Court Opinion

ID: 4397433
Source: CourtListenerOpinion
Date Created: 2019-05-16 15:00:44.205803+00
Date Added: 2024-06-11T09:24:43.422403
License: Public Domain

NOTE: This disposition is nonprecedential.

  United States Court of Appeals
      for the Federal Circuit
                ______________________

     SCENTSATIONAL TECHNOLOGIES LLC,
              Plaintiff-Appellant

                           v.

    PEPSICO, INC., PEPSI-COLA TECHNICAL
    OPERATIONS, INC., THE QUAKER OATS
     COMPANY, STOKELY-VAN CAMP, INC.,
        TROPICANA PRODUCTS, INC.,
              Defendants-Appellees
             ______________________

                      2018-2091
                ______________________

   Appeal from the United States District Court for the
Southern District of New York in No. 1:13-cv-08645-KBF,
Judge Katherine B. Forrest.
                 ______________________

                Decided: May 16, 2019
                ______________________

    MELVIN C. GARNER, Leason Ellis LLP, White Plains,
NY, argued for plaintiff-appellant. Also represented by
LORI LEIGH COOPER, LAUREN BRETTE SABOL, CAMERON
SEAN REUBER; JOEL B. ROTHMAN, Sriplaw PLLC, Boca Ra-
ton, FL.

   RICHARD B. HARPER, Baker Botts, LLP, New York, NY,
2               SCENTSATIONAL TECHNOLOGIES v. PEPSICO, INC.

argued for defendants-appellees. Also represented by
JULIE BETH ALBERT, ROBERT LAWRENCE MAIER, JENNIFER
COZEOLINO TEMPESTA.
               ______________________

    Before PROST, Chief Judge, LOURIE and BRYSON, Circuit
                           Judges.
PER CURIAM.
    Appellant ScentSational Technologies LLC (“ST”) filed
this action against the defendants (collectively, “PepsiCo”),
alleging misappropriation of trade secrets and breach of
contract, and seeking correction of inventorship on a patent
issued to PepsiCo. ST’s claims arose from dealings ST had
with PepsiCo in which ST contends that PepsiCo misappro-
priated ST’s trade secrets to a process of adding aromas to
beverage bottles in order to enhance the perceived taste of
the beverage. ST argues that PepsiCo used the misappro-
priated trade secrets, in violation of non-disclosure agree-
ments between the parties, so as to obtain patent rights to
ST’s technology.
     ST’s claim for damages is based on its separate negoti-
ations with the Coca-Cola Company that ST expected
would result in an agreement that would entail the com-
mercialization of ST’s technology in various beverages sold
by the Coca-Cola Company. Those negotiations came to an
end, according to ST, when Coca-Cola discovered that Pep-
siCo had filed a patent application on similar technology
and for that reason decided not to pursue a commercializa-
tion agreement with ST. Before the district court, ST
sought lost profits damages based on its estimate of the
profits it would have earned from the prospective commer-
cialization of the ST technology in Coca-Cola’s products.
    The district court granted summary judgment to Pep-
siCo. The court first struck much of ST’s expert testimony
as improper under the principles of Daubert v. Merrell Dow
Pharmaceuticals, Inc., 509 U.S. 579 (1993). Based in part
SCENTSATIONAL TECHNOLOGIES v. PEPSICO, INC.                  3

on its Daubert rulings, the court then granted summary
judgment against ST on the issues of causation and dam-
ages, which resulted in the dismissal of ST’s claims of trade
secret misappropriation and breach of contract. Finally,
the court granted summary judgment to PepsiCo on ST’s
claim of a right to correction of inventorship, on the ground
that ST’s evidence of inventorship was not sufficient to sup-
port its claim. ST then took this appeal.
    1. ST’s appeal is directed in large part to challenging
the district court’s Daubert rulings that struck much of
ST’s evidence of causation and damages. The Supreme
Court has explained that “the trial judge must have consid-
erable leeway in deciding in a particular case how to go
about determining whether particular expert testimony is
reliable,” and for that reason, “a court of appeals is to apply
an abuse-of-discretion standard” when it reviews a trial
court’s decision to admit or exclude expert testimony.
Kumho Tire Co. v. Carmichael, 526 U.S. 137, 152 (1999);
see Gen. Elec. Co v. Joiner, 522 U.S. 136, 142 (1997). In the
Second Circuit, whose law we apply to this non-patent-law
issue, a decision to exclude expert testimony is not an
abuse of discretion unless it is “manifestly erroneous.”
Chin v. Port Auth. of N.Y. & N.J., 685 F.3d 135, 160–61 (2d
Cir. 2012) (quoting Amorgianos v. Nat’l R.R. Passenger
Corp., 303 F.3d 256, 265 (2d Cir. 2002)).
    The district court in this case engaged in an exception-
ally detailed analysis of each of ST’s experts’ reports and
each expert’s claimed field of expertise before finding that
certain portions of the proffered evidence would be admit-
ted and other portions would not. We have reviewed the
district court’s analysis closely and are satisfied that the
district court did not abuse the broad discretion it is ac-
corded in determining whether, and to what extent, to ad-
mit particular expert testimony at trial.
   2. In the absence of the proffered expert testimony on
damages and causation, the district court concluded that
4              SCENTSATIONAL TECHNOLOGIES v. PEPSICO, INC.

summary judgment was appropriate on those issues. In
particular, the court held that ST’s proffered evidence was
insufficient to support its claim to lost profits based on the
prospect that Coca-Cola would adopt its technology and
commercialize products using that technology. We agree
with the district court’s conclusion, for essentially the rea-
sons given by the court.
    3. In the course of its briefs, ST makes passing refer-
ences to other theories of recovery on its trade secret mis-
appropriation and breach of contract claims. One theory is
that ST was entitled at least to damages related to the com-
pletion of “Phase 2” of the development project with Coca-
Cola, which Coca-Cola terminated, allegedly when it
learned of PepsiCo’s patent application. A second theory is
that ST was entitled to at least an award of nominal dam-
ages, and therefore summary judgment should not have
been granted extinguishing ST’s causes of action for trade
secret misappropriation and breach of contract. The rec-
ord, however, does not justify reversal of the judgment as
applied to either of those theories.
     Before the trial court, the plaintiff’s argument on dam-
ages in opposition to summary judgment was focused en-
tirely on lost profits—in particular the lost profits from
potential commercialization of ST’s proprietary technol-
ogy. ST addressed the issue of funds for Phase 2 of the de-
velopment project in a single short passage in its brief in
opposition to summary judgment. That passage reads as
follows: “On September 15, 2011, ST sent Coke an updated
Phase 2 statement of work. . . . This version stated that
the development cost for Phase 2 was [various sums for
particular work] . . . . This is additional development
money that ST lost.” That passage is found in a section of
the plaintiff’s brief that addresses “reasonably expected
profits.”
    In the section of her order on summary judgment deal-
ing with the infirmities of the plaintiff’s showing on lost
SCENTSATIONAL TECHNOLOGIES v. PEPSICO, INC.               5

profit damages, the trial judge did not specifically address
the one sentence in which the plaintiff referred to the “ad-
ditional development money that ST lost.” The plaintiff
did not seek reconsideration on the ground that the court
had overlooked the claim to damages based on the loss of
funds from Phase 2 of the development project.
    The evidence in the record regarding ST’s theory of re-
covery for Phase 2 of the development project work is thin.
Although Coca-Cola and ST never executed an agreement
to proceed with Phase 2, Coca-Cola paid ST a modest
amount for work that ST performed after the completion of
Phase 1 and before the cancellation of the project. That
evidence, however, does not indicate that Coca-Cola had
signed on to ST’s proposal for Phase 2 or would have agreed
to ST’s proposed payment terms for that part of the devel-
opment project.
    ST introduced a draft statement of work for Phase 2
that it prepared, but there is no evidence that Coca-Cola
agreed to either the statement of work or the proposed fee.
Moreover, ST proffered no evidence as to what its costs
would have been for the work on Phase 2, from which its
potential profits on that part of the development project
could be calculated.
    Finally, ST relies on an email from a Coca-Cola official
after the completion of Phase 1 of the development project
saying “I am looking forward to some breakthrough work,”
as evidence that Coca-Cola was committed at that time to
proceeding with Phase 2 of the project. That remark, how-
ever, falls far short of an agreement on Coca-Cola’s part to
proceed with Phase 2 of the project, much less to do so on
the terms subsequently set forth in ST’s proposed state-
ment of work.
     In its brief on appeal, ST made only passing mention of
the development fees as a component of its damages claim.
ST wrote: “Even without ST’s lost profits analysis, it could
still prove damages based on other factors, such as (i) a
6              SCENTSATIONAL TECHNOLOGIES v. PEPSICO, INC.

modified version of ST’s lost profits analysis using different
volume, cost, or pricing numbers, (ii) ST’s lost development
fees from Coke, or (iii) the company valuation theory pre-
sented by Pepsi’s damages expert, Mr. Imburgia, i.e., that
Coke would not pay more for [the aroma project] than it
would to buy ST . . . .” ScentSational Br. 44 [emphasis
added]. ST’s reply brief also contains only a single sen-
tence addressing this issue: “At a minimum, ST lost the
full revenue from its Phase 2 development agree-
ment.” ScentSational Reply Br. 13.
     Even assuming that the cursory references to the
Phase 2 development fees in the district court and in this
court are sufficient to preserve ST’s claim to that compo-
nent of damages, the evidence to which ST points is not
sufficient to support reversal of the district court’s sum-
mary judgment order. In particular, the evidence fails to
show that Coca-Cola would have agreed to the statement
of work and the fees for that work proposed by ST, and it
fails to show what portion of those proposed fees would
have constituted profits for ST, given that ST would have
incurred at least some costs in performing that work.
     As for nominal damages, ST’s brief on appeal makes
two passing references to nominal damages, one in the sec-
tion of the brief on its inventorship claim, and the other in
the section directed to its breach of contract claim. In its
district court brief opposing summary judgment, ST made
no reference at all to nominal damages. That claim was
therefore waived by not having been raised before the dis-
trict court. See Sage Prods., Inc. v. Devon Indus., Inc., 126
F.3d 1420, 1426 (Fed. Cir. 1997). In any event, we have
held that we will ordinarily not remand a case merely to
determine whether nominal damages would have been ap-
propriate. Northrop Grumman Computing Sys., Inc. v.
United States, 823 F.3d 1364, 1368 n.2 (Fed. Cir. 2016).
    4. The district court held that ST had failed to produce
sufficient evidence to support its claim that its principal,
SCENTSATIONAL TECHNOLOGIES v. PEPSICO, INC.                 7

Steven Landau, was “at least a joint inventor” of the patent
that was issued to PepsiCo in 2013. The court noted that
ST had merely compared its allegations regarding one of
its trade secrets with the language in PepsiCo’s patent,
which the court held was insufficient to support a correc-
tion of inventorship claim. That was especially so, the
court stated, because “evidence demonstrate[d] that ST
drafted its trade secrets after Pepsi had applied for its pa-
tents (and during this litigation).” The court added that
there was “no deposition testimony from Mr. Landau . . .
indicating the specific circumstances of his inventorship,
let alone any documentary evidence.”
    In order to establish a right to correction of inventor-
ship on a co-inventorship theory, a party must prove co-in-
ventorship by facts supported by clear and convincing
evidence. Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d
1456, 1461 (Fed. Cir. 1998). To satisfy that burden, the
alleged co-inventor must prove his contribution to the con-
ception of the invention by more than his own testimony
concerning the relevant facts. Gemstar-TV Guide Int’l, Inc.
v. Int’l Trade Comm’n, 383 F.3d 1352, 1382 (Fed. Cir.
2004). The requisite reliable corroborating evidence “pref-
erably comes in the form of records made contemporane-
ously with the inventive process.” Id.
    In its opposition to the motion for summary judgment,
ST relied on Mr. Landau’s description of his trade secrets
and a comparison between that description and one of the
claims of PepsiCo’s patent. 1 The Landau declaration on

    1    In its briefs before this Court, ST refers to several
of its trade secrets in support of its inventorship claim. In
its opposition to summary judgment before the district
court, however, ST’s argument on correction of inventor-
ship referred only to what ST refers to as the “secondary
cover” trade secret. Our analysis is therefore limited to
that trade secret.
8              SCENTSATIONAL TECHNOLOGIES v. PEPSICO, INC.

which ST relied provided a description of that trade secret.
The declaration thus provided evidence of the existence of
the trade secret, but it did not point the district court to
corroborating evidence relating to the inventive process it-
self sufficient to support Mr. Landau’s asserted contribu-
tion to the conception of the claimed invention.
     On appeal, ST frames its correction of inventorship
claim as equivalent to its trade secret misappropriation
claim. ST states that “[t]he evidence supporting ST’s claim
of misappropriation relating to [PepsiCo’s patent] goes
hand-in-hand with its correction of inventorship claim; one
necessarily proves the other.” ScentSational Br. 46. ST
then argues that correction of inventorship could be
awarded as an equitable remedy for misappropriation of
trade secrets. See id. (“Even if ST was denied lost profits
[for trade secret misappropriation], a jury could still award
it an equitable remedy, correction of inventorship . . . .”).
That argument, however, was not raised before the district
court, and it was therefore waived for purposes of appeal.
In any event, even if that argument had been raised below,
it fails to provide the necessary corroboration for Mr. Lan-
dau’s assertion that he conceived of the secondary cover
trade secret claim.
    In light of the insufficiency of ST’s showing in response
to PepsiCo’s summary judgment motion, the district court
did not err in granting the motion with regard to the inven-
torship issue.
                       AFFIRMED