Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_00-cv-04071/USCOURTS-cand-4_00-cv-04071-1/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 28:1338 Patent Infringement

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

O2 MICRO INTERNATIONAL LIMITED, 

a Cayman Islands corporation,

Plaintiff,

v.

MONOLITHIC POWER SYSTEMS, INC., 

a California corporation, and DOES 1

through 10,

Defendant. _____________________________________

MONOLITHIC POWER SYSTEMS, INC., 

a California corporation,

Counterclaimant,

v.

O2 MICRO INTERNATIONAL LIMITED, 

a Cayman Islands corporation, and

O2 MICRO, INC., a California

corporation,

Counterdefendants. /

Nos. 

C 00-4071 CW (EDL)

(consolidated with

C 01-3995 CW) 

ORDER GRANTING IN

PART AND DENYING

IN PART O2 MICRO'S

MOTION TO ALTER OR

AMEND THE JUDGMENT

AND RENEWED MOTION

FOR JUDGMENT AS A

MATTER OF LAW;

DENYING MPS'

RENEWED MOTION FOR

JUDGMENT AS A

MATTER OF LAW; AND

DENYING IN PART

AND CONDITIONALLY

GRANTING IN PART

MPS' MOTIONS FOR A

NEW TRIAL

Plaintiff and Counterdefendant O2 Micro International Limited

and Counterdefendant O2 Micro, Inc. (collectively, O2 Micro) move

to amend the November 10, 2005 Judgment to include prejudgment

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interest and to declare that U.S. Patent Nos. 6,144,814 (the '814

patent) and 6,316,881 (the '881 patent) are invalid under 35 U.S.C.

§ 103 as obvious in view of the prior art. Alternatively, O2 Micro

moves for judgment as a matter of law that the patents in question

are obvious. Defendant and Counterclaimant Monolithic Power

Systems, Inc. (MPS) opposes these motions.

MPS renews, pursuant to Federal Rule of Civil Procedure 50(b),

its motion for judgment as a matter of law. O2 Micro opposes the

motion. In a separately filed motion, MPS further moves for a new

trial and a vacatur of the judgment in this case. O2 Micro opposes

that motion.

These motions were heard on January 6, 2006. Having

considered all of the papers filed by the parties, oral argument on

the motions and evidence presented, the Court grants in part and

denies in part O2 Micro's motion to alter or amend the judgment and

its renewed motion for judgment as a matter of law. Specifically,

the Court amends the judgment to include prejudgment interest on

the reasonable royalty award, but denies O2 Micro's motion to amend

the judgment to state that certain patent claims are invalid as

obvious and denies O2 Micro's renewed motion for judgment as a

matter of law. The Court denies MPS' renewed motion for judgment

as a matter of law and denies in part and conditionally grants in

part MPS' motions for a new trial.

BACKGROUND

As explained in the Court's previous orders, O2 Micro brought

suit against MPS for a declaratory judgment that MPS' '814 patent

and '881 patent were invalid and not infringed. The patents relate

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to methods and apparatuses for supplying electrical power for

driving a discharge lamp, such as a cold cathode fluorescent lamp

(CCFL), used to backlight a liquid crystal display panel. 

MPS asserted counterclaims against O2 Micro for infringement

of its patents. O2 Micro later filed a new lawsuit against MPS,

alleging misappropriation of its trade secrets. The Court

consolidated the two cases. Following a motion to dismiss, claim

construction, motions for summary judgment and discovery disputes,

the case proceeded to a jury trial on June 27, 2005. The equitable

issues were reserved for trial to the Court.

After an eleven-day trial, the jury returned a verdict. The

jury found that O2 Micro's Trade Secret Claims 1 through 11 were

trade secrets and that MPS willfully and maliciously

misappropriated Trade Secrets 1 and 8 through 11. The jury awarded

O2 Micro $12 million in unjust enrichment damages for MPS'

misappropriation of Trade Secret 1, the transformer-related claim,

but awarded no damages for MPS' misappropriation of Trade Secrets 8

through 11. The jury further found that O2 Micro did not infringe

the asserted claims of MPS' '814 patent or its '881 patent and that

all asserted claims were invalid as anticipated by the prior art. 

The jury, however, did not find that the asserted claims were

invalid as obvious.

 The Court heard additional testimony regarding inequitable

conduct and reasonable royalty issues. On November 10, 2005, the

Court issued its findings of fact and conclusions of law after the

bench trial. The Court found and concluded that, because O2 Micro

failed to prove by clear and convincing evidence that the prior art

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in question was material and that MPS acted with intent to deceive,

MPS did not engage in inequitable conduct. In the same order, the

Court concluded that O2 Micro failed to prove unjust enrichment

damages for misappropriation of Trade Secret 1. In lieu of the

jury's unjust enrichment damages award, the Court awarded O2 Micro

a reasonable royalty and exemplary damages. That same day, the

Court entered judgment and O2 Micro was awarded "the sum of

$900,000, for a reasonable royalty pursuant to California Civil

Code section 3426.3(b), and $1,800,000, for exemplary damages

pursuant to California Civil Code section 3426.3(c), with interest

thereon as provided by law." The judgment was amended on

November 30, 2005, to note that, pursuant to the jury's verdict,

certain products of O2 Micro did not infringe asserted claims of

the '814 and '881 patents and that those asserted claims are

invalid as anticipated pursuant to 35 U.S.C. § 102.

STANDARD OF REVIEW

I. Amendment or Alteration of Judgment

The Ninth Circuit has instructed that amendment or alteration

is appropriate under Federal Rule of Civil Procedure 59(e) "if

(1) the district court is presented with newly discovered evidence,

(2) the district court committed clear error or made an initial

decision that was manifestly unjust, or (3) there is an intervening

change in controlling law." Zimmerman v. City of Oakland, 255 F.3d

734, 740 (9th Cir. 2001).

II. Judgment as a Matter of Law 

 A motion for judgment as a matter of law after the verdict

renews the moving party's prior Rule 50(a) motion for judgment as a

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matter of law at the close of all the evidence. Fed. R. Civ.

P. 50(b). Judgment as a matter of law after the verdict may be

granted only when the evidence and its inferences, construed in the

light most favorable to the non-moving party, permits only one

reasonable conclusion as to the verdict. Where there is sufficient

conflicting evidence, or if reasonable minds could differ over the

verdict, judgment as a matter of law after the verdict is improper. 

See, e.g., Kern v. Levolor Lorentzen, Inc., 899 F.2d 772, 775 (9th

Cir. 1990); Air-Sea Forwarders, Inc. v. Air Asia Co., 880 F.2d

176, 181 (9th Cir. 1989); Peterson v. Kennedy, 771 F.2d 1244, 1252

(9th Cir. 1985).

III. New Trial

A new trial may be granted if the verdict is not supported by

the evidence. There is no easily articulated formula for passing

on such motions. Probably the best that can be said is that the

Court should grant the motion "[i]f, having given full respect to

the jury's findings, the judge on the entire evidence is left with

the definite and firm conviction that a mistake has been

committed." Landes Constr. Co., Inc. v. Royal Bank of Canada, 833

F.2d 1365, 1371-72 (9th Cir. 1987)(quoting 11 Wright & Miller, Fed.

Prac. & Proc. § 2806, at 48-49).

The Ninth Circuit has found that the existence of substantial

evidence does not prevent the court from granting a new trial if

the verdict is against the clear weight of the evidence. Landes,

833 F.2d at 1371. "The judge can weigh the evidence and assess the

credibility of witnesses, and need not view the evidence from the

perspective most favorable to the prevailing party." Id.

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Therefore, the standard for evaluating the sufficiency of the

evidence is less stringent than that governing the Rule 50(b)

motions for judgment as a matter of law after the verdict.

DISCUSSION

I. O2 Micro's Motion to Alter or Amend Judgment

O2 Micro seeks to amend the judgment, pursuant to Federal Rule

of Civil Procedure 59(e), in two respects. First, it seeks to

amend the judgment to specify an award of prejudgment interest. 

Second, it seeks to amend the judgment (and alternatively moves for

judgment as a matter of law) to include a declaration that the '814

and '881 patents are invalid as obvious pursuant to 35 U.S.C.

§ 103.

A. Prejudgment Interest

The Court awarded O2 Micro "interest thereon as provided by

the law." O2 Micro now seeks the Court to specify the interest to

be awarded and to amend the judgment to reflect that amount.

Post-judgment interest is not in dispute. The parties,

however, disagree, over whether prejudgment interest should be

awarded. O2 Micro contends that it is entitled to prejudgment

interest, which is governed by State law. California Civil Code

section 3288 provides, "In an action for the breach of an

obligation not arising from contract, and in every case of

oppression, fraud, or malice, interest may be given, in the

discretion of the jury." As O2 Micro notes, courts have

interpreted "in the discretion of the jury" to mean in the

discretion of the trier of fact. See, e.g., Michelson v. Hamada,

29 Cal. App. 4th 1566, 1586-87 (1994). Asserting that the law

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provides for prejudgment interest, O2 Micro requests that the

judgment be amended to include a prejudgment interest award in the

amount of $ 978,075.00: $ 326,025.00 in interest on the reasonable

royalty and $ 652,050.00 in interest on the exemplary damages.

MPS argues that O2 Micro is not entitled to prejudgment

interest because its request is untimely, does not meet Federal

Rule of Civil Procedure 59(e) criteria and prejudices MPS. These

arguments are not compelling. O2 Micro moved to amend the judgment

within ten days after the Court's judgment. Fed. R. Civ. P. 59(e)

("Any motion to alter or amend a judgment shall be filed no later

than 10 days after entry of the judgment."). District courts in

this circuit have amended judgments to specify the amount of

prejudgment interest pursuant to Rule 59(e). See, e.g., Lake Tahoe

Sailboat Sales & Charter, Inc. v. Douglas County, 562 F. Supp. 523,

524-25 (D. Nev. 1983). And MPS fails to explain how it is

prejudiced by being denied the opportunity to argue for reduced

exemplary damages if prejudgment interest were awarded, when it can

now argue, and does, that prejudgment interest should not be

awarded, in part, because the Court awarded exemplary damages. 

Furthermore, as O2 Micro notes, interest and exemplary damages can

be determined independently of one another. See Vogelsang v.

Wolpert, 227 Cal. App. 2d 102, 125 (1964) ("interest and exemplary

damages are not mutually exclusive; both may properly be awarded in

the same case").

MPS' argument that prejudgment interest on the exemplary

damages should not be awarded, however, is compelling. As the

California Supreme Court explains, one of the purposes of

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prejudgment interest "is to provide just compensation to the

injured party for loss of use of the award during the prejudgment

period -- in other words, to make the plaintiff whole as of the

date of the injury." Lakin v. Watkins Associated Indus., 6 Cal.4th

644, 663 (1993). The purpose of awarding punitive damages is "for

the sake of example and by way of punishing the defendant." Cal.

Civ. Code § 3294(a). By definition, punitive damages "are not

intended to make the plaintiff whole by compensating for a loss

suffered." Id. 

O2 Micro argues that Lakin is not on point because it held

that section 3291, concerning damages in personal injury cases,

does not authorize the award of prejudgment interest on punitive

damages. Here, O2 Micro is seeking prejudgment interest under

section 3288. Although the California Supreme Court was discussing

section 3291, its reasoning concerning the purpose of prejudgment

interest on damages is persuasive and applicable to section 3288. 

Just as awarding "prejudgment interest on punitive damages arising

from personal injury actions would therefore give a windfall to the

plaintiffs in those actions," id., awarding O2 Micro prejudgment

interest on punitive damages here would give an unwarranted

windfall to O2 Micro. Thus, even if the Court has the discretion

to award prejudgment interest on punitive damages, an issue it does

not need to decide, it will not. 

But the Court will award prejudgment interest on the

reasonable royalty award; to do so would make O2 Micro "whole as of

the date of the injury." Id. MPS argues that, because O2 Micro

did not assert its transformer and other trade secret claims until

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1

This amount is calculated according to the following:

Interest = Principal*Rate*Time, where the principal is $900,000,

the rate is seven percent and the time is 5.101 years. As O2

Micro notes, for a judgment not based in contract, the rate of

prejudgment interest is seven percent per annum. See Children's

Hosp. & Med. Ctr. v. Bonta, 97 Cal. App. 4th 740, 775 (2002). 

9

June 25, 2004, prejudgment interest should be allowed only from

June 25, 2004. As O2 Micro notes, however, prejudgment interest is

assessed from the time of the alleged wrongful act. See, e.g.,

Michelson, 29 Cal. App. 4th at 1588. O2 Micro contends that

September 7, 2000, is when the wrongful acts giving rise to its

trade secret claim began; on that date, MPS obtained a confidential

copy of O2 Micro's OZ960 datasheet. But, as MPS notes, the jury

rejected O2 Micro's trade secret claims based on that datasheet,

which O2 Micro does not dispute. Instead, O2 Micro argues that

obtaining the datasheet was the first step in MPS' campaign to

acquire information about O2 Micro's transformer. O2 Micro points

out that the datasheet was used to analyze waveforms from an OZ960

board in early October, 2000, and from that comparison, an MPS

employee concluded in an email that the OZ960 transformer "must be

the key to efficiency" and asked if "we can get a hold of the

inverter and/or its transformer." The Court will assess

prejudgment interest from the date of that email: October 3, 2000. 

The Court will amend the judgment to award $321,363 in prejudgment

interest.1

B. Jury Verdict and Obviousness

The jury found that the asserted claims of the '814 and '881

patents are invalid as anticipated either by U.S. Patent

No. 5,923,129 (the Henry patent) or an article by Melvin C. Cosby,

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Jr. and R.M. Nelms, entitled "A Resonant Inverter for Electronic

Ballast Application," that was published in August, 1994 (the

Cosby/Nelms article). O2 Micro argues that the jury's verdict of

anticipation mandates a finding of obviousness and moves to amend

the judgment accordingly. MPS, however, attacks this request as

both procedurally and substantively flawed.

As noted above, the Ninth Circuit instructs that Rule 59(e) is 

an extraordinary remedy that should be used only when there is

newly discovered evidence, clear error or a change in the law. 

See, e.g., Carroll v. Nakatani, 342 F.3d 934, 945 (9th Cir. 2003).

Although MPS argues that there is no newly discovered evidence,

clear error or change in the law, O2 Micro contends that the jury's

verdict concerning obviousness constitutes a clear error of law,

which would work a manifest injustice on O2 Micro. If O2 Micro is

correct that the jury's finding of anticipation as a matter of law

mandates a finding of obviousness as well, then a Rule 59(e) motion

would be appropriate for raising the issue. 

MPS' second procedural argument is that O2 Micro waived its

right to claim that the jury's findings on anticipation and

obviousness are inconsistent: "When counsel is invited to consider

whether or not to discharge the jury, counsel risks waiver of

objections to any inconsistencies in the jury's findings if counsel

does not raise the issue before the jury is excused." Home Indem.

Co. v. Lane Powell Moss and Miller, 43 F.3d 1322, 1331 (9th Cir.

1995). Here, after receiving the verdict, the Court instructed the

jurors to go back to the jury room. Out of the presence of the

jury, the Court told the parties that there was a potential problem

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with the verdict form because the jurors found anticipation but not

obviousness. The Court stated that the jurors could have thought

that because they decided that the claims were anticipated there

was no need also to decide whether the claims were obvious. The

Court asked the parties what it should do, noting that it could

instruct the jurors on anticipation and obviousness, explain that

if the claims were anticipated then those same claims were likely

also obvious, and invite them to reconsider. Counsel for MPS,

agreeing that it was more logical that the jurors just did not

reach the obviousness issue, stated that the verdict was not

necessarily inconsistent as a legal matter, and that, as a

practical matter, nothing needed to be done. After the Court

stated that it would bring back the jury and put the verdict on the

record, counsel for O2 Micro asked for time to think about the

issue. The Court noted that MPS conceded that the verdict was not

inconsistent. Likely for strategic reasons, counsel for O2 Micro

chose not to ask the jury to reconsider its verdict based on the

possible inconsistency in the jury's anticipation and obviousness

findings. 

The Court will not amend the judgment. If O2 Micro wished to

remedy the possible inconsistency in the verdict, it should have

objected before the Court discharged the jury. Because it decided

not to do so, it has waived its right to object to the jury's

possible inconsistent findings.

II. O2 Micro's Motion for Judgment as Matter of Law

O2 Micro renews its motion for judgment as a matter of law,

asserting that the evidence presented at trial supports only one

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reasonable conclusion: that the '814 and '881 patents are invalid

as obvious. Specifically, O2 Micro argues that MPS failed to

present sufficient expert evidence to rebut O2 Micro's showing of

obviousness, that MPS failed to present sufficient evidence of

secondary considerations of non-obviousness and that the evidence

MPS did present is irrelevant because it is inconsistent with the

claims as interpreted by the Court.

A. Procedural Issues

Before reaching the substance of O2 Micro's motion, MPS argues

that O2 Micro's motion is procedurally barred because it seeks

judgment as a matter of law of obviousness and O2 Micro's Rule

50(a) motion did not. O2 Micro does not deny that it did not

previously move for judgment as a matter of law that the asserted

claims were obvious. But it responds that it identified the issue

of obviousness as a basis for its prior Rule 50(a) motion and that

its present motion closely tracks its prior motion; it argues that

this satisfies the specificity requirement.

Rule 50(a) requires that the motion "specify the judgment

sought and the law and facts on which the moving party is entitled

to judgment." Rule 50(b) allows the moving party to “renew” its

motion within ten days after the court's entry of final judgment in

the case. Fed. R. Civ. P. 50(b). Both parties cite out-of-circuit

precedent to defend their positions. The Ninth Circuit, which the

Court must follow on this procedural matter, has held that a party

cannot raise arguments in its post-trial motion for judgment as a

matter of law under Rule 50(b) that it did not raise in its

pre-verdict Rule 50(a) motion. Freund v. Nycomed Amersham, 347

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F.3d 752, 761 (9th Cir. 2003) (citing Advisory Comm. Notes to the

1991 Amendments, Fed. R. Civ. P. 50 (“A post trial motion for

judgment can be granted only on grounds advanced in the pre-verdict

motion.”)). 

Reviewing O2 Micro's pre-verdict motion filed on July 14,

2005, the Court finds that O2 Micro raised two of the same

arguments it presently raises: that MPS' experts failed to rebut O2

Micro's obviousness case and that MPS failed to present secondary

considerations of obviousness. Because these are the same

arguments, containing much of the same language, they are not

procedurally barred, even though O2 Micro did not previously ask

the Court to declare the asserted claims obvious. 

The third argument that O2 Micro presently seeks to assert,

however, is more problematic. In its Rule 50(a) motion, O2 Micro

moved for judgment as a matter of law on anticipation, arguing that

the only evidence brought by MPS in opposition to O2 Micro's

invalidity claims was irrelevant because it was inconsistent with

the claims as interpreted by the Court. As noted above, in its

present motion for judgment as a matter of law on obviousness, O2

Micro argues that MPS' evidence in opposition to O2 Micro's

invalidity claims is irrelevant to the action because it is

inconsistent with the claims as interpreted by the Court. At least

two of the paragraphs in the motions are almost identical. 

However, MPS asserts that the Court need not address the merits of

this third argument because the Rule 50(a) motion was directed only

towards anticipation and not obviousness. See, e.g., Duro-Last,

Inc. v. Custom Seal, Inc., 321 F.3d 1098, 1107 (Fed. Cir. 2003)

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(holding that a Rule 50(a) motion on anticipation was not

sufficient to support a Rule 50(b) motion on obviousness). But the

Court need not rule on this argument, because, as discussed below,

MPS presented sufficient secondary considerations of nonobviousness, and thus the evidence does not point to the single

conclusion that the asserted claims were obvious.

B. Substantive Issues

A patent is invalid for obviousness if the differences between

it and the prior art “are such that the subject matter as a whole

would have been obvious at the time the invention was made to a

person having ordinary skill in the art.” 35 U.S.C. § 103(a). To

determine if a patent is invalid for obviousness, the court must

consider the scope and content of the prior art, the difference

between the patented invention and the prior art, and the level of

skill in the art. Graham v. John Deere Co., 383 U.S. 1, 17 (1966);

see also Crown Operations Int'l, Ltd. v. Solutia Inc., 289 F.3d

1367, 1375 (Fed. Cir. 2002). “Determinations of obviousness cannot

be based on the hindsight combination of components selectively

culled from the prior art to fit the parameters of the patented

invention.” ATD Corp. v. Lydall, Inc., 159 F.3d 534, 546 (Fed.

Cir. 1998). 

As the Court explained to the jury, in determining whether the

asserted claims were obvious, the jurors also had to consider

evidence of: (1) commercial success due to the merits of the

claimed invention; (2) a long felt need for the solution provided

by the claimed invention; 3) unsuccessful attempts by others to

find the solution provided by the claimed invention; (4) copying of

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the claimed invention by others; (5) unexpected superior results

from the claimed invention; and (6) acceptance by others of the

claimed invention as shown by praise from others in the field or

from the licensing of the claimed invention. The Court instructed

the jury that such evidence may be an indication that a claimed

invention would not have been obvious at the time this invention

was made. Although the jury had to consider such evidence, the

importance of evidence on whether the claimed invention would have

been obvious was up to the jury.

MPS presented evidence of acceptance by others by licensing

its patents and evidence of commercial success. It licensed its

patents-in-suit to BiTEK, a commercially significant competitor. 

That BiTEK's motivation for seeking the licenses is unknown was for

the jury to weigh, not this Court on a motion for judgment as a

matter of law. MPS established a sufficient nexus for the jury to

conclude that MPS' commercial success was based on its claimed

invention. MPS notes that it started out with no presence in the

CCFL market and its first product was its four-switch inverter. As

the Federal Circuit found in a similar situation, "Its lack of

market power in this field would seem to suggest that it was the

features of the patented invention that led to the commercial

success." Pro-Mold and Tool Co., Inc. v. Great Lakes Plastics,

Inc., 75 F.3d 1568, 1574 (Fed. Cir. 1996). 

 MPS also introduced evidence to show that, following the

introduction of its products, its solution of a four-switch

inverter to drive a CCFL is now the industry norm. Thus, this is

not a case where evidence of licensing or commercial success alone

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is used to show non-obviousness. 

O2 Micro argues that these secondary characteristics are, in

fact, secondary. It notes that secondary considerations may be

legally insufficient to override obviousness based on primary

considerations. See Richardson-Vicks Inc. v. Upjohn Co., 122 F.3d

1476, 1483 (Fed. Cir. 1997). But in some cases "such evidence is

the most probative of obviousness." Id. 

As noted above, the Court finds that MPS presented sufficient

evidence of secondary considerations of non-obviousness, and thus

the evidence does not point to the single conclusion that the

asserted claims were obvious. Because there was sufficient

conflicting evidence and reasonable minds could differ over the

verdict, judgment as a matter of law after the verdict is improper,

and the Court denies O2 Micro's motion for judgment as a matter of

law.

III. MPS' Motion for Judgment as Matter of Law

MPS renews its motion for judgment as a matter of law, and

moves that the Court find that neither claim 10 of the '814 patent

nor claim 25 of the '881 is anticipated and that there is no

evidence that MPS acquired, and thus misappropriated, Trade

Secret 11. 

A. Anticipation

"A patent is invalid for anticipation when the same device or

method, having all of the elements contained in the claim

limitations, is described in single prior art reference." Crown

Operations, 289 F.3d at 1375; see also Scripps Clinic & Research

Fdn. v. Genentech, Inc., 927 F.2d 1565, 1576 (Fed. Cir. 1991)

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("Invalidity for anticipation requires that all of the elements and

limitations of the claim are found within a single prior art

reference."). "An anticipating reference must describe the

patented subject matter with sufficient clarity and detail to

establish that the subject matter existed in the prior art and that

such existence would be recognized by persons of ordinary skill in

the field of invention." Crown Operations, 289 F.3d at 1375. "The

question of what a reference teaches and whether it describes every

element of a claim is a question for the finder of fact." Med.

Instrumentation & Diagnostics Corp. v. Elekta AB, 344 F.3d 1205,

1221 (Fed. Cir. 2003).

As O2 Micro recognizes, issued patents are presumed to be

valid; thus, O2 Micro had the burden of going forward and the

ultimate burden of persuasion. New England Braiding Co., Inc. v.

A.W. Chesterton Co., 970 F.2d 878, 882 (Fed. Cir. 1992) (the

presumption of validity "acts as a procedural device which places

the burden of going forward with evidence and the ultimate burden

of persuasion of invalidity at trial on the alleged infringer"). 

But the test for judgment as a matter of law does not change

because O2 Micro has this burden. MPS erroneously asserts that,

for the Court to grant this motion, MPS need only show that O2

Micro did not present substantial evidence to the jury that would

meet O2 Micro's burden of proof. The grant or denial of a motion

for judgment as a matter of law, however, is a procedural issue not

unique to patent law, reviewed under the law of the regional

circuit in which the appeal from the district court would usually

lie. See, e.g., Summit Tech., Inc., v. Nidek Co., Ltd., 363 F.3d

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1219, 1223 (Fed. Cir. 2004) (citing Riverwood Int'l Corp. v. R.A.

Jones & Co., Inc., 324 F.3d 1346, 1352 (Fed. Cir. 2003). Thus,

MPS' citations to Federal Circuit cases supporting its assertion

are inapposite. In the Ninth Circuit, motions for judgment as a

matter of law are granted when "the evidence, construed in the

light most favorable to the nonmoving party, permits only a

conclusion contrary to the jury's verdict." McLean v. Runyon, 222

F.3d 1150, 1153 (9th Cir. 2000).

1. Claim 10 of the '814 Patent

MPS contends that O2 Micro failed to prove that either the

Henry patent or the Cosby/Nelms article anticipated claim 10. 

Claim 10 of '814 patent states: "The apparatus of claim 8, wherein

the opposite waveforms for each power phase have a symmetrical

shape so that the formation of a harmonic signal in the AC signal

is suppressed." The parties agreed that the phrase "symmetrical

shape" means "the positive (up-going) waveform shape of the AC

signal is the mirror image of the negative (down-going) waveform

shape but shifted by one half period." Further, the parties agreed

that the phrase "the formation of a harmonic signal in the AC

signal is suppressed" means "harmonic signals are integer multiples

(beginning with the integer 2) of the fundamental repetition

frequency of the AC signal. The fundamental repetition frequency

is the frequency of the AC signal generated by the network of the

plurality of switches. If the AC waveform generated by the network

of the plurality of switches is symmetrical, the even harmonics

(e.g., 2, 4, 6, 8, etc.) will be suppressed." O2 Micro maintains

that both the Henry patent and the Cosby/Nelms article disclose

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this limitation, and thus the jury's verdict can be upheld based on

either reference.

a. Henry Patent

MPS argues that O2 Micro's evidence that claim 10 was

anticipated by this patent was insufficient. O2 Micro responds by

citing the expert testimony from Dr. Erickson that claim 10 of the

'814 patent is anticipated by Henry. See Trial Tr. 984:20-25

("Q. And we haven't talked about claim 10 of the '814 patent 

. . . . Is that disclosed in Henry? A. Yes."). But, as MPS notes,

conclusory statements made by an expert witness cannot provide the

clear and convincing evidence necessary to prove anticipation. 

See, e.g., Koito Mfg. Co. v. Turn-Key-Tech, LLC, 381 F.3d 1142,

1152 (Fed. Cir. 2004). 

Dr. Erickson provided further and necessary explanation; he

stated that the drive waveforms Henry showed were symmetrical. The

four waveforms, shown in the parties' papers as Fig. 5D, 5E, 5F and

5G, drive the four switches in the full-bridge and produce the

opposite waveforms. O2 Micro states that, essentially, these

waveforms are the input to the full-bridge and the AC signal is the

output. As Dr. Erickson explained, "Figures 5D through 5G show the

waveforms that turn the switches on and off, and as a result, they

show what AC signal or rectangular waveform is produced by the

switching. . . . P1, P2, N1 and N2 are the same waveforms that

operate the switch -- the switches and make them produce -- This P1

and N2 are the same waveforms that turn the switches on and off

that we see on Figure 5D through 5 G. They turn the -- operate the

switches and make the switches operate with opposite switching and

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produced a symmetrical AC signal coming out of the bridge." Trial

Tr. 1898:24-1899:16. The full bridge in Henry, according to Dr.

Erickson, produces a symmetrical AC signal that confirms that "the

formation of a harmonic signal in the AC signal is suppressed." 

And, as noted above, if the waveform generated by the plurality of

switches is symmetrical, the even harmonics will be suppressed.

MPS argues that Dr. Erickson's testimony is not sufficient to

establish that the Henry patent contained all the elements of claim

10. Part of its criticism of O2 Micro's evidence is that it

addressed the waveform's input to the full bridge, and not the

output waveform. MPS asserts that O2 Micro conceded that the

Figure 5 waveforms disclosed in the Henry patent are input and not

output waveforms. But MPS takes out of context O2 Micro's language

that "the drive waveforms are the input to the full bridge." The

second part of that quote, that MPS ignores, is that "the AC signal

is the output." And, as noted above, Dr. Erickson testified that

the waveforms produce a symmetrical AC signal coming out of the

bridge. 

The Court is not persuaded that a reasonable jury could not

find that the rectangular output waveform in the Henry patent is

symmetrical or that claim 10 is anticipated by the Henry patent. 

Although P1 and N1 are not the mirror image of P2 and N2, P1 is the

mirror image of P2 and N1 is the mirror image of P2. Dr.

Erickson's testimony about the Henry provisional application refers

to the part of the application that was carried over to the Henry

patent. The Court concludes that the evidence presented to the

jury does not point to the single conclusion that claim 10 of the

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'814 patent was not anticipated by the Henry patent.

b. Cosby/Nelms article

Although the evidence on the Henry patent is sufficient to

support the jury's finding of anticipation, the Court will address

MPS' argument that O2 Micro failed to prove that claim 10 was

anticipated by the Cosby/Nelms article.

MPS asserts that Dr. Erickson's entire testimony regarding the

anticipation of claim 10 by the Cosby/Nelms article consists of

just the sixteen lines that it quotes. See Trial Tr. 969:10-25

("Q. Now, finally, let's look at claim 10 of the '814 . . . . did

you find that was present in the Cosby article? A. Yes, it is."). 

As O2 Micro notes, however, Dr. Erickson had more to say on the

subject. While discussing the Cosby/Nelms article, Dr. Erickson

explained that "what happens is first switches 'A' and 'D' turn on,

they connect the DC input to the output and you get the positive

part of the square wave. Then later you turn the opposite switches

on, 'B' and 'C,' which connects the DC input backwards and you get

the negative part of the square wave." Trial Tr. 954:16-21. Dr.

Erickson also testified that the full-bridge described in the

Cosby/Nelms article produces a "square-wave voltage" that he

illustrated for the jury in Exhibit 5020. During rebuttal, Dr.

Erickson testified that the full bridge disclosed by the

Cosby/Nelms article "generates a square wave. And a square wave

is, by definition, a symmetrical waveform." Trial Tr. 1904:18-20. 

According to Dr. Erickson, the full-bridge disclosed in the

Cosby/Nelms article produces a symmetrical AC signal, which could

have led the jury reasonably to find that the "formation of a

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harmonic signal in the AC signal is suppressed," and that the

Cosby/Nelms article anticipates claim 10 of the '814 patent. 

MPS contends that this evidence is insufficient. It argues

that Dr. Erickson never "actually testified" that the Cosby/Nelms

article disclosed a full bridge with opposite switching. But, as

noted above, he testified that the article disclosed a full bridge

and he also testified that there were opposite switches; he did not

need to say it in the same sentence. MPS argues that Dr. Erickson

abandoned his explanation of what the Cosby/Nelms article

disclosed, and instead was discussing only his general knowledge,

when he testified: "And the way it makes the square wave is by

switching these switches which we -- talked about last time how

that works in the full-bridge, but there's a DC input voltage that

is the input to the full bridge. And what happens is . . . ." 

Trial Tr. 954:13-16. But the jury could have reasonably thought

that Dr. Erickson was testifying about the article itself and

merely reminding the jurors that he had previously explained to

them how that works generally in the full bridge.

Furthermore, as O2 Micro notes, although the Court concluded

that the Cosby/Nelms article does not discuss a full-bridge

operating in power phases to generate opposite waveforms of a

symmetric shape, the jury could have reasonably concluded

otherwise. The Court's inequitable conduct findings do not prove

that reasonable minds could come to only one conclusion. The Court

found Professor Nelms to be credible, but the jury seemingly did

not; nor was it required to find Professor Nelms credible. In sum,

the evidence presented to the jury does not point to the single

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conclusion that the jury was incorrect in find that claim 10 of the

'814 patent was anticipated by the Cosby/Nelms article.

2. Claim 25 of the '881 Patent 

MPS contends that O2 Micro failed to prove that either the

Henry patent or the Cosby/Nelms article anticipated claim 25 of the

'881 patent. Claim 25 states: "The apparatus of claim 1, wherein

the duty cycle is varied so that the AC signal delivers a reduced

amount of power to the load." The Court defined the term "load"

for this claim as "a discharge lamp selected from the group of cold

cathode fluorescent, metal halide or sodium vapor." The Court

further defined the phrase "the duty cycle is varied so that the AC

signal delivers a reduced amount of power to the load" to mean

"adjusting the pulse width of the AC signal output by the network

of plurality of switches to decrease the amount of power delivered

to the load." The phrase "duty cycle" means "in percent, 100(t0/T)

where T is the period between pulses and t0 is the pulse width." 

O2 Micro maintains that this claim is anticipated by the Henry

patent, and thus the jury's verdict must be upheld; it states that

it did not contend at trial, and does not contend here, that the

Cosby/Nelms article anticipates claim 25.

The parties do not dispute that the Henry patent discloses

varying the duty cycle. But MPS contends that O2 Micro failed to

show that the duty cycle was varied to deliver a reduced amount of

power to the load and that Dr. Erickson simply opined that claim 25

was anticipated by the Henry patent. O2 Micro demonstrates in its

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2 O2 Micro further argues that the Henry patent itself

provides evidence that the jury could rely on to find anticipation

of claim 25. It cites a case concluding that the patent claims

were anticipated by a prior art reference based on the reference

itself without expert testimony. See Prima Tek II, LLC v. Polypap,

S.A.R.L., 412 F.3d 1284, 1290 (Fed. Cir. 2005). But, as MPS notes,

the court in Prima Tek stated, "Expert testimony was not required,

the technology being easily understood without expert testimony." 

412 F.3d at 1290 n.7. That is not true in this case.

24

opposition, however, that Dr. Erickson did more.2 

Dr. Erickson explained the dashed lines in Figure 5 of the

Henry patent: "What Henry is showing there is the circuitry that

varies the duty cycle is reducing the width of the pulse making

this pulse width, when the switch is on, shorter. And that's

varying the duty, or, in fact, reducing the duty cycle." Trial Tr.

984:13-16. Previously, Dr. Erickson had explained to the jury that

reducing the duty cycle and making the pulse widths shorter reduces

the amount of power delivered to the load. He stated that "by

getting rid of part of the cycle and making it reduced pulse width

and putting some zero time in here, you get less output. So you

can reduce the power, for example, that goes to the output." Trial

Tr. 965:19-22. MPS asserts that this testimony deals only with

obviousness generally; but that is incorrect. The testimony was

elicited in response to the question: "Now, I didn't ask you what

varied duty cycle meant. Can you explain that to the jury?" Trial

Tr. 963:24-25. MPS' argument that this testimony merely explained

the requirements of claim 25 generally also fails. After

discussing varying the duty cycle and reducing the power that goes

to the output, Dr. Erickson testified that this is information

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discussed in the Henry patent. 

O2 Micro presented evidence to the jury from which the jury

reasonably could conclude that claim 25 of the '881 patent was

anticipated by the Henry patent; MPS fails to show that the

evidence presented to the jury points to the single conclusion that

the claim 25 was not anticipated by the Henry patent.

B. Trade Secret No. 11

Trade Secret 11 comprises:

O2 Micro's method of using multiplexing functions in the

pins of the OZ9RR inverter controllers so that one pin of

the OZ9RR inverter controller may support multiple functions

co-existing in an inverter application, including for

example, use of one pin for both Soft Start (SST) and

Compensation (CMP) and the use of one pin for both Voltage

Sense (VSEN) and Dimming Control (DIM).

The Court, in its November 10, 2005 order, denied MPS judgment as a

matter of law that it did not use Trade Secret 11. MPS now argues

that jury's verdict that MPS misappropriated Trade Secret 11 must

be reversed as a matter of law because O2 Micro failed to introduce

evidence that MPS ever acquired the trade secret.

O2 Micro contends that Exhibit 474, an email from a MPS

employee forwarding a schematic diagram of the OZ9RR product to MPS

engineers and managers, shows that MPS acquired this information at

least as early as November, 2002. The schematic shows the pins on

the OZ9RR chip and identifies their functions: "SST/CMP" for one

pin and "VSEN/DIM" for another pin. Dr. Erickson testified that

the schematic does not say multiplexer or MUX, but it "does show

the circuitry" for the multiplexed pins. Trial Tr. 1071:10-14. In

its opposition, citing Dr. Erickson's testimony, O2 Micro states

that the MPS engineers who received this schematic were well aware

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that the identification of two functions for a single pin indicates

that the functions are multiplexed on that pin. But, as MPS notes,

O2 Micro did not introduce evidence at trial that the MPS engineers

who saw the schematic were well aware it showed a multiplexing

function, and O2 Micro provides no trial transcript citation for

this assertion, other than Dr. Erickson's statement regarding

circuitry. Furthermore, MPS argues in its reply that it is a

scientifically inaccurate assumption that a chip with more than one

function on a pin reveals to an engineer that the two functions are

multiplexed so that the signals co-exist at the same time on that

pin. 

Regardless, the Court cannot conclude that the jury improperly

inferred that MPS acquired Trade Secret 11; the evidence presented

at trial, although limited, does not point to the sole conclusion

that the jury was incorrect in finding that MPS acquired and thus

misappropriated Trade Secret 11. 

MPS' renewed motion for judgment as a matter of law is denied.

IV. MPS' Motion for a New Trial

MPS moves for a new trial. Specifically, it argues that the

Court should grant a new trial on anticipation, infringement and

misappropriation of trade secrets. Pursuant to Federal Rules of

Civil Procedure 50 and 59, MPS also conditionally moves for a new

trial on unjust enrichment damages due to trade secret

misappropriation in the event that the Federal Circuit reverses the

Court's grant of judgment as a matter of law that the jury's award

of unjust enrichment damages was not based on evidence presented at

trial.

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A. Patent-Related Issues

1. Anticipation

MPS argues that it is entitled to a new trial on anticipation

because O2 Micro argued invalidity based on Dr. Erickson's

textbook, which was an undisclosed reference, and based on the

Cosby/Nelms article, which the Court concluded, in its findings of

fact and conclusions of law, was not material. O2 Micro responds

that neither ground warrants overturning the jury's verdict.

a. Dr. Erickson's textbook

MPS argues that O2 Micro ambushed it at trial with Dr.

Erickson's textbook, which was not previously disclosed. Although

the jury did not specify the reference upon which it based its

anticipation finding, MPS claims that O2 Micro emphasized the

Erickson textbook more than any other reference, resulting in

prejudice that can only be remedied by a new trial. 

O2 Micro does not dispute that the Erickson textbook was not

previously disclosed as an invalidity reference. Instead, it first

argues that MPS waived its objection to the textbook by failing to

object consistently at trial. As O2 Micro notes, MPS objected

twice: once during the testimony of Dr. Lin and again during the

cross-examination of Mr. Moyer. MPS raised no objections during

the opening statement or the closing argument; nor did MPS object

when the Erickson textbook was admitted into evidence or when Dr.

Erickson, O2 Micro's expert, presented testimony regarding his

textbook. 

MPS responds that it was not required to continue to object

after having twice made the same objection and twice being

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overruled. It cites Federal Rule of Evidence 103(a): "Once the

court makes a definitive ruling on the record admitting or

excluding evidence, either at or before trial, a party need not

renew its objection or offer of proof to preserve a claim of error

for appeal." But, as MPS recognizes in its moving papers, the

Court did not admit the textbook as evidence of prior art that

could show anticipation. The Court overruled MPS' first objection

that Dr. Lin's testimony concerning the textbook was expert

testimony and not disclosed in O2 Micro's final invalidity

contentions because the testimony was to show that the basic

components of a resonant converter were understood and taught back

in the early 1990's and that Dr. Lin learned about them from the

textbook. The Court overruled MPS' second objection and allowed

the testimony, only after O2 Micro convinced the Court that the

testimony was not to show invalidity. The Court never made a

definitive ruling admitting the Erickson textbook as evidence to

show anticipation, and Rule 103(a) is inapposite.

Further, two of the cases cited by O2 Micro are apposite. As

in Kaiser Steel Corp. v. Frank Coluccio Const. Co., 785 F.2d 656,

658 (9th Cir. 1986), nothing prevented MPS "from raising this issue

with the trial court well before the jury began its deliberations. 

This action would have permitted the judge to examine the alleged

prejudice" and to issue a curative instruction, if warranted, that

the textbook could not be the basis for a finding of anticipation. 

Id. And, as in Kehr v. Smith Barney, Harris Upham & Co., Inc., 736

F.2d 1283 (9th Cir. 1984), where the court upheld the denial of a

new trial, O2 Micro's reliance on the Erickson textbook as

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anticipating prior art allegedly "occurred principally during

opening statement and closing argument, rather than throughout the

course of the trial." Id. at 1286. While constant objections are

not required, MPS "never objected during the closing argument or

moved for a mistrial." See id. Instead, it waited until after the

jury reached its verdict and after the Court issued judgment before

it objected by moving for a new trial.

The Court finds that MPS waived its objections absent a

showing of plain error, which it does not show. Furthermore, the

jury was instructed regarding anticipation:

A patent claim is invalid if the claimed invention is not

new. For the claim to be invalid because it is not new,

all of its requirements must be in a single previous device

or method or described in a single previous publication or

patent. We call these things prior art references. The

only prior art references that you may consider are the

Henry, Cosby and Park References. 

Trial Tr. 1971:25-1972:6. As O2 Micro notes, we presume jurors

follow the court's instructions absent extraordinary situations. 

Tak Sun Tan v. Runnels, 413 F.3d 1101, 1115 (9th Cir. 2005). This

is not an extraordinary situation "where we can lay aside the

'crucial assumption underlying our constitutional system of trial

by jury that jurors carefully follow instructions.'" Id. (quoting

Francis v. Franklin, 471 U.S. 307, 324 n.9 (1985)). The jury

instructions provided clear direction as to the scope of references

the jury could consider for anticipation. Nonetheless, the Court

will briefly address MPS' argument that the textbook was O2 Micro's

primary piece of evidence as to anticipation and that its admission

was erroneous. 

Much of what MPS points to is O2 Micro's use of the textbook

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as evidence of obviousness, not of anticipation. This motion is

for a new trial on the grounds of the jury's finding of

anticipation, not of obviousness. Although MPS claims that the

textbook was the centerpiece of O2 Micro's argument at trial, it

cites no testimony that the textbook itself disclosed all of

asserted claims of the '814 and '881 patents, which was required

for a finding of anticipation. Dr. Erickson testified that his

characterization of the Cosby/Nelms article was reflected as Figure

19.1 in his textbook, which shows the elements that are found in

that article and his understanding of that article in 1994 or 1995;

he did not testify his textbook itself anticipated the patents in

question. MPS quotes closing argument, where O2 Micro's counsel

argued, "If Dr. Erickson can write a book before this litigation

ever starts characterizing all of the issues in the case and

telling the world this technology is basic and it covers this, four

switches, et cetera, et cetera, then it is obvious, it is

anticipated." Trial Tr. 2104:8-12. But that is attorney argument,

which the jury was expressly instructed is not evidence. 

As MPS notes in its reply, Dr. Erickson's trial testimony of

his understanding of the Cosby/Nelms article in 1994 or 1995 is

directly contradicted by an expert report that Dr. Erickson signed

on July 21, 2003, in which he stated that, had he been aware of the

Cosby/Nelms article, he would have included his opinion regarding

the invalidity of the '814 and '881 patents based on the

Cosby/Nelms article in his expert report dated May 22, 2003.

Although this inconsistency is troubling, it is not grounds for a

new trial. Nor are the Court's rulings admitting testimony from

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Dr. Lin and Mr. Moyer concerning the Erickson textbook grounds for

a new trial. The Court's admission of evidence for one purpose did

not become erroneous because MPS failed to object when O2 Micro

allegedly used the admitted evidence for a purpose other than the

purpose for which Court originally, and properly, admitted the

evidence.

 MPS' motion for a new trial based on the admission of the

Erickson article is denied.

 b. Cosby/Nelms article

MPS argues that a new trial on anticipation is appropriate

based on the Court's finding that the Cosby/Nelms article is not

material. MPS notes that to establish inequitable conduct, O2

Micro had to show by clear and convincing evidence that the

Cosby/Nelms article was material; to establish anticipation, O2

Micro had to show by clear and convincing evidence that the

Cosby/Nelms article disclosed every limitation of each MPS claim in

suit. Because the Court utilized the same clear and convincing

standard that the jury was required to use in determining

anticipation, MPS argues that the Court's finding compels the

conclusion that the Cosby/Nelms article does not support a finding

of anticipation. That is incorrect. As discussed above, the

Court's inequitable conduct findings do not prove that the jury

erred. The Court's finding that the Cosby/Nelms article was not

material does not even prove, in and of itself, that the jury's

verdict was against the weight of the evidence. The jury could

have found anticipation based on the Henry patent. As noted above,

O2 Micro never asserted that the Cosby/Nelms article disclosed

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O2 Micro's objection to the declaration of Clay Ger in

support of this motion is sustained, and the declaration will not

be considered.

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claim 25 of the '881 patent. 

In its reply, MPS argues that a new trial is appropriate

regardless of whether a reasonable juror could have found

anticipation by the Cosby/Nelms article or the Henry patent. The

standard for granting a new trial is lower than the standard for

granting a judgment as a matter of law, as noted above. But, after

giving full respect to the jury's finding and reviewing the

evidence, the Court is not "left with the definite and firm

conviction that a mistake has been committed." Landes Constr. Co.,

833 F.2d at 1371-72. Thus, MPS' motion for a new trial on this

ground is also denied.

2. Infringement

MPS argues that the Court should grant a new trial on

infringement because the Court improperly allowed Dr. Erickson's

expert testimony of non-infringement.3 MPS asserts that Dr.

Erickson's testimony was based on tests performed by Mr. Kuhlmann,

that O2 Micro never showed that it was proper for Dr. Erickson to

rely on Mr. Kuhlmann's test results and thus that the testimony

should have been excluded as unreliable hearsay.

Under Federal Rule of Evidence 702, an expert's opinion is

admissible "if (1) the testimony is based upon sufficient facts or

data, (2) the testimony is the product of reliable principles and

methods, and (3) the witness has applied the principles and methods

reliably to the facts of the case." Although an expert may not

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 Rule 703 provides:

The facts or data in the particular case upon which an

expert bases an opinion or inference may be those

perceived by or made known to the expert at or before the

hearing. If of a type reasonably relied upon by experts in

the particular field in forming opinions or inferences

upon the subject, the facts or data need not be admissible

in evidence in order for the opinion or inference to be

admitted. Facts or data that are otherwise inadmissible

shall not be disclosed to the jury by the proponent of the

opinion or inference unless the court determines that

their probative value in assisting the jury to evaluate

the expert's opinion substantially outweighs their

prejudicial effect.

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adopt another's data without verifying the validity and reliability

of that data, Rule 703 allows an expert to rely on facts or data

relied upon by experts in the particular field in forming opinions

or inferences upon the subject; an expert is not required to

testify only upon data the expert has personally gathered or

tested. See Fed. R. Evid. 703.4

MPS argues that Dr. Erickson had no knowledge of Mr.

Kuhlmann's methodology; it uses snippets of testimony to support

its argument. But the evidence presented at trial shows otherwise. 

Dr. Erickson testified that he "didn't go to the lab and push the

buttons or anything like that," but he "did specify what [he]

wanted tested and how it should be tested." Trial Tr. 1027:6-9. 

He testified that he reviewed the Kuhlmann report and that Mr.

Kuhlmann's testing methodology was well-known: Mr. Kuhlmann used

"an automated measuring system" called a "gain phase meter" that is

"a well-known piece of equipment that is typically used to make

this kind of measurement." Trial Tr. 993:19-22. Dr. Erickson

stated that he had two gain phase meters in his office and wrote a

section in his book "about how to make this kind of measurement." 

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Trial Tr. 993:23-25. Based on this information, he told the Court

and jury that he believed the Kuhlmann report accurately

represented the resonant frequencies, the operating frequency and

the filter. And he further testified, "I see no reason to doubt

the report. It used a gain phase analyzer, that's a well-known

device, and you know, all you do is take a picture of the front

panel of the gain phase analyzer. So you know, there aren't --

there isn't a lot of opportunity to massage the data there." Trial

Tr. 1029:4-8.

Pursuant to Rule 703, the testing was performed according to

methods commonly accepted in the industry and Dr. Erickson's

testimony regarding non-infringement was properly admitted. The

evidence did not establish that a test using simple wires is not

sufficient to measure the frequencies, as MPS asserts. Dr.

Erickson testified that even assuming no high impedance probes were

used it was still reasonable to rely on Mr. Kuhlmann's data. Thus,

MPS' argument, that it was not its burden to make a threshold

showing of unreliability in order to exclude Dr. Erickson's

testimony based on Mr. Kuhlmann's report, fails. As O2 Micro

correctly notes, Mr. Kuhlmann was within the subpoena power of the

Court and MPS could have sought leave to call him in its rebuttal

case to challenge his methodology, but MPS chose not to do so. 

Thus, the Court did not err in admitting this testimony; nor

did the Court err in not allowing MPS to introduce evidence,

allegedly exposing the flaws in Mr. Kuhlmann's data, that consisted

of tests run by Mr. Matzen and a video of Mr. Matzen's testing that

were not previously disclosed. MPS' motion for a new trial on

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infringement is denied.

B. Trade Secret Issues

MPS contends that it is also entitled to a new trial on the

secrecy, pre-existing knowledge and intent elements of use of Trade

Secret 1, and a conditional new trial on O2 Micro's remedies for

misappropriation of the alleged trade secrets.

1. Secrecy of Trade Secret 1

As the Court discussed in its prior order denying MPS judgment

as a matter of law that it did not use Trade Secret 1, this

transformer-related trade secret claim consists of various

permutations of seven features, including size of wires, number of

turns and number of unfilled bays. Although the parties agree that

combinations of non-secret information can be trade secrets, MPS

argues it should be granted a new trial because O2 Micro failed to

show a combination trade secret, in part, because various of the

transformer features, such as wire size, were not secret. 

But, as O2 Micro notes, this argument ignores the testimony

provided at trial that many of the transformer features listed in

Trade Secret 1 are interrelated and interdependent. MPS' expert

conceded that in order to optimize the attributes the transformer

designer seeks, Dr. Lin, like other people using transformers, had

to go through an iterative process when he designed O2 Micro's

transformer. Trial Tr. 1434:13-14. To change one part requires

readjusting another part and trying various combinations. For

example, O2 Micro notes and MPS' expert agreed that there are many

different ways to get a turns ratio of 100. Thus, evidence

presented at trial supported O2 Micro's contention that the work

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Dr. Lin did resulted in a combination of transformer

characteristics that was optimal and secret. As O2 Micro notes,

MPS points to no evidence showing that Dr. Lin's design concerning

a combination of characteristics -- number of bays filled, wire

size, turns ratio and number of turns -- was non-secret. These are

the same characteristics that, as discussed in the Court's prior

order, MPS engineer Simon Tsai stated he experimented with on MPS'

transformer in response to customer complaints and Mr. Moyer's

instruction. It is irrelevant that all of the separate elements

may have been already known in the industry. As the Court

instructed the jury and noted in its previous order:

Combinations of public information from a variety of

different sources when combined in a novel way can be a

trade secret. It does not matter if a portion of the

trade secret is generally known, or even that every

individual portion of the trade secret is generally

known, as long as the combination of all such information

is not generally known.

Final Jury Instructions at 8:17-23. 

The Court finds that the jury's finding of that Trade Secret 1

was a trade secret is supported by the evidence. The Court is not

left with a definite and firm conviction that the jury committed a

mistake in reaching its verdict. The Court denies the motion for a

new trial on secrecy.

2. Pre-Existing Knowledge

MPS contends that it is entitled to a new trial because the

jury ignored overwhelming evidence that MPS had pre-existing

knowledge of any transformer-related trade secret information that

it allegedly used, and thus the jury's finding of misappropriation

is against the clear weight of the evidence and must be set aside. 

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It further argues that the Court erred in rejecting its request

that the verdict form contain a separate entry for pre-existing

knowledge. The Court will address the latter argument first.

MPS argues that because it is settled law that a defendant's

pre-existing knowledge is a complete defense to a trade secret

claim, the jury should have been required by the verdict form

specifically to decide pre-existing knowledge. O2 Micro responds

that two of the cases MPS cites to support its settled-law argument

are distinguishable and that the third case was decided long before

California's adoption of the UTSA. See Oral Vision, Inc. v.

Encompass, Inc., No. C94-20430-JW, 1995 WL 66790 (N.D. Cal.);

Rigging Int'l Maint. Co. v. Gwin, 128 Cal. App. 3d 594, 608 (1982);

Monolith Portland Midwest Co. v. Kaiser Aluminum & Chemical Corp.,

267 F. Supp. 726 (S.D. Cal. 1966). Regardless of whether these

cases hold that it is settled law that pre-existing knowledge is a

complete defense, none of the cases holds that a party is entitled

to a separate entry on the verdict form for pre-existing

knowledge. And, as O2 Micro notes, MPS' argument that omitting

pre-existing knowledge is akin to omitting fair use from the

verdict form in a copyright case is unpersuasive: the preexisting knowledge defense is not found in California's Uniform

Trade Secrets Act, whereas the fair use defense to copyright

infringement appears in the copyright statute. See Cal. Civ. Code

§ 3426 et seq.; 17 U.S.C. § 107.

Although it was not on the verdict form, the jury was

instructed on pre-existing knowledge. In its jury instruction on

the definition of a trade secret, the Court instructed the jury,

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"If the principal person who can obtain economic benefit is aware

of it, there is no trade secret." MPS contends that this

instruction was buried in dense jury instructions and that without

a verdict form that required the jury actually to vote on 

pre-existing knowledge, MPS' key defense, the jury had no clear way

to act on that instruction. But, as noted above, it is presumed

that the jury followed instructions, even in a complex case with

lengthy jury instructions; thus, MPS' contention is not well taken. 

Not including a separate part on the jury verdict for pre-existing

knowledge was not an error.

O2 Micro argues that, even if a question on pre-existing

knowledge had appeared on the verdict form, it would have had no

impact on the verdict, which it contends the evidence strongly

supported. While the Court does not agree that the evidence

strongly supported the verdict, it does find that the jury's

verdict was supported by the evidence. As the Court previously

recognized, the jury could reasonably have disbelieved MPS'

testimony regarding when particular information and exhibits were

acquired by MPS. The jury did not need to believe that evidence

was forged in order to reach its verdict; nor does O2 Micro contend

that any of the documents were forged. Although MPS presents in

its papers, and presented to the jury, evidence of pre-existing

knowledge, after having given full respect to the jury's findings

and based on all of the evidence, the Court is not left with the

definite and firm conviction that the jury's verdict, with its

implicit finding that MPS did not have pre-existing knowledge of O2

Micro's transformer trade secret, was a mistake. 

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3. Intent

MPS argues that it is entitled to a new trial as to intent on

the transformer trade secret claim because the evidence at trial

did not show that it knew or had reason to know that obtaining a

board from Sumida in October, 2000 would misappropriate an O2 Micro

trade secret, nor did the evidence show that MPS acted wilfully and

maliciously.

As MPS notes, misappropriation of trade secrets is an

intentional tort. PMC, Inc. v. Kadisha, 78 Cal. App. 4th 1368,

1382 (2000). Therefore, MPS argues, O2 Micro must prove that MPS

obtained Trade Secret 1 using improper means. MPS quotes PMC,

Inc., "Use of a trade secret without knowledge it was acquired by

improper means does not subject a person to liability unless the

person receives notice that its use of the information is wrong." 

78 Cal. App. 4th at 1383. This is correct. Improper means is one

way to show misappropriation; but there are others. See Cal. Civ.

Code § 3426.1(b). The court in PMC, Inc. further stated that

defendants can be liable for misappropriation if "they knew or had

reason to know that the knowledge of the trade secrets was derived

from or through a person who had improperly acquired the knowledge,

or the secrets were obtained by a person who owed a duty to

plaintiffs to maintain the secrecy." Id. California Civil Code

section 3426.1(a) provides, "'Improper means' includes theft,

bribery, misrepresentation, breach or inducement of a breach of a

duty to maintain secrecy, or espionage through electronic or other

means. Reverse engineering or independent derivation alone shall

not be considered improper means."

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As the Court explained to the jury: "MPS acted willfully if

MPS knew that it was misappropriating 02 Micro's trade secrets when

it improperly used or disclosed them. MPS acted with malice if it

knew the consequences of its conduct and willfully and deliberately

failed to avoid those consequences."

MPS presents evidence showing lack of intent and lack of

improper means; some evidence shows that MPS did not know that

obtaining a board from Sumida would misappropriate an O2 Micro

trade secret. The board in question was marked with Sumida's name

and had no O2 Micro logo on it. The MPS employee who obtained the

board from Sumida testified that he thought the board was a

production board, which is intended for the open market. MPS'

employees Mr. Moyer and Mr. Ueunten testified that they too thought

that the board was a Sumida production board and that it had the

features that are characteristic of production boards. 

But O2 Micro presents evidence supporting the jury's finding

that MPS misappropriated the trade secrets willfully and

maliciously. As noted above, O2 Micro contends that MPS'

misappropriation began when it first obtained, distributed and then

used a OZ960 datasheet. "Confidential" was stamped diagonally

across each page of the data sheet in letters almost three-fourths

of an inch tall; the words "NOT FOR PUBLIC RELEASE" appeared on the

front page. The datasheet arrived in an email sent, to the

personal email account of an MPS executive, by a Mr. Kim, who wrote 

that he had obtained the datasheet "from a friend," and noted, "You

have to keep confidential." It was not kept confidential. As Mr.

Ueunten testified, on receiving the email, he saw that the

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datasheet had a confidential stamp across the front of it, but he

still reviewed it. Mr. Moyer testified that upon receiving the

data sheet that was stamped confidential he "felt awkward in seeing

it" because of the confidential stamp. Trial Tr. 506:9. When

asked if he reviewed it, Mr. Moyer responded, "Of course." Trial

Tr. 506:14. In an October 3, 2000, email, mentioned above, Mr.

Ueunten concluded, based on a comparison of information from the

confidential datasheet, that the transformer "must be the key to

efficiency" for the OZ960, and asked if MPS could "get a hold of

the inverter and/or its transformer." Shortly thereafter, MPS

obtained what it states was a production board, but what Dr. Lin

testified was a demo board. 

Although the jury rejected trade secret claims based on the

confidential datasheet, the Court finds that the above evidence

cited by O2 Micro supports the jury's finding that MPS had the

necessary intent to misappropriate willfully and maliciously. The

Court recognizes that the above evidence cited by MPS would have

supported a jury finding that MPS did not misappropriate the trade

secrets willfully and maliciously. But, again, after having given

full respect to the jury's findings, based on all of the evidence,

the Court is not left with the definite and firm conviction that

the jury's verdict was a mistake.

4. Damages

MPS requests a conditional new trial, pursuant to Federal Rule

of Civil Procedure 50, on unjust enrichment damages in the event

that the Federal Circuit reverses the Court's judgment as a matter

of law that the award of unjust enrichment damages was not

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supported by the evidence presented at trial. As MPS notes, O2

Micro raises the same arguments in its opposition that this Court

rejected previously. And, even after giving full respect to the

jury's findings, the Court is left with the definite and firm

conviction that a mistake in awarding unjust enrichment damages was

committed. The Court grants MPS a conditional new trial on unjust

enrichment damages. 

CONCLUSION

For the foregoing reasons, the Court DENIES in part and GRANTS

in part O2 Micro's motion to alter or amend the judgment and

renewed motion for judgment as a matter of law (Docket No. 1249): 

the Court amends the judgment to award $321,363 in prejudgment

interest, but denies O2 Micro's motion to amend the judgment to

state that certain claims are invalid as obvious and denies O2

Micro's renewed motion for judgment as a matter of law. The Court

DENIES MPS' renewed motion for judgment as a matter of law (Docket

No. 1253). The Court DENIES in part and CONDITIONALLY GRANTS in

part MPS' motions for a new trial (Docket No. 1255): the Court

conditionally grants MPS' request for a new trial on unjust

enrichment damages, but denies all other requests for a new trial.

IT IS SO ORDERED.

Dated: 3/9/06

 

CLAUDIA WILKEN

United States District Judge

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