Summary
The Supreme Judicial Court of Massachusetts reviewed a judgment involving breach of contract, trade secret misappropriation, tortious interference, unjust enrichment, and G. L. c. 93A violations arising from the development and disclosure of tunable lasers for optical coherence tomography systems. The court affirmed the exclusion of speculative expert testimony concerning future lost profits and the denial of permanent injunctive relief absent proof of likely recurrence. It directed that the final judgment include an additional declaration concerning the parties' contractual sales restrictions.
Topics
Practice areas
Questions Presented
- Whether the trial judge abused her discretion by excluding expert testimony concerning lost profits after the expiration of the parties' contract because the methodology was unreliable under the Daubert-Lanigan standard and the opinion was speculative.
- Whether the trial judge abused her discretion by denying permanent injunctive relief against future use or disclosure of alleged trade secrets where LightLab proved past misappropriation but did not show a reasonable likelihood of recurrence.
- Whether LightLab was entitled to a declaration reflecting the contract-interpretation ruling that Axsun's exclusivity provision barred supplying tunable lasers to Volcano in all fields of use during the period of LightLab's exclusive right.
Holdings
- The trial judge did not abuse her discretion by excluding the expert's opinion concerning lost profits after April 28, 2014. General acceptance of the discounted-cash-flow method did not end the Daubert-Lanigan inquiry, and the opinion was properly excluded because its use of an unvalidated and untestable 'first mover advantage' methodology and its factual assumptions rendered it unreliable and speculative.
- The trial judge properly denied permanent injunctive relief because LightLab relied on past misconduct but failed to prove a reasonable likelihood that the defendants would use or disclose the claimed trade secrets in the future.
- Because LightLab requested declaratory relief and prevailed on its motion for summary judgment concerning contract interpretation, it was entitled to a declaration that Section 3 of the agreement barred Axsun from supplying tunable lasers to Volcano in all fields of use, not only human coronary artery imaging, during the period of LightLab's exclusive right.
Key quotations
“Faced with a proffer of expert testimony, the trial judge "must rule first on any challenge to the validity of any process or theory underlying a proffered opinion. 'This entails a preliminary assessment of whether the reasoning or methodology underlying the testimony is scientifically valid and of whether that reasoning or methodology properly can be applied to the facts in issue.'"” (slip op. at 15)
“A permanent injunction should not be granted to prohibit acts that there is no reasonable basis to fear will occur.” (slip op. at 23)
“It is further ORDERED, ADJUDGED, and DECLARED that Section 3 of the Asxun-LightLab Tunable Laser Development and Supply Agreement (First Amendment), dated April 29, 2008 (the Agreement), bars Axsun Technologies, Inc., from supplying tunable lasers to Volcano Corporation in all fields of use, and not just in the field of human coronary artery imaging, during such periods of time that LightLab Imaging, Inc.'s exclusive right described in Section 3(i) of the Agreement is in effect.” (slip op. at 24)
Factual background
LightLab and Axsun entered into a joint development relationship for tunable lasers used in optical coherence tomography and executed confidentiality and supply agreements giving LightLab exclusive rights to certain lasers and restricting sales to Volcano. Axsun disclosed LightLab's laser specifications and prototype to Volcano during Volcano's acquisition of Axsun, and the jury found misappropriation of trade secrets, breach of contract and the implied covenant of good faith and fair dealing, and tortious interference. LightLab sought damages based on projected lost profits from future products, permanent injunctions against future use or disclosure of additional alleged trade secrets, and a declaration that the exclusivity provision barred sales of tunable lasers to Volcano in all fields of use.
Procedural history
LightLab commenced the civil action in the Superior Court in January 2009. After a jury found liability on several contract, tort, trade-secret, unjust-enrichment, and consumer-protection claims, the trial judge excluded proposed expert testimony concerning future lost profits, denied permanent injunctions for trade secrets for which no likely future use or disclosure was shown, and entered summary judgment on certain contract-interpretation issues. The amended final judgment awarded damages, attorney's fees, and other relief, but omitted a requested declaration concerning the scope of Axsun's exclusivity obligation. The Supreme Judicial Court affirmed the judgment as modified to include that declaration.
Remand instructions
The amended final judgment must be modified to include a declaration that Section 3 of the Axsun-LightLab Tunable Laser Development and Supply Agreement, as amended April 29, 2008, barred Axsun from supplying tunable lasers to Volcano Corporation in all fields of use, and not only human coronary artery imaging, during the periods when LightLab's exclusive right under Section 3(i) was in effect.