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TurnKey Solutions Corp. v. Hewlett Packard Enterprise Co.

United States District Court, D. Colorado

January 26, 2018



          CHRISTINE M. ARGUELLO, United States District Judge

         This matter is before the Court on two Rule 702 Motions filed by Defendant Hewlitt Packard Enterprise Company's (HPE) in which it requests the exclusion of testimony by experts Dale Ellis and Mark Pedigo. (Doc. ## 216, 219.) Having thoroughly reviewed the parties briefing and relevant legal authority, for the reasons set forth below, the Court (1) denies HPE's request to exclude Mr. Ellis's testimony but cautions that TurnKey must lay the proper foundation supporting his opinions at trial; and (2) denies Defendant's request to exclude Mr. Pedigo's reasonable royalty damage testimony because it appears to be the product of reliable principles and methods.


         Plaintiff Turnkey Solutions Corporation (Turnkey) initiated this lawsuit in July 2015, alleging that HPE used Turnkey's confidential design methodologies to develop competing products. TurnKey specifically contends that HPE misappropriated key scriptless, automation features of TurnKey's core product cFactory and incorporated those features into HPE's Business Process Testing (BPT), versions 12.5 and 12.5x. (Doc. ## 1 at 1-3; 223 at 3.) TurnKey further claims that HPE misappropriated its trade secrets for resale to SAP, a multinational technology company, in violation of TurnKey's and HPE's contractual arrangement, and that HPE's misappropriation cost TurnKey millions of dollars in direct sales and potential royalty payments. (Doc. # 223 at 2-3.) Stemming primarily from these allegations, TurnKey brings three claims for relief: Misappropriation of Trade Secrets; Breach of Contract; and Fraud. (Id. at 13-15.) The Parties are set for nine-day jury trial, to begin on February 12, 2018.

         Turnkey has designated two experts to testify at trial: Dale Ellis, TurnKey's Chief Technology Officer; and Mark Pedigo, TurnKey's damages expert. For the testimony of these experts to be admissible, TurnKey must establish that the experts are qualified “by knowledge, skill, experience, training, or education” and that their “scientific, technical, or other specialized knowledge” (1) will help the trier of fact to understand the evidence or to determine a fact in issue; (2) is based on sufficient facts or data; and (3) is the product of reliable principles and methods. Fed.R.Evid. 702. Simply put, a qualified expert's testimony must be “reliable” and “relevant.” Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 589-92 (1993). This Court must act as a gatekeeper and exclude testimony that does not meet these requirements. See Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 147 (1999).

         II. DALE ELLIS

         Dale Ellis is TurnKey's founder and Chief Technology Officer, disclosed as an expert in the fields of software development and software test automation. (Doc. # 221 at 1.) Mr. Ellis intends to testify regarding:

1. The process by which companies develop software, in particular software for automating the testing of software applications;
2. Technical overlap between HPE's BPT and cFactory; and
3. Whether the technical overlap between BPT and cFactory and “the circumstances of HPE's development of BPT, including its acquisition of confidential information of TurnKey, suggest use by [HPE] of TurnKey's confidential information in [HPE's] development of BPT version 12.50 or higher versions.”

(Doc. # 219-1 at 1-2.)

         TurnKey's expert disclosure (the Ellis Disclosure) also states that Mr. Ellis may testify concerning the facts set forth in TurnKey's “Supplemental Response to HPE's Interrogatory No. 4, which response is incorporated into this disclosure.” (Doc. # 219-1 at 3.) TurnKey's supplemental response to Interrogatory No. 4 sets forth all of the “facts [that] support TurnKey's contention that [HPE] misappropriated the Trade Secrets through acquisition by improper means.” (Doc. #149-1, p. 51.) The Ellis Disclosure further lists fifteen “assumptions” that Mr. Ellis relied upon in reaching his conclusions. (Doc. # 219-1 at 3.)

         HPE lodges several objections to this proposed testimony-all of which essentially challenge the foundation supporting Mr. Ellis's opinions, i.e. whether they are based on actual knowledge, not “subjective belief or unsupported speculation.” Daubert, 509 U.S. at 590 (1993). HPEs objections can be grouped into two main categories: (1) Mr. Ellis's proposed testimony contains improper speculative commentary on HPE's state of mind, and (2) Mr. Ellis plans to deliver an improper recitation of facts supporting TurnKey's narrative of this case.


         HPE first contends that much of Mr. Ellis's disclosed testimony is improper commentary on HPE's state of mind-particularly as it relates to HPE's internal development of BPT 12.5x, a development process about which Mr. Ellis has no direct knowledge.

         In so arguing, HPE relies heavily on Pritchett v. I-Flow Corp., wherein the court excluded a plaintiff's expert's proposed testimony about the defendant's state of mind during its process of compliance with federal regulation standards. No. 09-CV-02433-WJM-KLM, 2012 WL 1059948 (D. Colo. Mar. 28, 2012). The court found that the expert was not qualified to offer such opinions because she was not employed by the defendant or the federal regulatory agency during the applicable timeframe; had no direct knowledge of the regulatory review and approval process; and her opinion did not derive from any research or experience outside the subject litigation. Id. at *6-7.

         Here, however, Mr. Ellis, although not employed by HPE, is offered as an expert on the industry standards governing software development based in part on his twenty-eight years of experience in the test automation software industry (including during the relevant time period), his formal training and education regarding software development, and his receipt of two U.S. Patents for software test automation methods. From that vantage point, TurnKey argues that Mr. Ellis is expected to compare HPE's process of developing BPT 12.5x to the industry standards and practices governing software development, including the development of competing products and common signs of infringement. TurnKey suggests that Mr. Ellis's knowledge of HPE's process is derived from not only his review of documentary evidence in this case but also his company's interactions with HPE during that process-including via joint meetings and email exchanges.

         Provided that an adequate foundation is laid as to Mr. Ellis's expertise in the area of software development and his observations of HPE's BPT software development process in comparison to the ordinary practices and usages in the industry, the Court sees no reason to exclude his opinions. However, to the extent Mr. Ellis begins to improperly speculate about HPE's motivations, intent, or state of mind, the Court agrees with HPE that such speculation is not contemplated by Rule 702 and should be excluded. In other words, Mr. Ellis cannot speculate as to HPE's employee's motive or intent, but he can testify about facts and his observations from which the jury can then infer motive or intent. See Wells v. Allergan, Inc., No. CIV-12-973-C, 2013 WL 7208221, at *2 (W.D. Okla. Feb. 4, 2013) (making the same distinction); DePaepe v. Gen. Motors Corp., 141 F.3d 715, 720 (7th Cir. 1998) (holding an engineer could testify as an expert “that reducing the padding saved a particular amount of money ... [and] that [the manufacturer's] explanation for the decision was not sound; but he could not testify as an expert that [the manufacturer] had a particular motive”). Mr. Ellis may also explain to the jury the meaning, based on his experience in the industry, of “technically-worded” communications or documents that the jury will not necessarily understand without his assistance. See Summit Elec. Supply Co., Inc. v. Int'l Bus. Machines Corp., No. CIV 07-431 MCA/DJS, 2010 WL 11414471, at *7 (D.N.M. Sept. 30, 2010) (allowing an expert to testify to the meaning of an email “as it would normally be understood by computer industry professionals” but not regarding “what the particular recipients of the email believed or internalized.”).

         With this distinction in mind, the Court denies HPE's request that the Court exclude portions of Mr. Ellis's proposed testimony in advance of trial. If, however, the proper foundation is not laid for his opinions or Mr. Ellis departs from an analysis of the facts and enters the realm of speculation, HPE may renew its objections.

         B. RECITATION OF ...

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