Alifax Holding Spa v. Alcor Scientific Inc. et al

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
___________________________________
)
ALIFAX HOLDING SPA, 	)
)
Plaintiff, 	)
)
v. 	) 	C.A. No. 14-440 WES
)
ALCOR SCIENTIFIC INC.; and 	)
FRANCESCO A. FRAPPA, 	)
)
Defendants. 	)
___________________________________)
MEMORANDUM AND ORDER
Before the Court is Defendants’ Motion for Attorney and Expert
Fees 	and 	Costs 	as 	to 	the 	Breach 	of 	Confidential 	Relationship,
Copyright Infringement and Trade Secret Causes of Action, ECF No.
307 (“Defs.’ Mot.”), as well as Defendant Alcor Scientific Inc.’s
Renewed Motion for Judgment as a Matter of Law, ECF No. 304 (“Mot.
for JMOL”), as it relates to Count III.1 	For the reasons set forth
below, the motion for fees and costs as it pertains to Count II is
DENIED 	AS 	MOOT 	because 	of 	the 	Court’s 	order 	granting 	in 	part 	Al-
cor’s Motion for New Trial, or in the Alternative, for Remittitur
(“Mot. 	for 	New 	Trial”), 	ECF 	No. 	303.2 	As 	to 	Counts 	III 	and 	IV,
1 Although titled in Alcor’s name alone, this motion asks the
Court to enter judgement as a matter of law on Count III in favor
of Francesco Frappa. See Mot. for JMOL at 2 n.1.
2 The Court has released an opinion on Alcor’s Rule 59 motion
contemporaneously with this order. 	As explained therein, the Court
construed Alcor’s motion for a new trial as a joint motion.
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the 	Defendants 	motion 	for 	fees 	and 	costs 	is 	DENIED. 	Defendant
Frappa’s 	renewed 	motion 	for 	judgment 	as 	a 	matter 	of 	law 	on 	Count
III is also DENIED.
I. 	Discussion
A. 	Count II: Trade Secret Misappropriation
Defendants 	move 	for 	fees 	and 	costs 	incurred 	from 	defending
against Count II’s allegations pursuant to the Rhode Island Uniform
Trade Secrets Act (“RIUTSA”), R.I. Gen. Laws § 6-41-1 et seq.3 	See
Defs.’ Mot. 11. 	The Court has ruled, however, that the Defendants
are entitled to a new trial on both liability and damages concern-
ing Alifax’s claim that the Defendants misappropriated its secret
conversion 	algorithm. 	Thus, 	no 	party 	has 	yet 	prevailed 	on 	Count
II 	and 	the 	Defendants’ 	motion 	is 	moot. 	Should 	the 	Defendants
succeed in a new trial, they may refile their request for fees and
costs without prejudice.
B. 	Count III: Breach of Confidential Relationship
At the close of the trial’s liability phase, the jury returned
a 	verdict 	for 	Alifax 	on 	Count 	III, 	finding 	that 	Frappa 	breached
his confidential relationship with Alifax under Italian law. 	See
Jury Verdict Phase I: Liability 7, ECF No. 292. 	Frappa moved for
judgment as a matter of law on Count III at the close of Plaintiff’s
3 RIUTSA provides that “the court may award reasonable attor-
ney’s fees” if, among other reasons, “a claim of misappropriation
is made in bad faith . . . ”. 	R.I. Gen. Laws § 6-41-4(a).
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case in chief and renewed his motion at the close of the evidence.
See Trial Tr., Vol. 6, 118:19-120:4, Apr. 24, 2019; Trial Tr. Vol.
9, 12:23-13:16, Apr. 29, 2019. The Court reserved ruling on those
motions. 	Regardless, 	the 	Court 	held 	that 	Alifax 	could 	not 	argue
for an award of money damages concerning Count III because it had
failed 	to 	make 	a 	timely 	supplemental 	disclosure 	of 	its 	unjust
enrichment 	theory. 	See 	Trial 	Tr., 	vol. 	11, 	28:21-29:11, 	May 	1,
2019. 	The 	Court 	issued 	this 	ruling 	prior 	to 	the 	start 	of 	the
damages phase. 	Id.
Frappa now argues that Alifax’s failure of proof with respect
to 	money 	damages 	means 	that 	he 	has 	prevailed 	on 	Count 	III 	as 	a
matter of law and that the Court must vacate the jury’s liability
verdict. 	See Mot. for JMOL 2 n.1. 	Based on the belief that Frappa
is entitled to judgment in his favor, Defendants’ request an award
of 	fees 	and 	costs 	related 	to 	Count 	III 	under 	Italy’s 	“loser 	pays
all” statute. 	See Defs.’ Mot. 8-9.4
Before addressing the issue of fees and costs, the Court will
use this opportunity to explain its rationale for prohibiting Ali-
fax from making a money damages argument to the jury in phase two
of the trial. 	Under Rule 26(a)(iii) of the Federal Rules of Civil
4 Article 91 of the Code of Italian Civil Procedure states, in
relevant 	part, 	“With 	the 	decision 	that 	terminates 	the 	proceeding
before 	the 	Court, 	the 	Judge 	orders 	the 	unsuccessful 	party 	the
reimbursement of costs in favor of the other party and calculates
the 	amount 	including 	the 	legal 	fees.” 	Article 	91 	Italian 	Code 	of
Civil Procedure, ECF No. 307-13.
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Procedure, 	a 	party 	must 	disclose 	a 	“computation 	of 	each 	category
of damages” it claims in the action. 	Here, Alcor also propounded
an 	interrogatory 	that 	asked 	Alifax 	to 	state 	the 	amount 	and 	basis
for 	damages 	claimed. 	See 	Pl.’s 	First 	Am. 	Answers 	to 	Defs.’ 	In-
terrog.’s 	2, 	ECF 	No. 	284-2 	(“Pl.’s 	Answers”). 	Neither 	Alifax’s
Rule 	26(a) 	disclosures 	nor 	its 	interrogatory 	responses 	revealed
its 	theory 	of 	unjust 	enrichment 	with 	respect 	to 	Frappa 	and 	Count
III. 	See 	id.; 	see 	also 	Pl.’s 	Initial 	Disclosures, 	ECF 	No. 	284-1.
Instead, 	Alifax 	explained 	its 	unjust 	enrichment 	theory 	and 	the
factual bases therefore (Frappa’s salary and iSED-related commis-
sion 	payments) 	for 	the 	first 	time 	during 	a 	mid-trial 	chambers
conference 	on 	April 	30, 	2019. 	See 	Trial 	Tr. 	vol. 	11, 	at 	28:21-
29:2.
Rule 	26(e) 	requires 	a 	party 	to 	supplement 	its 	discovery 	re-
sponses 	if 	the 	party 	learns 	that 	its 	response 	is 	materially 	in-
complete 	or 	incorrect. 	Fed. 	R. 	Civ. 	P. 	26(e)(1)(A). 	It 	is 	self-
evident that Alifax’s damages-related disclosures were inadequate
with 	respect 	to 	Frappa 	and 	Count 	III. 	Thus, 	pursuant 	to 	Rule
37(c)’s familiar text and abundant decisional authority, the Court
prohibited 	Alifax 	from 	arguing 	a 	surprise 	theory 	of 	damages 	at
trial. 	See 	Eldredge 	v. 	Gordon 	Bros. 	Grp., 	LLC, 	863 	F.3d 	66, 	77
(1st Cir. 2017) (affirming exclusion of untimely damages theory);
Inteum 	Co. 	LLC 	v. 	Nat’l 	Univ. 	of 	Sing., 	C17-1252-JCC, 	2019 	WL
1282014, 	at 	*2 	(W.D. 	Wash. 	Mar, 	20, 	2019) 	(granting 	motion 	to
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exclude an undisclosed theory of damages); Waymo LLC v. Uber Tech’s
Inc., 	No. 	C. 	17-00939 	WHA, 	2018 	WL 	466510, 	at 	*2 	(N.D. 	Cal. 	Jan.
18, 	2018) 	(granting 	motion 	to 	exclude 	undisclosed 	damages 	theory
in a trade secret misappropriation context).
The absence of money damages does not, however, mandate judg-
ment 	for 	Frappa 	on 	Count 	III.5 	Alifax 	has 	always 	requested 	in-
junctive 	relief 	as 	a 	remedy 	for 	Frappa’s 	breach 	of 	duty. 	See
Second 	Am. 	Compl. 	16-17, 	ECF 	No. 	68. 	The 	jury’s 	verdict 	suggests
Alifax may have suffered irreparable harm that may eventually war-
rant such relief.
The 	District 	of 	Maine’s 	ruling 	in 	Merrill 	Lynch, 	v. 	Bishop,
839 	F. 	Supp. 	68, 	72 	(D. 	Me. 	1993) 	provides 	helpful 	guidance. 	In
Merrill, 	the 	court 	ruled 	that 	a 	breach 	of 	confidentiality 	auto-
matically warranted injunctive relief and stated:
5 The Court pauses here for a brief interstitial on Alifax’s
contention that Frappa waived his argument for judgment as a matter
of law. 	Pl. Alifax Holding SpA’s Opp’n to Def. Alcor Sci. Inc,’s
Mot. 	for 	Attorney 	and 	Expert 	Fees 	and 	Costs 	for 	Breach 	of 	Confi-
dential Relationship, Copyright Infringement and Trade Secret Mis-
appropriation 7, ECF No. 323. 	Although the grounds asserted in a
Rule 	50(b) 	motion 	must 	parallel 	grounds 	asserted 	in 	a 	Rule 	50(a)
motion, the rule simply requires reasonable notice of the party’s
position. 	Lynch 	v. 	City 	of 	Boston, 	180 	F.3d 	1, 	13 	n.9 	(1st 	Cir.
1999); Western Union Co. v. MoneyGram Payment Sys., Inc., 626 F.3d
1361, 1367 (Fed. Cir. 	2010). 	Here, there was no formal Rule 50(a)
motion 	because 	the 	court 	excluded 	Alifax’s 	argument 	before 	the
damages phase commenced. 	See Trial Tr., vol. 11, 28:21-29:11. The
Court made the basis for its ruling abundantly clear. 	Id. Although
the 	parties 	did 	not 	separately 	submit 	further 	briefing, 	Alifax
cannot plausibly claim unfair surprise. 	The Court is unpersuaded
that Frappa waived his argument under Rule 50 under these circum-
stances.
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Once confidentiality is breached, the harm is
done 	and 	cannot 	be 	undone 	. 	. 	. 	and 	no 	award
of 	money 	damages 	will 	change 	the 	fact 	that
information 	which 	Plaintiff 	was 	entitled 	to
have kept from the knowledge of third parties
is no longer shielded from their gaze. Confi-
dentiality, like pregnancy, is an all or noth-
ing 	proposition; 	either 	it 	exists 	or 	it 	does
not exist.
Bishop, 	839 	F. 	Supp. 	at 	72. 	Here, 	Alifax 	may 	request 	permanent
injunctive relief tailored to remedy Frappa’s breach of duty under
Count 	III. 	Thus, 	Frappa 	is 	not 	entitled 	to 	judgment 	as 	a 	matter
of law or to fees and costs.
C. 	Count IV: Copyright Infringement
Defendants 	lastly 	move 	for 	fees 	and 	costs 	under 	the 	U.S.
Copyright Act. 	The Act states:
In 	any 	civil 	action 	under 	this 	title, 	the
court in its discretion may allow the recovery
of 	full 	costs 	by 	or 	against 	any 	party 	other
than the United States or an officer thereof.
Except 	as 	otherwise 	provided 	by 	this 	title,
the 	court 	may 	also 	award 	a 	reasonable 	attor-
ney’s 	fee 	to 	the 	prevailing 	party 	as 	part 	of
the costs.
17 	U.S.C. 	§ 	505 	(2006). 	Bad 	faith 	is 	not 	required 	for 	an 	award
under 	this 	statute. 	See 	Garcia-Goyco 	v. 	Law 	Envtl. 	Consultants,
Inc., 	428 	F. 	3d 	14, 	20 	(1st 	Cir. 	2005). 	A 	victorious 	party 	need
only 	show 	that 	the 	opposing 	party’s 	claims 	or 	defenses 	were 	“ob-
jectively 	weak.” 	See 	id. 	Such 	a 	finding 	may 	turn 	on 	any 	number
of 	factors, 	including 	a 	claim’s 	“frivolousness, 	motivation, 	ob-
jective 	unreasonableness 	(both 	in 	the 	factual 	and 	in 	the 	legal
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components 	of 	the 	case) 	and 	the 	need 	in 	particular 	circumstances
to 	advance 	considerations 	of 	compensation 	and 	deterrence.”
Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 n.19 (1994). 	Any award
of 	fees 	or 	costs 	is 	ultimately 	a 	discretionary 	act; 	no 	award 	is
required 	even 	if 	the 	Court 	decides 	a 	particular 	claim 	was 	weak.
See 	Airframe 	Systems, 	Inc. 	v. 	L-3 	Communications 	Corp., 	658 	F.3d
100, 109 (1st Cir. 2011).
Here, unlike the other claims, Defendants are the clear pre-
vailing 	party. 	The 	Court 	excluded 	the 	copyright-related 	opinion
of Alifax’s damages expert before the start of trial. 	See Alifax
Holding 	SPA 	v. 	Alcor 	Sci. 	Inc., 	C.A. 	No. 	14-440 	WES, 	2019 	WL
1579503, *1 (D.R.I. Apr. 12, 2019). 	The Court concluded that the
expert’s 	theory 	was 	“not 	reasonably 	related 	to 	the 	alleged 	in-
fringement 	and 	[was] 	therefore 	speculative.” 	Id. 	at 	1. 	This
ruling eliminated the copyright claim from the case.
Defendants’ request for fees and costs rests on two arguments.
See Defs.’ Mot. 14-15. 	First, Defendants argue that Alifax failed
to 	demonstrate 	“the 	[entirety 	of 	the] 	contents 	of 	its 	allegedly
protected 	source 	code.” 	Id. 	Second, 	they 	contend 	that 	Alifax
failed to provide evidence to prove a theory of damages. 	Id.
Neither 	argument 	persuades 	the 	Court 	that 	fees 	or 	costs 	are
appropriate. 	Alifax’s copyright-protected information was at some
point present in Alcor’s source code. 	See Mem. and Order 30, ECF
No. 	244. 	The 	Court 	denied 	summary 	judgment 	on 	that 	basis, 	which
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suggests that the claim was not “objectively weak.” 	See id; Air-
frame Systems, 658 F. 3d at 109-10 (ruling that even a claim that
lost 	at 	summary 	judgment 	was 	not 	“objectively 	weak.”) 	(emphasis
added). 	Alcor’s objection based on Alifax’s purported failure to
produce 	the 	“entirety 	of 	the 	copyrighted 	code 	subject 	to 	each
registration” was never decided. 	See Defs.’ Obj. Pursuant to L.R.
Cv 44 1, ECF No. 257. This evidentiary issue indicates little, if
anything, 	about 	the 	overall 	strength 	of 	the 	claim. 	Furthermore,
the fact that the claim failed for reasons only indirectly bearing
on its merits does not show that the claim was “objectively weak.”
See Garcia-Goyco, 428 F.3d at 20.
The Court also concludes that the Fogerty factors do not weigh
in favor of finding that the claim was frivolous or unreasonable.
Fogerty, 510 U.S. at 534 n.19. 	Alifax’s various legal claims all
arose out of the same factual circumstances: 	Alifax alleged that
the Defendants unlawfully took its intellectual property (partic-
ularly its source code) to develop their own diagnostic instrument.
Indeed, the facts supporting Alifax’s copyright claim were so sim-
ilar 	to 	its 	trade 	secret 	misappropriation 	claim 	that, 	had 	both
claims proceeded to trial, it would have been anomalous for Alifax
to prevail on Count II and lose on Count IV.
There is moreover nothing in the record indicating that Alifax
brought this claim with an improper motivation. 	See Garcia-Goyco,
428 	F.3d 	at 	20. 	Alifax 	had 	a 	legitimate 	theory 	of 	the 	case; 	the
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claim’s demise was brought about by its expert’s failure to revise
his 	opinion 	as 	the 	factual 	circumstances 	became 	more 	refined.
There is therefore no need to compensate Alcor nor to deter Alifax.
See 	id. 	Accordingly, 	the 	Court 	declines 	to 	award 	any 	legal 	fees
or costs concerning Count IV. 	See id.
Since 	Alcor 	is 	not 	entitled 	to 	fees 	and 	costs 	on 	any 	count,
the 	Court 	need 	not 	address 	whether 	the 	amount 	of 	fees 	and 	costs
requested is reasonable.
II. 	Conclusion
For 	the 	reasons 	set 	forth 	above, 	Defendants’ 	Motion 	for 	At-
torney and Expert Fees and Costs as to the Breach of Confidential
Relationship, 	Copyright 	Infringement 	and 	Trade 	Secret 	Misappro-
priation Causes of Action, ECF No. 307, is DENIED. As to Count II,
the 	motion 	is 	DENIED 	AS 	MOOT 	in 	light 	of 	the 	Court’s 	decision 	to
grant Defendants’ Motion for New Trial, ECF No. 303. As to Counts
III and IV, the motion is DENIED WITH PREJUDICE.
IT IS SO ORDERED.
William E. Smith
Chief Judge
Date: September 4, 2019
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