Analysis of ChromaDex's Evidentiary Motions
Okay, so let's take a closer look at the Evidentiary Motions and see what's at stake, and whether anything interesting is likely to occur.
In this article we'll look at ChromaDex's Motions.
ChromaDex first proposes to exclude testimony by Elysium expert Iain Cockburn, who opines that ChromDex committed Patent Misuse with anticompetitive effects that cannot be dissipated.
You can read ChromaDex's blistering, withering, 20-page critique of this testimony, and you'll probably come away like I did, confident that the testimony will get excluded.
ChromaDex's complaints are that Cockburn uses improper methodology (or no methodology), misdefines the market, offers legal opinions, invites speculation, and ignores evidence. And for each of these, ChromaDex summons a boatload of legal authority and references to the record. The brief hits with the force of a locomotive, or, in more modern terms, a nuclear bomb, and the testimony is not likely to survive.
That's not a surprising outcome. We have said from the start that the Patent Misuse Claim is bogus and fictional, so an expert report that attempts to validate fiction is obviously going to run into all sorts of trouble. Cooley does a remarkable job documenting those troubles.
So much so, that I find myself wondering who wrote that brief -- it is an amazing piece of work. Five attorney signed it, but it feels mostly like the work of a single person who labored for a long time to craft something perfect.
That's interesting -- and perhaps tragic -- because ChromaDex is taking no chances with the Patent Misuse claim. I have already predicted that the claim will get tossed on summary judgment, and it probably will, and then the issue this brief is addressing will be largely or entirely moot. But if Elysium does manage to get its Patent Misuse claim past summary judgment, that Patent Misuse laim will face a bigger and worse Boss in this brief, and that should be that.
ChromaDex's other motion in limine aims to exclude:
(1) References to Honig/Brauser/Frost investigations
(2) Characterization of "Fraudulent Spreadsheet" in opening statement
(3) Royalty Refunds as evidence of Patent Misuse
The arguments here are pretty straightforward.
Honig Investigations. The Honig/Brauser/Frost SEC investigations do not involve ChromaDex, and therefore are not relevant to Elysium's breach of contract claims against ChromaDex. ChromaDex's concern stems in part from an email in the exhibits in which Elysium's CEO, Eric Marcotulli, in a series of emails o third parties, "falsely represented that ChromaDex 'is run and backed by legitimate criminals' based on its ties with Honig, Brauser, and Frost."
ChromaDex makes a strong case that Honig's escapades are not relevant to any issue at trial, and obviously an allegation that ChromaDex was backed by legitimate criminals would be prejudicial. I would guess this motion will be granted.
Fraudulent Spreadsheet. What's interesting about this part of the brief is not the application of the law, but the presentation of the facts. ChromaDex's argument is simply that the spreadsheet was not in fact fraudulent, and we are treated for the first time to ChromaDex's side of the story.
ChromaDex says that the inadvertently disclosed spreadsheet tabs did not include information that showed a violation of the MFN terms, because it did not contain specific dates, prices, or amounts of any order. So Elysium's theory that the extra tabs were evidence of fraud "makes no sense."
Instead, here is ChromaDex's account of what was really going on:
The “blinded” tab, as promised, contained an anonymized summary of the terms of ChromaDex’s NR supply agreements. The “unblinded” tabs contained, among other things, those companies’ names, as well as additional companies with whom ChromaDex had not signed supply agreements. For example, the summary of terms for Live Cell—a company with which ChromaDex was negotiating, but had no executed supply agreement—were identified on the unblinded tabs in the “DATE” column as “PENDING.” (Ex. 6 at 35 & 39.) Because Jaksch said only that the June 13 Spreadsheet was a summary of supply agreements, not “pending” negotiations, it was plainly not fraudulent. And, as discussed above, the “unblinded” tabs did not include specific order dates, prices, or amounts, nor did Jaksch ever agree to send such specific sales order information to Elysium.
In any case, the spreadsheet didn't matter because Morris had already provided he actual dates, prices, and amounts of specific NR orders placed by Live Cell.
ChromaDex makes a convincing case that it was Elysium, not ChromaDex, that was perpetrating deception:
About 20 minutes after receiving that sales information from Morris, Elysium—intending to deceive ChromaDex—requested the exact same information from Jaksch by email, claiming that it needed “sales and price data of NR that ChromaDex has sold to other customers” for a potential investor. (Ex. 8 at 111.) Jaksch, faithful to ChromaDex’s policy of not sharing its trade secret sales information, told Elysium that he was “not sure how much [he was] going to be able to share about other NR customer relationships.”
I don't have a guess right now about how the Court is going to rule on this evidentiary issue, but it looks like Elysium's eventual attempt to inflame the jury with this evidence might not work, whether they are allowed to call it a "fraudulent spreadsheet" in opening statements or not.
Royalty Refunds. It strikes me as self-evident that ChromaDex's attempt to moot he patent misuse claim is not evidence that the claim was real, and thus this evidence absolutely should not be admitted for this purpose. Does ChromaDex make the point in a compelling manner?
To assess whether the Purge was an admission (it was not) or, instead, a practical business decision aimed at eliminating one aspect of a legal dispute (as it was), the parties would need to present additional evidence as to reasons behind and for ChromaDex’s decision, as well as argue to the jury the complexities of the patent misuse defense and the purge doctrine. The Court would also need to explain to the jury the obscure legal principles of “patent misuse” and “purge,” which are equitable issues “noted to be fraught with potential abuse, including ‘unfair prejudice, confusion of issues, or misleading the jury,’ resulting in the loss of ‘fundamental fairness of the adjudication.’” Cordance Corp. v. Amazon.com, Inc., 2009 WL 2252556, at *1 (D. Del. July 28, 2009) (citation omitted). Conducting such a mini-trial on the Purge would add “palpable delay” and “carry a substantial risk of confusing the jury.” Fed. R. Evid. 403. Therefore, to avoid unnecessary delay and the risk of prejudice to ChromaDex, Defendants should be precluded from presenting evidence and argument related to the Purge to the jury.
That certainly makes sense to me; I don't know whether it's legally compelling. In any case, ChromaDex says it is ALSO going to ask the Court to take the Patent Misuse issue away from the jury because there is no jury trial right on an equitable defense.
ChromaDex is going to get some favorable rulings here -- maybe all of them -- although I am less certain about the last two, "fraudulent spreadsheet" and "royalty refunds."