calculate a proposed reasonable royalty. See id. LinkCo argues that these
projections are probative of Fujitsu's valuation of LinkCo's technology at
the time of the alleged misappropriation in 1997. See Pl. Mem. at 14.
Fujitsu's projections would be admissible if they were created near the
time of the hypothetical negotiation and if it were probable that the
parties would have considered the figures during their negotiations. See
Interactive Pictures, 274 F.3d at 1385; Snellman, 862 F.2d at 289.
However, the projections were not available until several months after
the hypothetical negotiation. Therefore, it is impossible for the parties
to have considered these projections at the time of the hypothetical
negotiation. Although the parties could have agreed on a lump-sum royalty
based on expected sales, Fujitsu's projections are not evidence of
expected sales at the time of the negotiation. LinkCo must establish
expected sales with evidence available to the parties before the alleged
theft. As a result, Fujitsu's sales projections are inadmissible to prove
damages because they are irrelevant, highly prejudicial to Fujitsu, and
would tend to mislead the jury. See Riles v. Shell Exploration and Prod.
Co., 298 F.3d 1302, 1313 (Fed. Cir. 2002).*fn9
2. Actual Sales
According to Fujitsu, the parties would have negotiated a running
royalty to be applied against actual sales. Although actual sales were
not known until after the negotiation, the form of the reasonable royalty
is an issue of fact and Fujitsu may present its running royalty theory to
the jury. See supra Part II.C. In order to permit Fujitsu to present its
proposed damages calculation, the running royalty must be applied to
actual sales because there is no proof of reliable sales projections.
See supra Part III.A.2. LinkCo, however, will then be permitted to prove
that these sales figures are misleading because of the way in which
Fujitsu commercialized and/or marketed the product and may further
present evidence as to what it believes the sales would have been had it
brought its own product to market.
3. Lack of Profits
Fujitsu claims that because it had expenses of $10 million, it made no
profits on its sales of DisclosureVision. See 10/7/02 Trial Tr. at 265.
Fujitsu argues that its lack of profits is relevant to both the measure
of damages and to the value of the trade secret. Applying the balancing
test of Rule 403 of the Federal Rules of Evidence, this evidence must be
precluded. Profits can be considered in a reasonable royalty calculation.
However, lack of profits is not admissible because it is unfairly
prejudicial to LinkCo and would defeat the purpose of a reasonable royalty
measure of damages.
IV. PRE-JUDGMENT INTEREST
The final issue raised by the parties is whether pre-judgment interest
is mandatory or discretionary. Pursuant to the New York Civil Practice
Law and Rules, pre-judgment interest is mandatory for a damage award,
except when the action is equitable in nature. See N.Y. C.P.L.R. §
5001(a) (McKinney 2002). When the action is equitable, pre-judgment
interest is left to the court's discretion. Id.
Whether a trade secret misappropriation claim is legal or equitable has
not been clearly decided. Decisions addressing this issue suggest that
trade secret misappropriation claims can be either equitable or legal in
nature.*fn10 However, a close reading of these cases reveals that trade
secret misappropriation claims are equitable in nature only when
plaintiffs are seeking injunctive relief. See, e.g., Speedry, 306 F.2d at
330; Protexol Corp., 12 F.R.D. at 8.
Where a plaintiff seeks damages for trade secret misappropriation,
rather than equitable relief, the claim is essentially legal in nature.
See Softel, 891 F. Supp. at 943; Spiselman, 61 N.Y.S.2d at 141.*fn11
Because LinkCo is seeking damages, its misappropriation claim is an
action at law and pre-judgment interest is mandatory.
For the reasons discussed above, the appropriate measure of damages for
plaintiff's misappropriation of trade secrets claim, where defendant did
not profit from the alleged infringement, is a reasonable royalty.
Depending on the evidence presented at trial, the royalty may result in a
lump-sum payment based on a reasonable royalty as applied to expected
sales or a running royalty based on actual sales. If damages are
awarded, pre-judgment interest is mandatory under New York law because a
claim for damages is legal in nature.