ERIC F. MELGREN, District Judge.
Plaintiff The Paradigm Alliance, Inc. ("Paradigm") commenced this action against Defendants Celeritas Technologies, LLC and Celeritasworks, LLC (collectively "Celeritas"), alleging numerous claims, including breach of contract, breach of fiduciary duty and fair dealing arising from a joint-venture business relationship, fraud by silence, conversion, misappropriation of trade secrets, and violation of the Computer Fraud and Abuse Act. In answering, Celeritas asserted several counterclaims against Paradigm and third party defendant Ken Wilkerson, alleging claims of defamation, tortious interference with contracts, tortious interference with business expectations, violation of the Lanham Act, breach of contract, and violation of the Computer Fraud and Abuse Act.
Now before the Court are Celeritas' Motion for New Trial Regarding their Counterclaims (Doc. 497), Renewed Motion for
At the close of Celeritas' evidence, Paradigm and Wilkerson moved for judgment as a matter of law as to both of Celeritas' counterclaims. After hearing argument, the Court granted Paradigm's and Wilkerson's motion, dismissing Celeritas' claims for defamation and tortious interference with business expectation. Celeritas now moves for a new trial pursuant to Rule 59(a) of the Federal Rules of Civil Procedure on these counterclaims. The basis of their motion is that the Court erred by failing to construe the evidence and inferences in a light most favorable to Celeritas, weighed the credibility of Celeritas' principal witness as to its counterclaims, and substituted its own judgment for that of the jury in ruling that Celeritas failed to demonstrate that it was damaged by Paradigm's and Wilkerson's alleged defamatory statements. For the following reasons, we deny the motion.
A motion for new trial under Rule 59(a) is committed to the sound discretion of the trial court.
Celeritas argues that during trial, they submitted evidence from which the jury could have found that Wilkerson made the alleged defamatory statements. Specifically, Celeritas asserts that certain emails of Eilene Nettleton-Stanger, along with entries she made into ESRI's Pivotal system, proved that the defamatory statements Wilkerson made to Steve Kinzy caused Celeritas' termination from ESRI's business partner program. While Celeritas agrees that this evidence is hearsay, they contend that it is nonetheless admissible because neither Paradigm nor Wilkerson objected to its admission at trial. As a result, Celeritas suggests that there existed sufficient question so that the Court should have permitted their counterclaims to go to the jury.
The issue is not whether Stanger's emails and Pivotal entries were admissible, but whether the evidence presented was so speculative that there was no legally sufficient basis for a jury to find in favor of Celeritas on their counterclaims. The only evidence that controverted Kinzy's testimony was speculative and unreliable, and the Court is not required to submit such evidence to the jury. As the Tenth Circuit has recognized,
Stanger, who was neither present nor a party to Kinzy's conversation with Wilkerson, relied on Kinzy as the source for both her emails and the Pivotal time entries. Kinzy, who had the actual conversations with Wilkerson, and thereafter, Stanger, disagreed with the accuracy of Stanger's entries and testified that Wilkerson did not make the statements to which Stanger attributed to him. Stanger's testimony failed to provide any reliability to her entries, which are clearly speculative in nature. As a result, because Celeritas' evidence relating to Stanger's emails and Pivotal time entries merely rest upon speculation, the Court was not required to submit that evidence to the jury.
Kinzy further testified that neither Wilkerson nor Paradigm contributed to ESRI's decision to terminate Celeritas from its business partner program, and in fact, he had recommended Celeritas' termination from the program after a 2006 evaluation due to Celeritas' failure to provide financial or strategic value to the program. Stanger's emails do nothing to controvert Kinzy's testimony that, notwithstanding any alleged statements by Wilkerson or Paradigm, Celeritas would have been terminated from ESRI's program. Celeritas failed to present any evidence to demonstrate that, as a result of any alleged defamatory conduct by either Paradigm or Wilkerson, its relationship with ESRI was affected in ways that would not otherwise have been affected absent the alleged conduct. Therefore, judgement as a matter of law on their counterclaims was appropriate.
Paradigm and Wilkerson also suggest that granting a new trial based on Celeritas' hearsay evidence would be futile. They contend that their lack of objection at trial does not preclude them from asserting their objection to the admission of this hearsay evidence in a future trial or moving for summary judgment, and as Celeritas' counsel agreed, without this evidence, their counterclaims fail. Interestingly, Celeritas argues that Paradigm's and Wilkerson's failure to object to this admission of hearsay evidence became a stipulation, and therefore, neither is permitted raise objection in the future. This argument is without merit. A party does not "stipulate," or admit to the facts contained in any particular piece of evidence simply because they choose not to object to its admission into evidence. As Wilkerson's counsel indicated, it was a strategic decision made for this trial, as nowhere in the record does either party make any express or implied admission relieving Celeritas from proving any particular set of facts contained within either Stanger's emails or her Pivotal system entries. Therefore, neither Paradigm nor Wilkerson would be precluded, as Celeritas suggests, from raising an objection to Celeritas' attempt to admit this hearsay evidence in a future trial.
Celeritas also argues that the Court erred by ruling that the jury could not legally conclude that Celeritas was damaged by the change in the tenor of their relationship with ESRI. Celeritas asserts that during trial, it provided sufficient evidence concerning damages that
Paradigm and Wilkerson contend that the evidence presented at trial proves that Celeritas suffered no damage as a result of being terminated from the business partner program with ESRI. They argue that Celeritas' CEO, Rob Cossins, testified that the only damages Celeritas was claiming was related to the costs they would incur in converting their GIS software over to another vendor, which are costs that would not be incurred if Celeritas chose not to migrate to another GIS software solution and remain with ESRI. Paradigm and Wilkerson claim that because it is Celeritas' choice to migrate to another software vendor, they are creating their own damages and have shown no harm that directly results from any statements or actions of Paradigm or Wilkerson.
Relying on Sunlight Saunas, Inc. v. Sundance Sauna, Inc.,
Celeritas compares the evidence presented in Sunlight Saunas to that of their own presented at trial, suggesting it illustrates prejudicial error. Specifically, Celeritas contends that they established damages through testimony proving that the business partner agreement between Celeritas and ESRI was terminated, and immediately after receiving notice of that termination, Celeritas feared its systems would stop functioning. Celeritas further claims their attempts to contact ESRI by email, telephone, and letters to gain information to alleviate this fear went unanswered. As a result, Celeritas asserts they lost confidence in ESRI, and thus, are
Contrary to Celeritas' assertion, the evidence they presented at trial failed to prove that they were damaged by any defamatory conduct of either Paradigm or Wilkerson. While it is true that ESRI at one point terminated Celeritas from its business partner program, Celeritas did not provide any evidence of how that termination caused them damage. Instead, Celeritas presented testimony showing how Celeritas thought they might be damaged, such as experiencing an interruption in software functionality. However, no such stoppage occurred. In addition, Celeritas suggests that they were damaged simply by the fact that ESRI terminated their membership in the business partner program. But as the Court indicated in its comments at trial, the evidence demonstrated that the termination did nothing to alter Celeritas' current business process, and in fact, Celeritas continued to operate using ESRI's product as they had when they were a member of the business partner program. The only evidence concerning damages that Celeritas alleged were a result of any defamatory conduct by either Paradigm or Wilkerson was the cost Celeritas would incur in the future in migrating to another vendor—an action that was the result of Celeritas' loss of confidence in ESRI due to ESRI's conduct rather than any conduct of Paradigm or Wilkerson. In contrast to the plaintiff in Sunlight Saunas, Celeritas provided no evidence of lost or decreased business or damage to their reputation with customers, or fielded or spent any time responding to complaints or concerns by their customers regarding Celeritas' reputation, nor did they provide any other evidence to show how the business or its reputation was negatively affected.
A plaintiff alleging defamation must prove actual damages that resulted from the defendant's conduct.
Pursuant to Rule 50(b) of the Federal Rules of Civil Procedure, Celeritas renews their motion for judgment as a matter of law previously made under Rule 50(a) at the close of Paradigm's evidence at trial. A post-trial motion for judgment as a matter of law pursuant to Fed.R.Civ.P. 50(b) is appropriate only if the evidence, viewed in a light most favorable to the nonmoving party, "points but one way and is susceptible to no reasonable inferences supporting the party opposing the motion."
Celeritas moves for judgment as a matter of law on Paradigm's breach of fiduciary duty claim, arguing that during trial, Paradigm failed to present clear and convincing evidence that it and Celeritas entered into a joint venture. Celeritas first asserts that Paradigm failed to provide any evidence that they shared profits, and absent such a showing, there could be no joint venture relationship. They further assert that Mark Allen's testimony that a joint venture existed failed to meet the clear and convincing standard, and as a result, judgment as a matter of law is required for this claim.
Celeritas contends that Paradigm failed to present clear and convincing evidence that a joint venture relationship existed between the parties. Relying on PulseCard, Inc. v. Discover Card Services, Inc.,
In addition to the foregoing, Celeritas argues that the actual operation of the business demonstrates that there was no joint venture. Celeritas asserts that the evidence presented at trial clearly showed that Paradigm had no access to the soft-ware code, and in fact, the code and passwords were exclusively controlled by Celeritas. Celeritas contends there was no evidence showing joint ownership of any business assets, no joint employees, and no joint agreement fixing any salaries. Celeritas finally argues that, even more importantly, there was no winding down of the alleged joint venture and no discussion of or payment of compensation by Celeritas
Relying on Modern Air Conditioning, Inc. v. Cinderella Homes, Inc.,
Paradigm also argues that the testimony of Celeritas' own President, Brett Lester,
Paradigm asserts that, in addition to the Partnering Document, the lack of testimony rebutting Allen's statements allows the reasonable inference that Allen's testimony was accurate. Further, Paradigm asserts that because Allen's testimony was clear and unrebutted, it was convincing evidence that, coupled with all the other evidence presented, including the Partnering Document, the parties intended, and in fact did, enter into a joint venture with respect to the development and sale of the Cartridge.
When viewing the evidence in the light most favorable to Paradigm, the non-moving party, the Court cannot agree with Celeritas that Paradigm failed to present evidence sufficient to support the jury's finding that Paradigm and Celeritas were engaged in a joint venture.
In Kansas, a joint venture exists where two or more corporations associate
Here, Allen testified that he had a conversation with Lester in October 2006 in which they discussed partnering with each other to develop and sell a community awareness solution. Thereafter, Lester drafted a Partnering Document wherein he indicated that their goal was to "outline an agreement that will detail the `
When questioned by Paradigm's counsel regarding the Partnering Document, Lester agreed that the document was a fair representation of Celeritas' relationship with Paradigm in 2003 and 2004, and it was the result of the agreement he and Allen reached as a result of their initial October 2003 discussion. Evidence was also presented at trial indicating that, although there was no pooling of funds, Paradigm and Celeritas shared expenses related to both the Cartridge's development and advertising, combined their skills, knowledge, business processes, and manpower to develop the Cartridge, shared control over pricing, and shared responsibility for determining the product's requirements during development.
Celeritas claims that even if a joint venture and its attendant fiduciary duty existed between them and Paradigm, Paradigm failed to prove that Celeritas breached any such duty. Celeritas argues that Paradigm's only claim for breach of fiduciary duty stems from Celeritas' filing of a patent application. Celeritas contends that because the filing took place after the joint venture terminated,
Paradigm asserts that its claim for breach of fiduciary duty extends beyond Celeritas' filing of either the provisional or non-provisional patent applications, but includes the secret preparation of the '718 Application and the use of Paradigm's confidential information and trade secrets in filing those applications. Paradigm contends that absent the fiduciary relationship created by virtue of the parties' joint venture, Celeritas would not have been privy
Celeritas' claim that there was insufficient evidence to demonstrate they breached their fiduciary duty to Paradigm is unconvincing. When a joint venture is found to exist, the existence of a fiduciary relationship may be inferred.
Celeritas argues that even with the existence of a joint venture and its attendant fiduciary duty, Paradigm's damages theory as presented at trial is fatally flawed because it failed to fit the facts of this case and because it fails under Daubert v. Merrell Dow Pharmaceuticals, Inc.
After reviewing Dr. Ward's trial testimony and his testimony at the Daubert hearing, we find no reason to alter the previous ruling issued by this Court regarding Dr. Ward's testimony. Therefore, based on the reasoning as explained in our November 17, 2009 Order, 2009 WL 3855677, we conclude that Paradigm's damages theory was not legally defective, as Dr. Ward's testimony meets the standards as set forth in Daubert, and his conclusions were supported by the facts of this case.
Celeritas asserts that because no joint venture existed, they had no duty to
Evidence presented was also sufficient to permit the jury to reasonably conclude that it was unlikely that Paradigm or its counsel could have discovered the patent applications so as to question Celeritas about them. In filing the applications, Celeritas requested that they not be made public, and absent Celeritas informing Paradigm of their existence, Paradigm would neither have reason to search for them or likely locate such filings. Due to the parties relationship, Paradigm reasonably expected Celeritas to disclose this information because, as Paradigm's witnesses testified, such disclosure would have impacted the type of information disclosed in the development of the Cartridge. Thus, because sufficient evidence was presented to permit the jury to legally return a verdict in Paradigm's favor on its claim of fraud by silence, we deny Celeritas' motion with respect to this claim.
Celeritas contends that because the testimony at trial failed to prove that they disclosed any of Paradigm's trade secrets, they are entitled to judgment as a matter of law on this claim. Celeritas argues that of the four alleged trade secrets testified to by Paradigm's President of GIS, Matt Brunett, no evidence indicated that Celeritas disclosed any of them. Celeritas further asserts that nowhere in the patent applications does Celeritas make any reference to the processes Brunett described, claiming that they are seeking patent protection for Celeritas' software and not Paradigm's public awareness processes.
As Paradigm correctly asserts in its response, their principal claim of misappropriation has not been that Celeritas disclosed its trade secrets and confidential information, but that they used Paradigm's trade secrets in preparing, filing, and prosecuting the patent applications. Evidence was presented at trial that the processes, as described by Brunett, were used in the patent applications by providing information and descriptions that otherwise could not have been provided absent Paradigm's processes. As example, Brunett testified that as part of the patent applications, Celeritas included a map bearing Paradigm's job number that was generated through use of the four processes described by Brunett, without which the map would not have existed as presented by Celeritas in the application.
Celeritas argues that it is entitled to judgement as a matter of law for Paradigm's breach of contract claims. Celeritas once again argues that because they never disclosed Paradigm's confidential information in the patent applications, they did not breach any confidentiality or non-compete provisions of the contracts. Celeritas asserts among other things that, because the maps and software description were generally available to the public through the parties' marketing material, Celeritas did not breach any contract. They argue that disclosure of screenshots and maps cannot constitute breach of any obligation of confidentiality or disclosure as those items were part of the product's software product description, which was provided to potential customers without restriction. As such, Celeritas posits the information was made available by means other than through any alleged breach of confidentiality under the contracts, and thus, no liability results.
In response, Paradigm argues that Celeritas once again focuses solely on disclosure and ignores the improper "use" of its confidential information. Nevertheless, Paradigm asserts that its claim was not limited to just the screenshots that appears in the patent applications, but also included confidential information that Celeritas provided, without Paradigm's permission, to its patent attorney during the time the parties were exchanging information during the product's development stage. Specifically, Paradigm points to evidence demonstrating that in January to February 2004, while Celeritas was working with Paradigm and receiving confidential information regarding the product's development, Larry Miley, Celeritas' Product Manager, was secretly providing this information to Celeritas' patent attorney in the effort to patent the product. Paradigm contends that Celeritas' patent attorney was not a "need to know" person under the terms of the agreements.
Paradigm also asserts that the Reseller Agreement contained broad language not to compete. Paradigm argues that Celeritas' cease and desist letter, coupled with Celeritas' CEO Rob Cossins' testimony that Celeritas files patent applications to gain a competitive advantage, was more than sufficient evidence to permit a jury to find that Celeritas' took steps to compete with Paradigm in violation of the agreements.
The Court concludes that, in reviewing the record in a light most favorable to Paradigm, a legally sufficient evidentiary basis exists to permitted the jury to properly find for Paradigm on its contract claims. Evidence was presented demonstrating that specific information was shared during the development of the Cartridge, without Paradigm's knowledge or consent, and as previously discussed, used in pursuit of patenting the parties' jointly developed product. In addition, a jury could find from the evidence that identifying addresses within the buffer zone, which is an item identified by Celeritas in its filings, constitutes use of Paradigm's confidential information. Evidence was also provided that would permit a jury to conclude that Celeritas violated the non-compete provision of the Reseller Agreement, including Celeritas' patent filings on the Cartridge, the cease and desist letter sent to Paradigm, and Cossins' testimony relating to Celeritas' reasons for patenting products.
Celeritas also argues that even if there was a breach of contract, Paradigm has failed to prove damages caused by any such breach. We disagree. As a result of Celeritas' breach of these agreements,
Celeritas argues that Paradigm's expert investigating the alleged hacking of its computers, Daniel Jablonski, was hired not by Paradigm, but by Paradigm's counsel to assist in this litigation and not to conduct any damage assessment of Paradigm's computers. Accordingly, Celeritas contends that Jablonski's fees for his services are not recoverable under the Computer Fraud and Abuse Act ("CFAA"). In support, Celeritas relies on an invoice sent by Jablonski to Mike Cargnel, one of Paradigm's counsel. Celeritas also claims that Jablonski failed to conduct any type of forensic examination of Paradigm's servers, further supporting their contention that his expense was in the course of litigation and not a loss under the CFAA. Finally, Celeritas asserts that Jablonski's fee was not based on an hourly rate, but an "agreed to" charge that is conveniently above the statutory requirement in order to be a qualifying loss under the CFAA.
Paradigm argues that the costs incurred in responding to a computer attack is a qualifying loss under the CFAA. Paradigm claims that it hired Jablonski to investigate Celeritas' attempted hacking to determine whether its computers were in fact accessed, and if so, determine whether any damage resulted. In doing so, Jablonski interviewed the owner of the hosting company for Paradigm's PDQWeb application, Aaron Gibbs. Jablonski later determined that Celeritas attempted several times to access Paradigm's PDQWeb application but was unsuccessful. Being unsuccessful, Jablonski found no damage to Paradigm's systems.
First, the Court finds Celeritas' argument that Jablonski was hired by Paradigm's counsel and not Paradigm unpersuasive. Although Jablonski sent an invoice to Paradigm's counsel on December 26, 2007, he testified at trial that he was hired by Paradigm, not by the Shook Hardy & Bacon law firm or by Mike Cargnel. Celeritas had the opportunity to question Jablonski regarding this statement, and they chose not to do so. The Court is unwilling to presume from this invoice alone that Jablonski was hired by Paradigm's counsel for the purpose of assisting in this litigation. Such a finding would be contrary to Jablonski's testimony and wholly speculative.
Jablonski testified that he was hired by Paradigm to investigate a possible hacking attempt into Paradigm's computer system. During this investigation, Jablonski interviewed Gibbs and also Paradigm's Vice President of Business Applications/Vice President of GIS/IT Matt Brunett. In addition to these interviews, Jablonski reviewed server logs, identified suspicious IP addresses, and eventually traced those IP addresses through the American Registry of Internet Numbers to Celeritas. After identifying the IP addresses, Jablonski reviewed the pattern of the attempted accesses to determine the username and passwords used. Jablonski also noted that password recovery was also attempted. While Jablonski testified that he did not himself physically examine the servers,
Celeritas contends that because Paradigm failed to provide clear and convincing evidence that Celeritas acted in a willful, wanton or malicious manner, Paradigm's punitive damages claims should be dismissed. Paradigm responds by arguing that Celeritas' arguments on this issue are brought before the Court for the first time in its Rule 50(b) motion, and as a result, they should be denied.
After reviewing Celeritas' Rule 50(a) motion, including the arguments incorporated through their Motion for Summary Judgment, the Court concludes that Celeritas is raising this issue for the first time in this Rule 50(b) motion. As Paradigm correctly asserts, "issues not raised in an initial Rule 50(a) motion may not be asserted in a subsequent post-trial motion for judgment as a matter of law under Rule 50(b)."
Celeritas moves for a new trial pursuant to Rule 59(a) & (e) of the Federal Rules of Civil Procedure. The Court has already identified the standard for reviewing a motion for new trial under Rule 59(a) supra is Section 1 of this Order. A motion to alter or amend judgment pursuant to Rule 59(e) may be granted only if the moving party can establish: (1) an intervening change in the controlling law; (2) the availability of new evidence that could not have been obtained previously through the exercise of due diligence; or (3) the need to correct clear error or prevent manifest injustice.
Celeritas claims that throughout the entire trial, Paradigm made improper arguments and introduced incompetent evidence concerning issues involving the patent applications. Celeritas argues that Paradigm built its case on the theory that Celeritas stole and attempted to patent Paradigm's ideas and business processes to prevent Paradigm from competing in the marketplace. Celeritas asserts that due to the scope of Paradigm's claims, the central question is whether the patents admitted into evidence cover Paradigm's ideas, processes, and basic business model. Celeritas contends that to answer this question, the Court must, according to the Supreme Court's holding in Markman v. Westview Instruments Inc.,
Markman was an action where the holder of a patent for inventory control sued a competitor for patent infringement. After
Paradigm argues that referencing patent applications during trial neither coverts this suit to a patent case nor does it invoke Markman. Paradigm asserts that the language employed in the patent applications, along with images that depict certain results that could only be obtained through those processes, was the same language and images that the parties used in their product description for the Cartridge and other documents developed during the product's development. Paradigm contends that although it read parts of the patent applications to the jury, such a reading does not, as Celeritas suggests, require the Court to construe any of the patents' claims.
As Celeritas correctly asserts, a "patent case" is one in which either "federal patent law creates the cause of action or [where] the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal patent law, in that patent law is a necessary element of one of the ... claims."
Celeritas also contends that a new trial is required because they were precluded from calling their patent counsel, James Stipek, as a witness, and their case was prejudiced as a result. Celeritas argues that through "ambush tactics," Paradigm blatantly mischaracterized to the Court the nature of Stipek's deposition testimony, and based on this mischaracterization and without first reviewing the deposition transcript or permitting any briefing,
Paradigm called Stipek as a fact witness during its case-in-chief, and to the extent Celeritas had the opportunity to cross-examine him on issues within the scope of that testimony and chose not to, they can-not meaningfully claim prejudice now. The Court is also convinced, as it was at trial, that Celeritas' counsel precluded Stipek from testifying during his deposition to a number of questions concerning this action claiming attorney-client privilege that were clearly outside the scope of that privilege. Celeritas now proffers a number of topics that Stipek would have testified at trial, but those topics were not made known to the Court during trial in response to Paradigm's arguments to exclude Stipek.
In addition to the reasons previously discussed, Celeritas moves for new
It is within the trial court's discretion to exclude the testimony of a witness that violates the court's sequestration order.
Celeritas argues that the Court should reduce the amount of actual damages because the amount awarded by the jury is not supported by the evidence. Celeritas asserts that the Court must examine the evidence for only a three to six month time period in 2004, which clearly demonstrated that total sales for the Cartridge
Celeritas' arguments concerning Paradigm's damages theory and the evidence supporting damages are not new to the Court. Celeritas has previously raised this issue in their motion to exclude Dr. Ward's testimony, in a motion in limine, and in their renewed motion for judgment as a matter of law, where the Court concluded that Paradigm's damages theory was sufficient. The Court also determined that the evidence presented at trial supported Paradigm's theory, and it was for the jury to determine the actual amount from that evidence. Therefore, the Court will not once again revisit the issue here other than to state that our review of the record demonstrates that the evidence presented to the jury supports the actual damages award covering the time period that Paradigm would have sold its equivalent product, which encompassed more than a three to six month time period in 2004. Therefore, Celeritas' motion to reduce the actual damages awarded is denied.
Celeritas also argues that the Court should grant a new trial on punitive damages because the jury was not instructed to consider Celeritas' financial condition when determining whether to award such damages. Celeritas argues that Paradigm failed to present evidence of Celeritas' financial condition and suggests that they themselves had no burden to present such evidence. The burden of presenting evidence of financial condition as a mitigating factor to punitive damages, however, rests with Celeritas, and not Paradigm.
Celeritas also moves the Court to reduce the punitive damages amount, arguing that the amount awarded was excessive. In determining the constitutionality of a punitive damage award, the Court must consider: "(1) the degree of reprehensibility of the defendant's misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases."
When determining the reasonableness of a punitive damage award, the most important of these guideposts is the reprehensibility of the defendant's misconduct.
Celeritas argues that all of these factors weigh against the punitive damages award. The first factor considers the nature of the injury. Neither party contends that the harm caused by Celeritas' acts were physical, and thus, Paradigm's injury was purely economic in nature. But economic injury may still result in significant penalty when the acts complained were intentional. As the Supreme Court explained, "infliction of economic injury, especially when done intentionally through affirmative acts of misconduct, or when the target is financially vulnerable, can warrant a substantial penalty."
The second factor does not support a punitive damages award. The conduct at issue does not reveal an indifference to or a reckless disregard of the health or safety of others.
The third factor of reprehensibility considers Paradigm's financial vulnerability. Here, there is no evidence that Paradigm was in a position of financial weakness when compared to Celeritas, and because neither party asserts such a claim, we conclude that this factor does not favor a punitive damages award.
The fourth factor addresses whether the conduct at issue involved repeated actions or was simply an isolated incident. Celeritas argues that their conduct involved only a one-time omission, and accordingly, is not reprehensible conduct. Paradigm, however, claims that Celeritas' conduct involved multiple instances of breaching their fiduciary duty and false statements over the entire length of their joint venture relationship. Nevertheless, Paradigm asserts that even if Celeritas' conduct is viewed as one instance, that one instance had substantial results that supports the rather, they were formulated to determine whether an award is grossly excessive and violates due process. See id. at 417, 123 S.Ct. 1513 ("To the extent an award is grossly excessive, it furthers no legitimate purpose and constitutes an arbitrary deprivation of property.")
The fifth factor assesses whether the harm resulted from intentional malice, trickery, or deceit, or whether it was merely the result of accident or oversight. It is clear that Celeritas' conduct was not the result of accident or oversight. Evidence demonstrated, among other things, that within the parties' fiduciary relationship, Celeritas failed to disclose to Paradigm that they were using confidential information obtained from Paradigm in their patent applications. In addition, Celeritas took steps to prevent the filings from being publicly available, which also impacted Paradigm's ability to learn of the filings. Based on the record, we conclude that this factor supports a punitive damages award.
Taken as a whole, the Court concludes that the factors reveal a level of reprehensible conduct by Celeritas that supports a punitive damages award.
While the Supreme Court has declined to establish a bright-line ratio for which a punitive damages award cannot exceed, it has established that "in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process."
In this case, the ratio between punitive damages and compensatory damages is 2.3 to 1.
The Court declined to reduce the amount of actual damages, and therefore, Celeritas' argument is without merit. In addition, as part of the jury's verdict, it found that Celeritas' conduct was willful, wanton, and malicious to such degree as to award punitive damages in an amount just over two times the actual damages awarded. We see no reason to conclude as a matter of law that this amount is unreasonable in light of the evidence presented. The Court, therefore, concludes that a ratio of 2.3 to 1 is reasonable and proportionate to the amount of harm suffered by Paradigm and to the amount of compensatory damages it recovered.
The third guidepost requires that the Court look at the "disparity between the punitive damages award and the civil penalties authorized or imposed in comparable cases."
The Kansas Uniform Trade Secrets Act ("KUTSA")
After reviewing the requisite guideposts as set forth by the Supreme Court, we conclude that the punitive damages awarded are not unconstitutionally unreasonable, and therefore, we deny Celeritas' motion.
Paradigm moves the Court to alter or amend the judgment to include both a declaration that it is a fifty percent co-owner of the patent applications and to impose a constructive trust on any benefits, rights, or interests that Celeritas has or will obtain from the patent applications. Paradigm contends that, because the jury found in its favor on its claims for breach of fiduciary duty, fraud, and misappropriation of trade secrets, it is now entitled to the declaratory relief requested. Paradigm argues that declaratory relief is appropriate and does not constitute double recovery because the jury awarded compensatory damages for its past injury, and the declaratory relief targets the harm Paradigm will suffer in the future based on patents that may issue from those applications.
Paradigm relies on Foster v. Boch Industries
Contrary to Paradigm's contentions, to provide the equitable relief requested and give Paradigm a 50% ownership interest in the pending patent applications would require the Court to construe the applications, which we decline to do at this point of this litigation. While it may be true, as Paradigm asserts, that it has claimed an ownership interest in the patent applications from the beginning of this action, it failed to raise this issue with the Court at any point past the Pre-Trial Order, and this issue was not presented at any time during trial. Thus, it appears Paradigm made the strategic choice to proceed without raising this claim. The Court concludes that the jury verdict provided an adequate remedy for Paradigm's injury.