The U.S. Court of Appeals for the Federal Circuit upheld a grant of summary judgment and other evidentiary rulings that effectively precluded Microstrategy from presenting evidence as to damages and causation. Microstrategy Inc. v. Business Objects, S.A.,Case No. 04-1572 (Fed. Cir. Nov. 17, 2005) (Newman, J.).
Microstrategy sued Business Objects, a competitor in the field of business intelligence software, for patent infringement, as well as for misappropriation of trade secrets, tortious interference with contract, violation of the Computer Fraud and Abuse Act and conspiracy to injure Microstrategy. The claims at issue on appeal were all resolved by the district court without a jury.
The opinion is notable primarily for its consideration of an extraordinary set of evidentiary rulings from the district court and for substantially precluding Microstrategy from submitting critical evidence, both expert and nonexpert, on damages and causation related to its tort claims.
Microstrategy’s case relied heavily upon its damages expert and his three expert reports. The district court, however, excluded those reports for using a flawed methodology because they failed to consider certain factors obviously relevant to the damages analysis. For example, despite a recent history of extreme financial instability and the introduction of new products from Business Objects, the damages expert attributed all of Microstrategy’s post-2000 financial losses to Business Object’s alleged tortious conduct. As the Court instructed, "[w]hile an expert need not consider every possible factor to render a "reliable" opinion, the expert still must consider enough factors to make his or her opinion sufficiently reliable in the eyes of the court." Nor, noted the Court, did the expert reports accurately link the alleged damages to any of the alleged torts. As a result, the Federal Circuit agreed the district court correctly deemed the reports unreliable under the Daubert test. The Federal Circuit concluded the district court had not abused its discretion in excluding the reports. The Court further noted that without any expert reports to support testimony, the district court properly refused to allow Microstrategy's expert to testify at trial.
The district court did not abuse its discretion in excluding nonexpert theories on damages, said the Court, because Microstrategy had not timely supplemented interrogatories to include them. Failure to disclose these theories was "substantially justified not harmless." In sum, the Federal Circuit found the district court’s determinations were well supported even though the combined effect of the rulings left Microstrategy with little or no evidence as to damages and causation.
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