StorageCraft Technology v. Kirby

Filing 337

MEMORANDUM DECISION AND ORDER denying 298 Motion for New Trial. Signed by Judge David Nuffer on 12/4/12 (alt)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH, CENTRAL DIVISION
STORAGECRAFT TECHNOLOGY
CORPORATION, a Utah corporation,

MEMORANDUM DECISION and ORDER
DENYING JAMES KIRBY’S
MOTION FOR NEW TRIAL

Plaintiff,
v.

Case No. 2:08-CV-921 DN
District Judge David Nuffer

JAMES KIRBY, an individual, and JOHN
DOES 1-10,
Defendants.

On August 9, 2012 the jury returned a verdict in favor of Plaintiff Storagecraft
Technology Corporation (STC) on each of its claims for breach of contract, copyright
infringement and trade secret misappropriation against Defendant James Kirby (Kirby). 1 The
jury awarded STC $2.92 million each on the breach of contract and trade secret misappropriation
claims, and awarded $100,000 on the copyright infringement claim after finding the infringement
was willful. 2 Prior to trial and to avoid double recovery by STC, the parties stipulated that STC
would receive only the highest damage award given on any of the three claims, 3 and the jury was
so instructed. 4
On September 4, 2012, Kirby filed a motion for a new trial 5 under Rule 59(a), 6 arguing
that "no evidence was presented that Kirby’s 'disclosure or use' of the trade secret caused STC

1

Jury Verdict for Plaintiff, docket no. 274, filed Aug. 9, 2012.

2

Id.

3

Stipulation Regarding Double Recovery, docket no. 260, filed Aug. 3, 2012.

4

Jury Instruction 43, docket no. 273, filed Aug. 9, 2012.

5

Defendant's Motion for New Trial (Motion), docket no. 298, filed Sept. 4, 2012.

6

Fed. R. Civ. P. 59(a).

any actual 'loss or injury;' therefore, the jury’s award of $2.9 million is against the clear weight
of the evidence and is greatly excessive." 7
STANDARD OF REVIEW
"[T]he jury’s award is inviolate unless . . . it [is] 'so excessive that it shocks the judicial
conscience and raises an irresistible inference that passion, prejudice, corruption, or other
improper cause invaded the trial.'" 8 The court will grant a motion for a new trial only if the
jury’s verdict is "clearly, decidedly or overwhelmingly against the weight of the evidence." 9
When considering a motion under Rule 59 for a new trial, the court must view all evidence in the
light most favorable to the prevailing party. 10
DISCUSSION
Kirby moves for a new trial arguing that the $2.92 million jury verdict was against the
clear weight of the evidence and that the verdict "was excessive, unreasonable, and should shock
the conscience of this Court given the lack of evidence that Kirby proximately caused any actual
'injury or loss' to STC." 11 Kirby argues that a reasonable royalty should not have been used to
determine the award because STC did not demonstrate an actual loss or injury cause by the
misappropriation.

7

Motion at 1.

8

Spahr v. Ferber Resorts, 686 F. Supp. 2d 1214, 1217 (D. Utah 2010) (quoting M.D. Mark, Inc. v. Kerr-McGee
Corp., 565 F.3d 753, 766 (10th Cir. 2009)).
9

Black v. Heib's Enters., Inc., 805 F.3d 360, 363 (10th Cir. 1986).

10

Spahr, 686 F. Supp 2d at 1217 (citing Escue v. N. Okla. College, 450 F.3d 1146, 1156 (10th Cir. 2006)).

11

Defendant's Memorandum in Support of his Motion for a New Trial (Memo in Support), docket no. 299, filed
Sept. 4, 2012.

2

STC counters that it "presented more than sufficient evidence at trial to establish the
harm caused by Kirby’s wrongful retention, disclosure and use of STC’s VSnap source code." 12
Testimony at trial showed that STC obtained a copyright for the VSnap source code because it
was the core of all its products. 13 Scott Barnes, STC's Chief Technology Officer, further testified
that STC takes great measures to maintain the confidentiality of the VSnap code to protect its
value to the company and its software products and technologies that it sells, markets,
manufactures and licenses. 14 STC allows a third party to have access to its technology only
when the third party signs a confidentiality agreement and also pays a license or royalty fee for
the technology. 15 Thus, when Kirby retained and disclosed the VSnap source code to David
Crocker, a representative of NetJapan, STC's adversary and competitor, Kirby compromised the
confidentiality of the code and caused STC to lose the royalty or license fee that it would have
otherwise been entitled to receive for its technology. Due to Kirby's actions, STC must now
disclose to potential purchasers and investors that the VSnap source code has been compromised,
which could reduce value of the source code and STC. 16 Consequently, when Kirby retained and
disclosed the VSnap source code in violation of the 2005 Settlement Agreement, and without
payment, he used the equivalent of an unrestricted license to the source code. STC’s damages
expert, Patrick Kilbourne, testified that a reasonable royalty for an unrestricted license for the
VSnap source code was at least $4.5 million.17 The jury discounted the expert's calculations and

12

StorageCraft Technology Corporation's Memorandum in Opposition to Defendant's Motion for New Trial
(Opposition) at 3, docket no. 314, filed Sept. 21, 2012.
13

Tr. of Aug. 6, 2012 at 36:1-37:6, docket no. 306, filed Sept. 19, 2012; Plaintiff's Exhibit 44.

14

Tr. of Aug. 9, 2012 at 121:13-125:19, docket no. 314, filed Sept. 21, 2012.

15

Jury Instruction No. 8; Tr. of August 7, 2012 at 175:15-23, docket no. 315, filed under seal Sept. 24, 2012;
Plaintiff's Exhibit 114.

16

Tr. of Aug. 7, 2012 at 141:23-142:18, 143:3-10, 144:16-147:4.

17

Tr. of Aug. 9, 2012 at 183:18-22.

3

awarded $2.92 million. This reduced award does not shock the conscious of the court and it is
not is "clearly, decidedly or overwhelmingly against the weight of the evidence" 18 presented at
trial.
Additionally, the Utah Trade Secrets Act 19 clearly permits the use of a reasonable royalty
to calculate damages for misappropriation liability, and states: "In lieu of damages measured by
any other methods, the damages caused by misappropriation may be measured by imposition of
liability for a reasonable royalty for a misappropriator's unauthorized disclosure or use of a
trade secret." 20 As noted by another Federal District Court, "it is sufficient to show 'use' by
disclosure of a trade secret with actual or constructive knowledge that the secret was acquired
under circumstances giving rise to a duty to maintain its secrecy." 21 The very essence of the
2005 Settlement Agreement was Kirby's covenant to return and protect all STC Intellectual
Property. 22 When Kirby disclosed the VSnap code, he did so with the knowledge that he had a
duty to maintain its secrecy under the Settlement Agreement. This is a sufficient showing of
"use" for which the jury could reasonably conclude that Kirby’s wrongful conduct caused STC
substantial harm resulting an award of a reasonable royalty of $2.92 million.
CONCLUSION AND ORDER
STC presented sufficient evidence for the jury to reasonably find that STC was
substantially harmed by Kirby’s misappropriation by wrongful disclosure and use of the VSnap
source code and was entitled to an award of a reasonable royalty for in the amount of $2.92
million. The jury's award, less than the amount to which the expert testified, is not "so excessive
18

Black, 805 F.3d at 363.

19

Utah Code Ann. §§ 13-24-1 to -9.

20

Utah Code Ann. § 13-24-4 (emphasis added).

21

Religious Tech. Ctr. v. Netcom On-Line Commc’n Servs., Inc., 923 F. Supp. 1231, 1257 n.31 (N.D. Cal. 1995).

22

Settlement Agreement, Plaintiff's Exhibit 48 ¶¶ 2, 4.

4

that it shocks the judicial conscience and raises an irresistible inference that passion, prejudice,
corruption, or other improper cause invaded the trial." 23
IT IS HEREBY ORDERED that Kirby's Motion for New Trial is DENIED. 24

Dated December 4, 2012.
BY THE COURT:
____________________________
David Nuffer
United States District Judge

23

Spahr, 686 F. Supp. 2d at 1217 (internal quotations and citations omitted).

24

Docket no. 298.

5