Atos a choisi pour l’appel une star des avocats américains, Me Kannon SHANMUGAM, qui plaide aussi devant la Cour Suprême. Vous pourrez juger par vous même, si la plaidoirie vaut la douloureuse dont Atos s’est bien gardé de communiquer le montant, mais qui doit se situer entre $9M et $15M (depuis le prononcé du verdict de première instance à aujourd’hui et en incluant les négociations post-verdict).
Après le podcast audio, qui était disponible sur le site de la cour d’appel, ceci est une exclusivité du blog disponible nulle part ailleurs. La retranscription écrite de l’intégralité des plaidoiries du 19 septembre 2022.
Vu la douloureuse, autant que vous en profitiez!
Plus sérieusement, pour ceux qui se font un plaisir d’exister via la critique de ce blog, ça a été des heures de travail bénévole de votre serviteur…
Licence shareware, c’est à dire que vous pouvez reproduire le texte mais en mentionnant l’origine, à savoir atos.blog
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La lecture détaillée de ces plaidoiries qui s’ajoute à toutes les autres pièces, (1) attendus de la juge de première instance (2) conclusions d’appel des parties (3) lecture d’une partie des 2300 exhibits (annexes), me conforte dans une estimation de perte de l’appel, avec une estimation légèrement relevée à la hausse pour Syntel avec 90% de chance de perdre l’appel et 10% de chance de gagner l’appel pour Syntel. Je me mets donc sur la même ligne que Lamaban.
Je ne passe pas à 100% de chance de perte pour Syntel à cause d’une phrase un peu choc de « notre avocat », Me Shanmugam, bien envoyée, que je commenterais à la fin des plaidoiries pour laisser un peu de suspens. Sans cette phrase, je serais à 100% de chances de perte pour Syntel. Il faut savoir que ces plaidoiries extrèmement courtes ne jouent peu sur le verdict, à la marge, et que les cours d’appels détestent se faire déjuger par la cour suprême, aussi, même une phrase bien envoyée, a une chance infime de changer la vision purement juridique de la cour et dont le principe est d’appliquer le droit à la lettre. D’autre part, les juges US ne sont pas contre créer des jurisprudences fortes!
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Résumé
-Syntel a interjeté appel le 26 mai 2021.
-Les parties ont déposés leurs conclusions en mai 2022.
-Après le dépôt des conclusions, les plaidoiries ont été programmées le 19 septembre 2022.
Il s’agit de plaidoiries dîtes « plaidoiries simplifiées », ou « plaidoiries synthétiques » avec un temps de parole « libre » de seulement 10mn pour chaque partie, hors temps de parole pour répondre aux questions des juges, ce qui nous donne finalement avec les questions des juges, une audience de 41mn, mais somme toute extrèmement succinte pour décider de l’avenir d’une peine de 600M€ en jeu…
Ces plaidoiries sont en anglais et en « US-english » donc avec des forts accents. Aussi nous vous proposons ci-après la transcription écrite réalisée par moitié avec un logiciel et par moitié avec de l’huile de coude.
Bien-entendu, la version audio reste disponible pour les anglophones.
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Avant de démarrer la lecture des plaidoiries, une petite présentation des acteurs :
La cour
Elle est composée d’un panel de 3 juges dont vous pouvez lire la bio :
Juge principal : Raymond J. Lohier, Jr.
Juges suppléants : Reena A. Raggi – Richard C. Wesley
Les Avocats
Pour Syntel : Me Kannon SHANMUGAM
https://www.paulweiss.com/professionals/partners-and-counsel/kannon-k-shanmugam
Pour TriZetto : Me John O’QUINN
https://www.kirkland.com/lawyers/o/oquinn-john-c
A NOTER QUE CES DEUX AVOCATS SONT LES « AVOCATS EN CHEF », MAIS ILS TRAVAILLENT AVEC UNE EQUIPE D’ENVIRON 10 AVOCATS « JUNIORS » COMPTE TENU DU NOMBRE D’EXHIBITS (annexes).
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LES PLAIDOIRIES
Note préliminaires: les avocats durant la plaidoiries utilisent l’expression « my friend« au lieu de dire « confrère » pour désigner l’autre avocat. Il me semblait important de le préciser pour la compréhension globale.
Greffier
Your argument next is Syntel Sterling Versus The TriZetto group, case 21:1370.
Judge Lohier
Thank you. Thank you, counsel.
Kannon Shanmugam
Good morning judge Lohier, Kannon Shanmugam of Paul Weiss for the Syntel appellants.
May it please the court.
The district court in this case committed fundamental errors as to both liability and damages. In upholding the award of nearly $600 million for violations of the Federal Defend Trade Secrets Act. As to liability, the district court permitted TriZetto to skirt the requirement that it identifies its claim trade secrets with particularity. That requirement is necessary to define the protected property, to permit a defendant to be able to defend itself, and to ensure that a lay jury can determine the existence of a trade secret. Here, however, TriZetto made no effort even to identify the majority of the claim trade secrets at trial. Merely providing the jury with a list of documents.
Judge Lohier
Why isn’t that enough to satisfy the particularity or specificity requirements?
Kannon Shanmugam
It isn’t enough because when you look at the cases that have applied this requirement, they have consistently done something more. They have required the plaintiff to identify with detail the protected subject matter. Now, that doesn’t require a one-by-one analysis, but it requires something more than merely saying: « here is a list of documents, or even a single document. Here is some source code. »
Judge Lohier
How does Mr. Noonan’s testimony come up short as to software trade secrets tools? Trade secrets or the manuals and guides?
Kannon Shanmugam
So let’s be clear with regard to the guides and manuals, because Mr. Noonan only talked about one of those 97 guides and manuals in any detail. In fact, the list hadn’t even been provided to jury at that point. And all that he did, and this is at pages 246 to 250 of the appendix, was to describe the relevant guide, the Data Model guide, as quote, describing in a technical way the architecture of TriZetto’s database. Now, that’s a description. And to be sure, there were descriptions of, for instance, what the software did.
Judge Raggi
There were also exhibits.
Kannon Shanmugam
Well, there were in the sense that the documents were available to the jury. But TriZetto’s entire argument was essentially to say to the jury, just go and look at this material and figure out for yourself what is protected.
Judge Raggi
It might not be the best argument, but in reviewing a jury verdict now, don’t we have to assume it did just that? And then the question becomes whether it was sufficient to admit the ruling?
Kannon Shanmugam
Well, I don’t think so, Judge Raggi, because if the court were to do that, it would eliminate the specificity requirement as a practical matter entirely.
Judge Raggi
You did ask for a specificity charge. I did see that. Right?
Kannon Shanmugam
Yes, that is correct.
Judge Raggi
District court did not give
Kannon Shanmugam
with regard to the DTSA claim, that is correct.
Judge Raggi
Right. Now, you did not argue on appeal that error was with respect to the charge. You bring a straightforward sufficiency challenge. Correct?
Kannon Shanmugam
Right.
Judge Raggi
And that whether the charge was given or not, this evidence is not sufficient.
Kannon Shanmugam
Yes, well, and it’s complicated, Judge Raggi, by the fact that the instruction was given with regard to the New York State law trade secret claim. But let’s put that aside. I’m willing to acknowledge that, which is to say…
Judge Raggi
Why don’t we assume that the jury not only heard the testimony, but looked at the exhibits, and together they’re enough to satisfy specificity?
Kannon Shanmugam
I don’t think so, because that would be conflating the argument that we’re making concerning the specificity requirement with the substantive requirement for what qualifies as a trade secret. And I think that those two things…
Judge Raggi
Explain that to me.
Kannon Shanmugam
Well, I will, it’s a little bit metaphysical, and I have to say that the cases that address this issue are a little bit under-theorized. Everyone acknowledges that there is a specificity requirement, but I think the right way to think about it, Judge Raggi, is that the specificity requirement defines the trade secret that is protected.
In other words, it tells you what the property interest is. And this is somewhat unique to the context of trade secrets, because if you think about other types of intellectual property, like patents and copyrights, those are, of course, defined typically by…
Judge Wesley
is it sufficiently defined by reference to a testimony in this case, Mr. Noonan, specifically saying that it’s kept in a confidential way? It’s regarded as confidential information?
Kannon Shanmugam
No, I don’t think that it is, because it’s one thing to say that the document is kept confidential. The really critical question is what is the know how? What is the subject matter that is protected? And I would point the court
Judge Lohier
enough just to say how it works in the general manner. That is for example, the case study allows them to dry-run alterations with regard to the programming for a particular client, maybe a health insurer as opposed to a hospital, and that they’re then able to anticipate difficulties with regard to the software without actually going through working out bugs after it’s been inserted. That that’s a particular kind of aspect of this program that makes it unique to TriZetto experience.
Kannon Shanmugam
So I think that something more would be required than even that. But I underscore at the outset
Judge Wesley
how much more would you ask?
Kannon Shanmugam
So I think at a minimum, there has to be a description of what it is in the document, in the source code that is trade secret. And I would to point the court to
Judge Wesley
you do Google searches, don’t you ?
Kannon Shanmugam
from time to time, yes.
Judge Wesley
How Google does searches is incredibly important information to people who want to utilize a Google search, right?
Kannon Shanmugam
Correct.
Judge Wesley
And Google probably has something within its logarithm that is unique and a trade secret. Does Google have to disclose the exact what makes it unique, or does it just have to show generally that there’s aspects of Google’s logarithm that allow that, then order who comes up one through three on the Google search?
Kannon Shanmugam
It does have to describe it. And I would point the court to the Third Circuit’s decision in Oakwood Lab.
Judge Wesley
Describing how sir ?
Kannon Shanmugam
well, I think this language…
Judge Wesley
excuse me, how it works or the particulars of what makes it work.
Kannon Shanmugam
It’s a little bit of both. Here’s what the Third Circuit said, which I think is a definition above which I can do no better. It said, quote to satisfy the particularity requirement, quote the subject matter of the trade secret must be described with sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons who are skilled in the trade and to permit the defendant to ascertain at least the boundaries within which the secret lies.
And I would note that with regard to the vast majority of the trade secrets here, we don’t even have what you just suggested in our colloquy; Judge Wesley with regard to one of the tools. And so the straightest path on this issue, I would submit is that if you agree that with regard to the 96 of the 97 guides and manuals that were just included in a subsequently provided list, with no testimony at all that is insufficient. I would point the court to the Third Circuit’s decision in Give it on.
Then at a minimum, the court needs to vacate and remand for a new trial. Now, I do want to spend a couple of minutes on the damages issue because I know this time is short.
Judge Lohier,
Why, why… just back up.
Why isn’t one way to look at this is whether the defendant was able to counter these claims. Well, if you, you know, you look at this record, there’s no sense, at least in my reading, that the defendant was not that your client was not able to counter the claims. So there’s every indication that it understood what the trade secrets were that that were at issue at trial.
Kannon Shanmugam
Well, I disagree respectfully with that Judge Lohier and let me explain why I think this is so important. TriZetto whole strategy here was, in some sense, to swamp the jury by claiming 104 trade secrets and not walking through all of them. That placed the burden of
Judge Lohier
Two are undisputed!
Kannon Shanmugam
with regard to appropriation, that is correct because of the district court’s preclusion order. But of course, here we’re talking about the threshold requirement of defining the trade secret. And I do think that if you read the record fairly as a whole, it was very difficult to defend against this precisely because there was a failure to identify the trade secrets such that we could really drill down on not just the question of what met the substantive requirements for trade secret, but also what was misappropriated here. And so I think in some sense, that’s why this requirement is so important and why courts have consistently said that the requirement is important. And to the extent that there might be difficult questions with how to draw the line in certain cases, I think we would acknowledge that the line is somewhere between doing nothing and going one by one in a way that would require you effectively to expose the trade secret in court. We’re not saying that Coca Cola has to come in and read the recipe.
judge Lohier,
I want to give you a minute. You are going to turn into damages.
Kannon Shanmugam
Well, I do, because I think that issue is extraordinarily important in its own right. And our fundamental submission is that the award of $285,000,000 in avoided costs here was wildly disproportionate. At a minimum, that award constitutes an obvious windfall to TriZetto, because the undisputed evidence here indicated that TriZetto suffered no more than $8.5 million in lost profits as a result of the alleged misappropriation. In fact, the profits, to us it is once again uncontroverted, were even smaller.
Judge Wesley,
The thing that I’m interested in is your client also is enjoined from employing any of the trade secrets that are allegedly employed in competing with them. Is that correct?
Kannon Shanmugam
Yes, that is correct.
There is a permanent injunction in place which, again, underscores
Judge Wesley,
That then seems like a double recovery for TriZetto because as I understand it, the 285,000,000 is a projection or a determination of what their development costs were in developing these trade secrets. In seems to me that if they’re made whole by that, then somehow it’s almost as if you purchase it so that the playing field is then level. Why wouldn’t the two of you compete with the same amount of development costs?
Kannon Shanmugam
That is exactly correct. Judge Wesley.
And let me set out our view of when avoided costs are appropriate and then bring in the relevance of the injunction. So our submission is that under sort of basic principles of compensatory damages, avoided costs are really appropriate in only limited circumstances.
First, where you destroy the value of the trade secret. Say you had a situation where you released Coca Cola’s formula to the New York Times. That’s a pretty straightforward example.
But leaving that aside, I think in a case where what you’re trying to do, as TriZetto is, is to use avoided costs as the proxy of the unjust benefit to us. We think that avoided costs are unavailable where the defendant’s gain can be readily calculated. Which is true here or where the defendant’s benefit does not equal the full cost of developing the trade secrets. And that’s where the injunction comes into play here because at most Syntel, it is alleged, used the trade secrets, the claim trade secrets only in providing services to a single additional customer UHG, that is the $8.5 million figure. Now, as you say, I suppose that one could imagine a hypothetical world in which if we were not enjoying, we would use the trade secrets not only to provide
Judge Wesley
beyond United Health that’s the idea?
Kannon Shanmugam
yes, right. And to develop competing software, which was never our goal parenthetically. But when you look at the relatively few cases where avoided costs are awarded, they’re typically cases in which the defendant is fully exploiting the trade secrets. But the permanent injunction prevents us from doing that. And one of the most notable things about TriZetto brief is that at one point TriZetto says: « well, look, if you think this is a problem, get rid off the permanent injunction ». And that illustrates well what is going on here. TriZetto wants this windfall and make no doubt about it, TriZetto makes quite clear that what it is trying to do here is to use this award to punish us. On page 70 of their brief, they say this is necessary so that Syntel can’t face meaningful consequences. But that’s not a compensatory award under any sense.
Judge Lohier
I think we have your argument.
Kannon Shanmugam
Yes, that renders it punitive. And of course, there was a punitive damages award in this case as well.
Thank you juge Lohier
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FIN DE LA PREMIERE PARTIE DE LA PLAIDOIRIE DE SYNTEL
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Judge Lohier
We’ll hear from Mr. O’Quinn for TriZetto?
Good Morning.
John O’Quinn
Good Morning. Thank you. Judge Lohier.
May I please the court, John O’Quinn on behalf of TriZetto.
As the district court found following the jury trial, the evidence showed that Syntel engaged in sustained course of illegal conduct against TriZetto pursuant to a long term strategy to pursue a billion dollar market opportunity in which it expected to make over $100 million a year. In this case. This is an unusual trade secrets case. There’s no question or dispute over what was taken. There’s no question over what was misappropriated. There’s no question that they had notice of the things that were asserted to be trade secrets individually using the gold standard for identification recognized by courts throughout the country. That if you’re talking about software, you can identify it using a source code and following the line that’s been drawn between things that were not adequately identified and that were adequately identified by any number of district courts within this circuit.. Namely, did you give the jury a specific exhibit to be able to access? Because that is exactly.
Judge Raggi
what that’s what you’re saying satisfies the sufficiency requirement, not the testimony of the witness by himself, but rather the testimony considered in conjunction with the exhibit. I mean these source codes.
John O’Quinn
I think that’s exactly right
Judge Raggi
Adversary says that sent the jury on a hunt for needles in haystacks. At least that’s how stood it. So why don’t you tell us why we shouldn’t be concerned about that on sufficiency?
John O’Quinn
Sure.
So, I think there are sort of three issues that are packed into there. One is this idea of identification. And my friend on the other side takes the idea of identification and then tries to load up a lot of other things with it. There’s no question here what was identified as trade secrets. There were 104 specific exhibits that were shown to the jury either individually or as a list and then discussed by various witnesses.
The second issue is, was there sufficient evidence for the jury to be able to decide, were these things kept confidential? Are they valuable because they were kept confidential? And that is what the testimony of the witnesses, Mr. Noonan, Mr. Bergeron were both addressed to. And with respect to the manuals and this gets to the third point that I want to make. This court can affirm, even if you don’t think a single manual was adequately identified. And just to be clear,
Judge Wesley
How do you say that?
John O’Quinn
Because this is a verdict on which there was a single legal theory that is a violation of the DTSA, on which there were different factual theories. And if one of them was insufficient factually, that’s not enough to vacate the entirety of the verdict. That’s the Supreme Court’s decision justice Scalia wrote it in the Griffin.
Judge Wesley,
You’re saying there’s one unit violation based and that could rest on one violation of the trade secret, one trade secret violation.
John O’Quinn
So for purposes of liability under the DTSA, the judgment of liability can be affirmed if any single one trade secret was properly found to be misappropriated, there’s sufficient evidence even as to one. And that’s why they don’t even try, because they know that they can’t show this court.
judge Wesley
Are we so held?
John O’Quinn
Your Honor, if you look, for example, at the Salmon Ease case that’s cited in our brief, as well as the Supreme Court’s decision in Griffin, if you have, the argument here is ultimately about sufficiency.
Judge Wesley
All your argument based on the DTSA. So we held in that context.
John O’Quinn
I don’t think this court has had a DTSA case where it has looked at it this way.
Judge Wesley
I don’t mean to interrupt you, but you’re saying 1s it wasn’t tried in a way that the defense was. Well, if you found one that only caused so much injury, if you found two that might have cause more injury, you’re saying it was tried that if any one trade secret was found, the damages, the ultimate injury to your client was the same.
John O’Quinn
Judge Wesley, almost. So I’m making two points. First, with respect to liability, if you look at appendix 524, that’s where the jury was instructed that it’s a single DTSA claim, any one factual theory will do. Then, with respect to the issue of damages, Judge Wesley if you look at appendix 421 to 425, that’s the testimony of Mr. Britvin. And under his testimony, there were essentially two… there were more than that, but for present purposes, there were two damages theories that were put to the jury. One was, if you just find the manuals to be have been misappropriated, what are the damages? The damages, there would have been $189,000,000.
For any of the other trade secrets, so the tools, the data dictionary, and to the extent there’s any doubt that it was identified adequately, they copied the data dictionary source code. Verbatim. We identified the data dictionary source code as being the trade secret. There was no doubt that it was kept confidential, and there was no doubt that the data dictionary itself was testified to have been the product of time and energy on how to organize the data, that’s appendix 261. But coming back, if they misappropriated the data dictionary, the custom code impact tool, the test cases, the… any single one of those,… any single one other than the manuals, the damages were 284 or $285,000,000, which is what the jury awarded.
Judge Wesley
That’s what they gave you
John O’Quinn
and that’s what they gave. So we would presume that the jury had acted consistent with substantial evidence unless the other side showed that it did not. And so the basis for the jury’s award tells you, no question about it, that they had to find something in addition to the manuals having been misappropriated. Now, I think there was more than adequate testimony about the manuals. Again, their challenge on appeal is identification.
Identification was very clear. The jury could quote ascertain the boundaries within which the secret lies, end quote. That’s the Oakwood case. And by identifying the manuals, there’s no question that the jury could do that. Then you had testimony explaining why these were trade secrets and why they were valuable.
And that was, if you look at appendix 267 to appendix 271, euh…
Judge Wesley,
you said 267 to 271?
John O’Quinn
267 to 271
Judge Wesley,
This is Mr. Noonan again,
John O’Quinn
this is Mr. Noonan. And he explains he put a list of manuals it’s not the same list that’s in the appendix at 2270, but he put a list of manuals in front of the jury, and he explained that all of the manuals taught the users how to configure, how to customize Facets, how it works. And he also, having walked through the data models guide, which you can see at confidential appendix 31, having walked through it in detail, he explained that each of the other manuals, quote, includes about the same level of detail as the Data models guide. That’s appendix 268. And he explained that each of the manuals revealed confidential, quote, architecture of Facets. That’s appendix 268, and explained that each one of the manuals revealed the configuration details for facets. That’s appendix 270. And, of course, that type of information this court has recognized in integrated cache.
The architecture of a computer program is a trade secret. And the fact that the package as a whole is not in the public domain means that it is protectable. Now, I would like to turn to the issue of damages, unless there are more questions on identification. And Judge Wesley, when it comes specifically to the question that you were asking about the injunction because the 7th Circuit has addressed the issue that you raised head on specifically in the 3M case. And there the court said, this is page 608 of the 3M opinion, quote, the jury’s cost of development award does not render the granting of an injunction duplicative, end quote. And the reason for the 7th…
Judge Raggi,
we have to decide if we agree with that!
John O’Quinn
That’s absolutely right. Judge Raggi, what was their reason? I was going to say and the reason for that is the same reason that the district court gave here at page 28 of her opinion, which is, number one, that the purpose of the injunction is separate. It is to prevent future harm to the trade secret owner. This was a case…
Judge Wesley,
Can I stop you just for a second?
John O’Quinn
Sure.
Judge Wesley
So you got damages for what they made off of their use of it. And then so you got you got something for their misuse of your trade secrets. Now, whether they were a good or a bad business, I mean, you shouldn’t be, but you got you made whole for what they did, for stealing, for the jury’s finding that they took and used your trade secret.
Then the question becomes to me, how have they been unjustly enriched? And if they can’t use it, how are they unjustly enriched by… I mean, I would think they were unjustly enriched if they competed with you, because all of a sudden they’re using your tools and you spent a lot of money to make them. But now, tell me, go forward then. Tell me the rest of it.
John O’Quinn
Yeah, I think there are three parts to it, Judge Wesley. So the first part is the idea that avoided costs are the entirety of the value of a trade secret in the abstract, I think is a misnomer. And in fact, on page 25 of their reply, they point to university computing to suggest that is the Fifth Circuit’s decision in university computing to suggest that, well, the norm is the scorched profits. Well, the reason that’s the norm is because university computing and this ties directly into your question, Judge Wesley, is that normally avoided costs are not sufficient. In fact, if you look at university computing at page 538, the court said that avoided costs are frequently inadequate. So avoiding costs…
Judge Raggi
Right. Suggests here that…. have to look at the particular case and see what damages the victim suffered. Now, if I understand it, you weren’t for your past for the past misuse. You weren’t just given their profits, you were given your losses which were more than their profits. Did I understand that correctly?
John O’Quinn
I don’t think that’s quite right, judge Raggi. So under the you are right that under the DTSA and this goes to part of why an injunction is appropriate as a forward looking remedy. Under the DTSA, you get both. You are entitled to seek both your harm, your lost profits and separate apart from that, unjust enrichment. Now, in this case, just for procedural reasons, we ultimately only sought the 285,000,000, which is the avoided cost award but we theoretically could have sought….
Judge Raggi
about unjust enrichment I mean, if they had taken everything that they took and used it once. Are you saying that they would have been responsible for paying the full development costs of a rather expensive system?
John O’Quinn
Yes. And that is exactly the holding of Salisbury.
Judge Raggi
Even if they were enjoined from ever using it again, for one use, which they profit it minimally on, they would have to pay the cost of developing that whole system even though they were enjoined from ever using it again.
John O’Quinn
Yes and respectfully…
Judge Raggi
why would that be the law’s view of what damages compensatory damages are?
John O’Quinn
Because it’s not compensatory damages.
This is not the measure of harm to us.
That is one form of damage under the DTSA. But we are also entitled to unjust enrichment. And as the Fifth Circuit addressed this squarely in Globe Ranger and said, quote, « damages. you’re not limited to damages based on the misappropriators profits » and…
Judge Raggi
I’d refer you to the full cost of development. The way in which they were unjustly enriched for one use
John O’Quinn
because in order to be able to use it even once and by the way, there’s a dispute that it was only used once.
Judge Raggi
I know that.
John O’Quinn
Okay, sure.
They did not provide any of their financial information after 2018, which is another reason why an injunction was appropriate here. There are certainly reason to believe in
Judge Wesley
I… I… I haven’t given anybody a hard time about that, but I’m just wondering… So tell me why, then the injunction doesn’t replicate or obviate the need for the recovery of the development cost.
John O’Quinn
Yeah
Judge Wesley
the cat’s not out of the bag. So the industry doesn’t know what you knew. Only one person did. That’s not the theory. You haven’t portrayed that. What else?
John O’Quinn
Right, so I agree that they had to for the circumstance of this case, that they had to use it at least once in order to be able to recover avoided costs. But once they’ve used it, they have gotten the benefit of a $285,000,000 investment. And if they actually were accountable for the losses, the development costs as losses, then they would have had a $257,000,000 loss. They got that benefit. And that is exactly the reason of the 11th Circuit’s decision in Salisbury. I’d point you to pages
Judge Wesley,
So it’s not that they’ll use it into the future, it’s that they avoided having to spend it.
John O’Quinn
Yes, that is exactly right. They avoided having to spend it in order to be able to offer the competing services in the first place.
Judge Wesley
Also anticipate I’m saying a lot here because. I haven’t seen there’s not a lot written on this. Is it also anticipate that that gives them the opportunity to try and reconstruct, not replicate the trade secret, but to figure out workarounds with regard to the similar operating system.
John O’Quinn
There’s no injunction in place that would prevent them from developing the equivalent things on their own. This isn’t like they’re are some cases where there are injunctions that say you can’t play in this space at all. That’s not what this injunction is. This injunction is prohibiting them from using the trade secrets.
Judge Wesley,
OK
John O’Quinn
That’s it. And they got the benefit, they got the value of the trade secrets. If they wanted to say they’re not arguing about quantification, maybe $285,000,000 is a big number, but they were acquired for $3.4 billion at this same time.
Judge Wesley,
It’s not like they took it from you. If they’d taken it from you and somehow destroyed its value, I can understand why you’d be entitled to get the 285, but you still got it and the cat’s not out of the bag.
John O’Quinn
Well, you’re right.
If we were seeking that as harm to us, the case law says the cat does have to be out of the bag if it is harm to us. But I would encourage you to look at the Globe Ranger decision, the Amerisciences decision. Well, logic. I mean, in Amerisciences, the fifth circuit affirmed not only the award of avoided costs, but barring the trade secret defendant from even putting on evidence of what their actual profits were because that would have been a distraction and that the trade circuit owner was entitled to seek that. And I would really encourage you to read the Salisbury decision by the 11th circuit. I think it is directly on point…
Judge Wesley
that’s the case that you think is really direct form?
John O’Quinn
It is because they made exactly the same argument. And the 11th Circuit rejected that and found that orders of magnitude more in avoided costs were the appropriate word. The last thing if…
Judge Wesley,
a pre-DTSA decision!
John O’Quinn
it was a Uniform Trade Secrets Act decision. And, of course, the DTSA was modeled on the Uniform Trade Secrets Act. And if made, the very last point with respect to Judge Raggi’s question about the injunction is they obviously didn’t appeal the injunction. So it’s a little bit of mitzvah to be arguing one but when they didn’t appeal the other…
Judge Wesley,
No. Got that. We’ll hear from your friend on the other side.
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FIN DE LA PLAIDOIRIE DE TRIZETTO
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Kannon Shanmugam
Thank you. Thank you Judge Lohier. I’m 30 seconds on liability and then the rest on damages. On liability. I would just make two points.
My friend Mr. O’Quinn doubles down on this notion that the whole documents were the trade secrets, which is what Dr. Bergeron testified to at pages 385 to 386 of the appendix. And yet there was substantial and uncontroverted evidence that there were things in the documents that were not trade secrets.
Judge Lohier
Respond to this argument that any single misappropriation of a trade secret under the DTSA would be sufficient.
Kannon Shanmugam
Yes. There’s no reason to think that the jury accepted the theory that Mr. Oakland propounded. And in a circumstance like this, where TriZetto was the one who sought the general verdict, it seems consistent with the general law and general verdicts that they bear the burden of an outcome where if one or more
Judge Lohier,
you could have asked for an articulation of a specific verdict, you didn’t?
Kannon Shanmugam
We asked for a specific…
Judge Lohier,
did raise error here in that regard. Well not you’re not arguing error here.
Kannon Shanmugam
Not that as a matter of law that the court was disabled from asking for presenting a general verdict form. But we are certainly
Judge Lohier,
you are stuck with how it was charged to the jury!
Kannon Shanmugam
But the consequence of an error in this circumstance is that the court has to vacate, particularly where what we’re talking about is the vast majority of the trade secrets at issue.
judge Raggi
I understand something you just said to Judge Wesley. Did you ask for specific findings on the verdict? As I said earlier, I did see where you asked for the jury to make specificity findings, but did you ask for an articulated verdict form?
Kannon Shanmugam
My recollection is that we asked for a claim by claim determination. I’ll check
Judge Raggi
But not a trade secret by trade secret?
Kannon Shanmugam
My belief is that that is, in fact, what we asked for. In other words, that each of…
Judge Raggi
if, before you leave today, you could tell us where in the record that is, that would be…
Kannon Shanmugam
Yeah, I will confirm that by letter.
On the issue of damages, I want to say just a couple of things.
First, I think that Mr. O’Quinn’s theory here really is, as he put it, that we got the benefit of TriZetto’s $285,000,000 investment, and therefore we should be on the hook for avoided costs. Well, of course, whenever there’s a misappropriation, you could say that the defendant got some benefit. Of course, our submission here is that we did not get the full benefit of that by virtue of the fact that we exploited the trade secrets allegedly only for providing services to one customer. But I think that the reason why that is such a dangerous rule is that it really makes avoided cost the floor and not the ceiling.
And I would submit that if you look at the language of the DTSA, consistent with ordinary principles of remedies. That language at most makes unjust enrichment available. It does not say that you get both as a matter of law in every single case
Judge Lohier,
What is the language that you’re in ?
Kannon Shanmugam
That is the language in 1836 B, 3B, which says that a court may award damages for any unjust enrichment caused by the misappropriation. So there is a causation requirement there of the trade secret that is not addressed in computing damages for actual loss.
judge Raggi
Mr. Oakwood suggested that signals to us that the statute does not contemplate only compensatory damages. Do you want to tell us whether you think that unjust enrichment statute, that provision deals with something other than compensatory damages?
Kannon Shanmugam
Yeah, I would say two things about that. First, that it makes clear that avoided costs in the unjust enrichment sense could be available in a circumstance in which, for instance, the profits can be readily calculated. I think we would acknowledge that avoided costs could be appropriate in that circumstance. But as I said to you earlier, Judge Raggi, I think here it’s uncontroverted that there was an alternative, much smaller figure. Both of TriZetto’s profits and our profits from the single TriZetto’s lost profits and our profits from the single customer
judge Raggi
The court did reduce, the initial jury amount, right?
Kannon Shanmugam
Yes, but it did so by remitting the punitive damages award. And of course, the punitive damages award in turn is dependent on the compensatory award. And if we were to prevail here on avoided costs, presumably there would have to be a similar analysis on remand.
But I think again, what’s so problematic about this is that it really is turning avoided costs into the floor and not the ceiling and if you look at the cases, avoided costs are only comparatively rarely awarded in trade secrets cases. Obviously, we have even less law under the DTSA, as this court will be aware, because it was a case that Judge Lohier was involved in. The New York Court of Appeals on Certification concluded that as a matter of New York law on policy related grounds that avoided cost damages are not available.
judge Lohier
I have no memory of that case whatsoever. Big laughs of Judge Lohier and all parties…
Kannon Shanmugam
Well, there is at least one case cited in there was at least one case cited in the briefs, if it makes you feel any better, that I worked on as well and I had only a dim recollection of that too. But I think what I would say is that there is no case while there are scattered cases in which courts have awarded avoided costs alongside profits, there’s never been a case involving an avoided cost award that is as wildly disproportionate as the award here. And at a minimum with regard to the statutory language judge Raggi, as we point out in our briefs, there is clearly a causation requirement. And if the way you want to think about this is sort of the narrowest possible way to think about it, I think it is to focus on the fact that because we received such a modest benefit from the alleged misappropriation, allegedly obtaining one additional customer, that you can’t say that the full amount of the avoided cost was caused by the misappropriation. And so I think if the court is concerned about establishing a rule for all time in the context of the DTSA,…
Judge Raggi
that is a way of remitting adversary about a one time use. Let me ask about it from your perspective. If you had a onetime use and you either didn’t make very much or whatever, that would be the full scope of your liability, even though you had misappropriated an extremely valuable trade secret.
Kannon Shanmugam
Well, it would be different if you destroyed the value of the trade entirely. That’s our release of Coca Cola’s recipe to the world. Or, I think, in a circumstance in which you developed a competing product that was completely unsuccessful in the end.
Now, I think that that’s a closer case
Judge Raggi
hypothetical! You used it once before you got caught, and that didn’t earn you very much money, but you basically took something that was very very valuable, and instead you’re only liable for $25,000 or whatever. That doesn’t seem to be what the law is talking about here, when it talks about the unjust enrichment to the extent it wasn’t factored into damages. I mean, that’s how the law is written.
Kannon Shanmugam
Well, I would fall back on my argument concerning causation at a minimum, but I think what I would say is that the problem with that approach, Judge Raggi, is that it really means that whether you have one use, 10 uses or 100 uses, the recovery is the same. That’s what I mean when I say that avoided costs are a floor. Here, what Mr. O’Quinn is saying, and I think this is a very dangerous proposition of law, is that whenever you get the benefit of the investment, which is, of course, always going to be true on some level, when you have a misappropriation, that that full amount can be recovered, it is as if you destroyed the value of the trade secret entirely. And I would submit that even under the common law prior to the DTSA, my friend would strain to find any authority to support that broad proposition.
Judge Lohier
I’ve got to go back to the load circuit, but that’s what I think he’s relying on.
Kannon Shanmugam
I think in cases in which you have a competing product, there are cases, Salisbury and Globe Ranger, where courts have upheld the award of avoided costs in some circumstances alongside gain.
But this is a very different case, both because of the remarkable disproportionality of the award and because the nature of the use is fundamentally different because we weren’t trying to develop competing software. And of course, the Facet software itself was the core trade secret,…
Judge Lohier
…using the software one time. That’s the distinction.
Kannon Shanmugam
Well, using the software to provide services on one occasion.
And I think that that is a fundamental distinction. It, at a minimum goes to Causation. But again, all roads lead back to the principle that in order to uphold this award, the court has to say that avoided costs are available as a matter of course, as a proxy for the benefit to the defendant. And again, I think there is a conceptual difference between, on the one hand, a circumstance in which the value of the trade secret is destroyed such that it is appropriate to look at what the plaintiff put into developing the trade secret and a case like this, where the plaintiff’s development costs are used as a proxy. And I would just underscore that I think that this is consistent with the way in which remedies ordinarily work in the trade secrets context.
My friend pointed to the Fifth Circuit’s decision in university computing. I would point to this court’s decision in Softel which said that avoided costs are, quote, usually appropriate only where the defendant has destroyed the value of the secret. And the cases are legion for the proposition that the ordinary remedy for misappropriation of a trade secret at common law is discouragement of profits. And at most here, that would be not $285,000,000, but $8.5 million.
Thank you very much. Thank you, Your Honors.
judge Lohier
Thank you both. Thank you both very much.
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FIN DES PLAIDOIRIES
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La phrase clef de l’avocat de Syntel et finallement la seule qui peut inverser la tendance :
« En validant le jugement de première instance vous allez créer une loi dangereuse, qui sera que les avoided costs vont devenir une peine plancher, alors que c’est sensée être une peine plafond selon de DTSA. »
Je rappelle que en France c’est le législateur qui crée la loi, alors que aux USA, ce sont les juges via leurs décisions qui créent (entre autres) la loi.
En France c’est uniquement les jugements de la cour de cassation qui font jurisprudence, alors que aux USA n’importe qu’elle décision d’un juge peut créer une jurisprudence.
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VERSION AUDIO
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Bravo et Merci pour cette transcription.