correctly addressing the parties, the Court
stated “I will allow that any supplemental report by defendant can be filed by Friday March 19th, and that will allow
the plaintiff to raise objections at the pretrial conference on Tuesday the 22nd at that time.” (Dkt. #767 at 8:18-22).
However, Dr. Ugone is Plaintiff’s financial expert. As such, Plaintiff would serve the supplemental report and
Defendant would object. The Court otherwise addressed the parties properly.
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As the Court previously held, sales made during the head-start period may be included in
damages even if payment was not realized until after the period. The Court understands Defendant
views the head-start period as a strict cutoff date. However, the Federal Circuit’s opinion does not
directly address the issue of design wins and supply contracts. As these sales go to disgorgement,
an equitable remedy, the jury’s finding is only an advisory opinion. The Court finds these disputed
sales should come in to provide the jury, and the Court, the greatest context.
TAOS should clearly distinguish between the undisputed sales and these disputed sales
when it puts on its evidence. Depending on the jury’s verdict, the Court may need to reach this
issue for disgorgement. In the event it does so, the Court may consider whether these disputed
sales are legally permissible as a disgorgement remedy. As such, the record must clearly reflect
which sales fall outside of the head-start period, under Defendant’s view of the law.
CONCLUSION
It is therefore ORDERED that Plaintiff’s motion to preclude Defendant from raising the
“Green Color Filter defense” (Dkt. #777) is hereby GRANTED.
It is further ORDERED that Plaintiff’s motion to preclude Defendant from asserting
certain prior art as evidence of derivation (Dkt. #776) is hereby GRANTED.
.
It is further ORDERED that Defendant’s motion for a new trial on exemplary damages
(Dkt. # 782) is hereby DENIED.
It is further ORDERED that Defendant’s motions to Exclude Plaintiff’s Technical Expert
(Dkt. #780) and Plaintiff’s Financial Expert (Dkt. #779) are hereby DENIED.
SIGNED this 30th day of March, 2021.
___________________________________
AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE
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