Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_17-cv-01268/USCOURTS-cand-4_17-cv-01268-24/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 28:1331 Fed. Question

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

LIVEPERSON, INC.,

Plaintiff,

v.

[24]7.AI, INC.,

Defendant.

Case No. 17-cv-01268-JST 

ORDER DENYING MOTION TO 

EXCLUDE CERTAIN TESTIMONY OF 

LIVEPERSON'S EXPERT WITNESS 

DR. WILLIAM CHOI

Re: ECF No. 534

Now before the Court is Defendant [24]7.ai, Inc.’s (“[24]7”) Motion to Exclude Certain 

Testimony of LivePerson’s Expert Witness Dr. William Choi. ECF No. 533-3.1 The Court will 

deny the motion. 

I. BACKGROUND

The background of this trade secret case2has been extensively described in prior orders. 

See, e.g., ECF No. 492. Briefly, Plaintiff LivePerson, Inc. (“LivePerson”) provides online chat 

engagement services through a digital platform that it sells to website operators. Chat engagement

allows website operators to initiate real-time text-based communications with website users

directly on the website. LivePerson’s platform attempts to maximize the effectiveness of those 

chat engagements by identifying when initiating a chat with a particular user is most likely to 

produce a positive outcome, such as a sale. The platform uses “rules” that recommend initiating a 

 

1 Because this order contains or refers to material subject to sealing orders, the Court initially filed 

the order under seal and provided the parties seven days to propose redactions. ECF No. 559 at 1 

n.1. The parties then filed a joint notice stating that they do not request any redactions. ECF No. 

563. Accordingly, the Court now files the order on the public docket.

2 The parties also have a companion patent infringement case which is not at issue here. [24]7.ai, 

Inc., et al v. LivePerson, Inc., Case No. 3:15-cv-02897-JST (N.D. Cal.). 

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chat based on variables such as the user’s navigation history on the website. LivePerson develops 

rules and variables specific to each customer and combines that information into a Design 

Requirements Document (“DRD”), which it shares with the customer. LivePerson’s chat platform 

also collects and analyzes XML data based on users’ visits to the customer’s websites. 

LivePerson makes those data reports accessible to its customers for use in their operations, and

LivePerson also uses that data to further develop its predictive models. See ECF No. 533-5 (Third 

Supplemental Expert Report of William S. Choi, Ph.D.) ¶ 17 (“[E]ach of the ‘data’ trade secrets 

consists of data tracking LivePerson metrics such as web visitor behavior, rule performance, chat 

volumes and content that is output from LivePerson’s predictive chat platform and can be in the 

form of either (i) XML data, or (ii) reports.”); id. ¶ 18 (“The XML data, in contrast, provides 

granular data about each interactive chat, including the transcripts of the chats themselves, which 

can be further utilized to draw additional conclusions.”). 

Thus, for purposes of this order, and as the foregoing would suggest, there are two types of 

LivePerson trade secrets at issue in this motion: “rules” trade secrets, which involve the 

combinations of rules and variables just identified, and “data” trade secrets, which consist of the 

XML data gathered during users’ visits to LivePerson’s customers’ websites. 

[24]7 also operates in the online chat industry. For a period of time, both companies 

operated under a series of agreements to market and provide services to mutual customers, through 

which [24]7 gained access to the rules and data developed for certain LivePerson customers. 

LivePerson alleges that [24]7 improperly used LivePerson’s trade secret information to develop its 

own competing chat platform and take LivePerson’s customers. LivePerson further alleges that 

[24]7 continued to make use of LivePerson’s protected information while providing chat platform 

services to those customers. 

LivePerson has retained economist William S. Choi, Ph.D., to render an opinion on 

damages. The Court previously granted a motion by [24]7 to exclude portions of Dr. Choi’s 

opinion on Daubert grounds. ECF No. 498; Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 

(1993). Specifically, the Court found that “Dr. Choi’s opinion must be excluded because he does 

not apportion trade secret misappropriation damages among particular alleged trade secrets, and 

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offers no methodology for the jury to calculate trade secret misappropriation damages on fewer 

than all of the 28 alleged trade secrets in the case. And because the initial trial is a bellwether trial 

in which only 15 of the 28 alleged trade secrets will be at issue, the jury’s verdict will necessarily 

encompass fewer than all of the alleged trade secrets.” ECF No. 498 at 3 (citation omitted). 

Following this ruling, the Court granted leave to LivePerson to submit a “supplemental 

damages report . . . that addresses the Court’s Daubert ruling,” ECF No. 519, which LivePerson 

did. [24]7 then filed this motion. 

II. LEGAL STANDARD

Federal Rule of Evidence 702 provides:

A witness who is qualified as an expert by knowledge, skill, 

experience, training, or education may testify in the form of an 

opinion or otherwise if:

(a) the expert’s scientific, technical, or other specialized knowledge 

will help the trier of fact to understand the evidence or to 

determine a fact in issue;

(b) the testimony is based on sufficient facts or data;

(c) the testimony is the product of reliable principles and methods; 

and

(d) the expert has reliably applied the principles and methods to the 

facts of the case. 

Trial courts serve a “gatekeeping” role “to ensure the reliability and relevancy of expert 

testimony.” Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 152 (1999) (citing Daubert, 509 

U.S. 579). They should screen “unreliable nonsense opinions, but not exclude opinions merely 

because they are impeachable.” City of Pomona v. SQM N. Am. Corp., 750 F.3d 1036, 1044 (9th 

Cir. 2014) (citation omitted). The reliability test under Rule 702 and Daubert “is not the 

correctness of the expert’s conclusions but the soundness of his methodology.” Id. (citation 

omitted). “Shaky but admissible evidence is to be attacked by cross examination, contrary 

evidence, and attention to the burden of proof, not exclusion.” Primiano v. Cook, 598 F.3d 558, 

564 (9th Cir. 2010). The proponent of the expert testimony has the burden of proving 

admissibility. Lust ex rel. Lust v. Merrell Dow Pharm., Inc., 89 F.3d 594, 598 (9th Cir. 1996).

Case 4:17-cv-01268-JST Document 565 Filed 07/19/19 Page 3 of 8
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III. DISCUSSION

A. Dr. Choi’s Third Supplemental Report

In his Third Supplemental Report, Dr. Choi addresses the Court’s prior concerns by 

valuing the alleged trade secrets using a three-step process. First, he apportions damages across 

the particular LivePerson customers with which the specific trade secrets are associated. Second, 

he allocates damages among the three trade secrets categories: rules, data, and tags. Third, Dr. 

Choi allocates damages between individual trade secrets within the same category (i.e., among all 

the rules trade secrets on the one hand and all the data trade secrets on the other).3 

As Dr. Choi explains, the “rules” trade secrets consist of more than just the rules

themselves, but also consist of variables: 

In some instances, the “rules” trade secrets comprise different trade 

secret information contained within a single document. For example, 

one “rule” trade secret may comprise the rules contained in a 

LivePerson trade secret document, while a different “rule” trade 

secret may comprise the variables contained in the same 

document . . . . [T]he rules use the variables to function and therefore 

the rules and variables work together to form LivePerson’s predictive 

chat technology.

ECF No. 533-5 ¶ 13. 

Using that backdrop, Dr. Choi then opines that damages can be further allocated among the 

individual rules trade secrets based on the total amount of predictive information contained in each 

trade secret DRD. Id. ¶ 15. The amount of predictive information contained within each trade 

secret, according to Dr. Choi, is reflected by the number of individual rules utilized by that trade 

secret, because the time and cost of generating the trade secret increases with the number of rules. 

In addition, the rules trade secrets for any given customer may 

reasonably be assigned a relative value (i.e., an allocated weight) 

based on the amount of information (namely, the number of rules) 

described in the trade secret document. Specifically, after reviewing 

the evidence, the number of rules in a trade secret document is a 

reasonable indication of the volume of predictive information 

contained therein, and hence the relative importance of the trade 

secret within the context in which it is used. That is a reasonable 

 

3

[24]7’s motion does not address the “tags” category in Dr. Choi’s opinion, but instead confines 

its arguments to his opinions about rules trade secrets and data (or XML) trade secrets. The Court 

therefore does the same. 

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inference given my understanding that generally the time and cost of 

developing each rules trade secret increases with the number of rules, 

as each separate rule must be individually constructed. 

Id. Dr. Choi further opines that the more rules a trade secret includes, the greater the volume of 

predictive information is included in the trade secret, which provided [24]7 with a 

commensurately greater ability to take LivePerson’s customers:

It is my understanding that the greater volume of predictive 

information, or the greater number of rules, provided [24]7 with more 

knowledge of LivePerson’s predictive functionality and also provided 

[24]7 with the ability to transition customers more seamlessly. 

Accordingly, for all these reasons, individual rules trade secrets for a 

given customer can properly be valued (weighted) relative to one 

another in accordance with the number of rules contained in the 

particular trade secret.

Id. ¶ 16. 

As to the XML trade secrets, Dr. Choi determined the value of the XML data as to each of 

the customers [24]7 allegedly wrongfully appropriated from LivePerson, assuming that for each 

customer [24]7 misappropriated a sufficient quantity of that customer’s data to construct its 

competing product for that customer. Stated simply, the value of an XML data trade secret is the 

value conferred on [24]7 by the transfer of the customer associated with that trade secret. 

LivePerson proposes that that this value be awarded if it proves that [24]7 has misappropriated “a 

sufficient amount of LivePerson data to take LivePerson’s customers and cause lost profits.” ECF 

No. 542 at 5. 

B. Rules Trade Secrets

[24]7 acknowledges that Dr. Choi has now assigned different values to each trade secret,

but argues that the Court should exclude his testimony nonetheless because there is no basis for 

Dr. Choi’s assumption that each rule should be assigned the same weight. It argues that the 

Court’s prior admonition that “[s]ome trade secrets are more valuable than others,” ECF No. 498 

at 4, must also apply to LivePerson’s rules and that Dr. Choi violates this admonition. 

The Court is not persuaded by this argument. Other courts have approved calculations of 

damages employing similar per-unit methodologies. For example, the District of Massachusetts 

recently considered an almost identical argument to the one [24]7 makes here. Iconics, Inc. v. 

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Massaro, 266 F. Supp. 3d 461 (D. Mass. 2017). In that case, the plaintiff moved to exclude the 

defendant’s damages expert’s opinion that apportioned profits by “assuming each customer 

contributed equally to [defendant’s] operating profit and that each line of code contribute[d] 

equally to the software’s overall value.” Id. at 476. As [24]7 argues here, the plaintiff in Iconics

argued that “some clients, some lines of code, and some trade secrets are more important and 

valuable than others.” Id. The court rejected the plaintiff’s argument, reasoning that the expert 

“justified his apportionment methodology and applied it in a defensible and replicable way. The 

merits of that apportionment may be explored during cross-examination at the appropriate time.” 

Id. 

Similarly, Judge Freeman of this district recently denied a motion to strike expert damages 

testimony in a patent case in which plaintiffs’ expert “calculate[d] Defendants’ alleged savings in 

R&D fees by totaling Plaintiffs’ mask design fees for the 139 projects they allege[d] contributed to 

the development of the accused trade secrets, multiplying this by the ratio of total R&D expenses 

to total mask fees (to estimate total expenses for the 139 projects), and using surface area ratios to 

apportion for the features that relate to trade secrets.” VIA Techs., Inc. v. ASUS Comput. Int'l, No. 

14-CV-03586-BLF, 2017 WL 3051048, at *6 (N.D. Cal. July 19, 2017). In other words, the 

expert “us[ed] surface area as a proxy for design effort,” id., much as Dr. Choi uses the number of 

rules as a proxy for the effort required to construct a trade secret. As [24]7 does here, Defendants 

moved to exclude the expert’s testimony as unreliable, arguing that the expert “[did] not attempt to 

measure the actual benefit received by Defendants from their alleged trade secret

misappropriation.” Id. Judge Freeman denied defendants’ motion to exclude the expert’s 

testimony, finding that their concerns could be adequately addressed on cross-examination. Id. at 

*7. 

In addition to the opinions of these courts, the Court has also considered the testimony of 

[24]7’s damages expert, Suzanne Stuckwisch. She admitted that there is no defined methodology

for allocating damages among trade secrets:

Q: There is no defined methodology in the law or in this industry 

that you know of, is there for allocating damages among trade 

secrets? 

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A: That is correct. 

ECF No. 541-8 (Stuckwisch Depo.) at 7-8. In fact, Ms. Stuckwisch conceded later in her 

deposition that she would apply Dr. Choi’s methodology to allocate damages for the lost profits 

associated with Allianz, one of the additional customers that [24]7 allegedly obtained from 

LivePerson. Id. at 426:18-21 (“Q. And then you would have the jury apply Dr. Choi’s allocation 

methodology for Allianz; correct? A. Yes.”); id. at 421:4-7 (“Q. And am I correct that you are not 

providing an independent allocation methodology? A. Correct.”). [24]7 does not explain or 

qualify this testimony in its reply brief. 

For all these reasons, and like the courts in Iconics and VIA, this Court finds that Dr. 

Choi’s opinion is sufficiently sound and reliable that it can be admitted at trial. 

C. XML Trade Secrets

As to Dr. Choi’s XML secrets valuation, [24]7 argues that each XML trade secret 

“represents all of the data collected over several years in connection with one of three customer 

accounts at issue in the first trade secret trial,” but “Dr. Choi offers no methodology for the jury to 

allocate damages if it finds only a subset of the XML data was misappropriated.” ECF No. 534 at 

6. 

The jury will either find that [24]7 misappropriated enough of a particular customer’s 

XML data to enable it to enroll that customer when it otherwise would not have, or it won’t. If it 

makes that finding, [24]7 fails to explain why Dr. Choi’s testimony is not an appropriate 

benchmark for LivePerson’s damages. Instead, it makes arguments about the completeness of 

LivePerson’s identification of its customer data that are not relevant to the Court’s consideration 

of Dr. Choi’s testimony. 

/ / /

/ / /

/ / /

/ / /

/ / /

CONCLUSION

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For the foregoing reasons, [24]’s motion to exclude Dr. Choi’s testimony is denied. 

IT IS SO ORDERED.

Dated: July 12, 2019

______________________________________

JON S. TIGAR

United States District Judge 

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