Summary
The Ninth Circuit reversed the district court's grant of summary judgment in favor of SAP SE in Teradata Corporation's antitrust and trade secrets lawsuit. The appellate panel held that the district court abused its discretion by excluding an economist's expert testimony on market definition and market power, which raised triable issues regarding SAP's alleged illegal tying of software sales under Section 1 of the Sherman Act. Additionally, the court found genuine disputes of material fact concerning whether Teradata properly designated its batched merge method as confidential and whether SAP's license agreement permitted its use. The case was remanded for further proceedings.
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Practice areas
Questions Presented
- Whether the district court abused its discretion by excluding Teradata expert John Asker's testimony concerning relevant market definition, market power, and harm to competition under Federal Rule of Evidence 702.
- Whether, after considering Asker's testimony, Teradata raised genuine disputes of material fact on its Sherman Act tying claim under either the modified per se rule or the rule of reason.
- Whether genuine disputes of material fact precluded summary judgment on Teradata's trade-secrets claim concerning designation of the batched merge method as confidential.
- Whether the parties' agreements unambiguously granted SAP a license to use the batched merge method in its own products.
Holdings
- The district court abused its discretion by excluding Asker's testimony under Rule 702. His qualitative market analysis and confirmatory quantitative analyses employed methodologies within the range on which experts might reasonably differ, and disputes concerning the strength or accuracy of his conclusions went to weight rather than admissibility.
- Teradata raised triable issues concerning market power in the tying market under the modified per se approach and substantial anticompetitive effects in the tied market under the rule of reason. Summary judgment for SAP on the tying claim was therefore improper.
- The evidence created a triable dispute over whether Teradata properly designated the batched merge method as confidential under the mutual non-disclosure agreement.
- The agreements did not conclusively establish that SAP had a right to use the batched merge method in its own products. Genuine disputes existed over whether the method was a protected Partner Material, whether it was newly developed software, and whether SAP's proposed interpretation was consistent with the implied covenant of good faith and fair dealing.
Key quotations
“Shaky but admissible evidence is to be attacked by cross examination, contrary evidence, and attention to the burden of proof, not exclusion.” (124 F.4th at 565)
“The hypothetical monopolist test does not require showing actual diversion in response to price changes, only likely diversion.” (124 F.4th at 578)
“But the fact remains that tying arrangements meeting the requirements of the modified per se rule are deemed unreasonable as a matter of law.” (124 F.4th at 579)
“Viewing the evidence in the light most favorable to Teradata, a rational jury could conclude that the district court’s interpretation would injure Teradata’s right to the benefits of the contract.” (124 F.4th at 587)
Factual background
SAP sells enterprise-resource-planning software and HANA database software, while Teradata sells enterprise data-warehousing software centered on its Teradata Database and batched merge method. The companies entered a joint Bridge Project and agreements governing confidential information and intellectual-property rights; Teradata later provided SAP a design document marked "Teradata Confidential" that described the batched merge method. SAP subsequently terminated the project, released HANA and S/4HANA, and required S/4HANA customers to purchase HANA under either a runtime or full-use license. Teradata alleged that the bundled sales unlawfully tied S/4HANA to HANA and that SAP misappropriated the batched merge method.
Procedural history
Teradata sued SAP in the Northern District of California, alleging unlawful tying under Section 1 of the Sherman Act and misappropriation of trade secrets under the California Uniform Trade Secrets Act. The district court excluded portions of Teradata expert John Asker's testimony, granted SAP summary judgment on both claims, and entered partial final judgment under Rule 54(b), while patent counterclaims remained unresolved. The Federal Circuit transferred the appeal to the Ninth Circuit, which reversed and remanded.
Remand instructions
The district court must conduct further proceedings on Teradata's tying and trade-secrets claims, including consideration of Asker's testimony and resolution of the disputed factual issues concerning market power, competitive harm, confidentiality designation, and SAP's contractual rights to use the batched merge method.