Court Opinion

ID: 2685887
Source: CourtListenerOpinion
Date Created: 2014-07-28 15:02:14.715759+00
Date Added: 2024-06-11T13:08:09.333637
License: Public Domain

NOTICE: All slip opinions and orders are subject to formal
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error or other formal error, please notify the Reporter of
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SJC-11374

     LIGHTLAB IMAGING, INC. vs. AXSUN TECHNOLOGIES, INC.,
                           & another. 1

          Suffolk.      December 2, 2013. - July 28, 2014.

 Present:    Ireland, C.J., Spina, Cordy, Botsford, Gants, Duffly,
                             & Lenk, JJ.

Contract, Performance and breach, Implied covenant of good faith
     and fair dealing, Interference with contractual relations,
     Construction of contract. Unlawful Interference. Trade
     Secret. Unjust Enrichment. Consumer Protection Act,
     Unfair act or practice. Evidence, Expert opinion.
     Witness, Expert. Damages, Future damages, Loss of profits.
     Declaratory Relief. Injunction. Practice, Civil,
     Injunctive relief.

     Civil action commenced in the Superior Court Department on
January 7, 2009.

     The case was tried before Margaret R. Hinkle, J.; a motion
for summary judgement was heard by her; and entry of final
judgment was ordered by Peter M. Lauriat, J.

     The Supreme Judicial Court granted an application for
direct appellate review.

     Kenneth R. Berman (Cynthia M. Guizzetti with him) for the
plaintiff.
     William F. Lee (Felicia H. Ellsworth & Laurence A. Schoen
with him) for the defendants.

     1
         Volcano Corporation.
                                                                     2

     SPINA, J.    The plaintiff, Lightlab Imaging, Inc.

(LightLab), prevailed in much of the litigation below, which

involved claims of breach of contract and the covenant of good

faith and fair dealing, tortious interference with contractual

and advantageous business relations, misappropriation of trade

secrets and confidential information, unjust enrichment, and

violations of G. L. c. 93A.    LightLab appeals from three aspects

of the judgment pertaining to relief.    First, the judge excluded

opinion testimony from LightLab's expert economist on the

question of future lost profits for twenty years beyond the term

of the parties' contract based on yet-to-be conceived future

products.   Second, the judge denied permanent injunctive relief

that LightLab sought for protection against future

misappropriation of its trade secrets where, although LightLab

had established past misappropriation, it offered no proof of a

likely reoccurrence.    Third, the judge who entered the amended

final judgment declined to include in that judgment a

declaration of LightLab's contract rights that mirrored the

language of the order for summary judgment concerning contract

interpretation.    We affirm, but order the inclusion of the

declaration sought by LightLab.

     1.   Background.   The trial of this action was conducted in

multiple phases.    We summarize the various phases.
                                                                      3

     a.   Liability phase.     The liability claims, except for the

G. L. c. 93A claim and certain of the trade secret claims, were

tried to a jury.   The jury could have found the following facts

at the liability phase.      LightLab has manufactured and sold

optical coherence tomography (OCT) systems since 2001, and until

recently it was the only company to do so.      OCT technology is

used to image human coronary arteries for diagnosis and

treatment.   OCT systems are based on computer analysis of images

produced by reflections generated by specialized lasers.

     Volcano Corporation (Volcano) is a competitor of LightLab,

but it relies on an imaging system based on intra vascular

ultrasound (IVUS) technology.      IVUS systems have dominated the

market because of limitations in OCT laser technology,

notwithstanding the poorer image quality of ultrasound systems.

The limitations in early OCT laser systems were due to the

occlusion of blood vessels during imaging, which presented

certain risks to patients.

     Axsun Technologies, Inc. (Axsun), is a leading manufacturer

of industrial lasers.   In early 2007, LightLab and Axsun entered

into a joint development relationship to develop a tunable laser

that would overcome the limitations in existing OCT technology.

LightLab shared with Axsun, pursuant to an October 12, 2007,

confidentiality agreement, its specifications, techniques to
                                                                   4

adapt lasers for OCT use, OCT laser performance testing methods,

and other confidential information about OCT technology.

     By April, 2008, they had developed the Version 5 laser,

giving rise to a second confidentiality agreement, dated April

29, 2008.    The second agreement gave LightLab exclusive rights

(conditioned on LightLab's fulfilment of its Minimum Purchase

Volume obligation) to Axsun's OCT lasers together with a

specific ban on sales of all lasers to Volcano, for six years

until April 29, 2014, with nonexclusive supply rights

thereafter.    By December, 2008, the Version 6 laser was

developed.    On December 24, representatives of Axsun and

LightLab orally agreed that the April 29 agreement would be

modified in writing by substituting the Version 6 laser for the

Version 5 laser.    These developments were technological

breakthroughs that overcame the earlier limitations in OCT

technology and gave LightLab a valuable competitive edge in the

field of imaging human coronary arteries.

     In the meantime, Volcano perceived OCT technology as a

significant threat to its IVUS business.    It was trying to

develop an OCT system but lacked an adequate laser.    In mid-

2008, after the Version 5 laser was developed, Axsun sought to

be acquired.    Having learned from LightLab of Volcano's desire

to develop an OCT system, Axsun secretly offered itself for sale

to Volcano in August, 2008.    Volcano recognized this as an
                                                                     5

opportunity to "leap-frog" LightLab.    It developed a plan to

"stall" LightLab.

     During negotiations with Axsun, Volcano insisted on

examining LightLab's laser specifications.    Axsun initially

resisted, citing its confidentiality agreements with LightLab,

but relented after Volcano agreed to indemnify Axsun against

liability to LightLab.    Following due diligence, Axsun divulged

LightLab's specifications for the Version 5 and Version 6 lasers

to Volcano, and provided Volcano with a tunable laser prototype

called "Alpha 6."   Volcano's head of OCT development viewed the

specifications and tested the Alpha 6 laser.

     LightLab first learned of Axsun's involvement with Volcano

on December 23, 2008, when Volcano publicly announced its

acquisition of Axsun.    Volcano stated in its announcement that

it could leverage Axsun's advanced tunable laser technology

know-how to accelerate its OCT product development and gain a

competitive advantage in the field of invasive imaging.    Volcano

intended to use the same Axsun engineers who worked with

LightLab to develop a tunable laser for its OCT systems.

Shortly after making its public announcement Volcano threatened

to terminate LightLab's laser supply.    After Axsun agreed orally

with LightLab on December 24 to modify their April 29, 2008,

agreement to cover sales of Version 6 lasers, Volcano directed

Axsun not to communicate with LightLab.    Axsun thereafter
                                                                    6

refused to discuss with LightLab further joint development or

tell LightLab how it would protect LightLab's confidential

information.

     LightLab filed the instant action on January 7, 2009.     On

January 8, Volcano instructed Axsun to download its technology

and make recommendations on OCT laser specifications to Volcano.

LightLab obtained a preliminary injunction on January 8, that

prevented Axsun from doing so.    Volcano employees gained access

to a university research laboratory and, unbeknownst to

LightLab, downloaded data from a LightLab OCT system that was

being used in a clinical trial.   Volcano also moved its OCT

development staff to Axsun's facility and appointed Axsun's

chief laser engineer, who had worked closely with LightLab, to

oversee Volcano's laser development program.   Volcano induced

Axsun to supply Version 5 lasers to LightLab during 2009, rather

than Version 6 lasers.

     In response to special questions the jury found that:

a.   the Alpha 6 laser, and the Version 5 and Version 6 laser
     specifications, were LightLab trade secrets that Axsun and
     Volcano had misappropriated and used;

b.   Axsun committed a breach of the confidentiality clause in
     its contract with LightLab by giving the Alpha 6 laser and
     the Version 5 and Version 6 laser specifications to
     Volcano;

c.   Axsun committed a breach of the the exclusivity provision
     of its contract with LightLab by giving the Alpha 6 laser
     to Volcano;
                                                                       7

d.   Volcano tortiously interfered with LightLab's contract with
     Axsun;

e.   Volcano tortiously interfered with LightLab's advantageous
     business relationship with Axsun;

f.   the April 29, 2008, contract between LightLab and Axsun, as
     orally modified on December 24, 2008, required Axsun to
     deliver Version 6 lasers rather than Version 5 lasers to
     LightLab;

g.   Volcano was unjustly enriched by LightLab's trade secret
     information;

h.   Axsun committed a breach of the implied covenant of good
     faith and fair dealing it owed to LightLab.

     b.    Damages phase.   After the jury returned its verdict on

February 4, 2010, in favor of LightLab on issues of liability,

the damages phase of the trial was scheduled to begin on April

7, 2010.    The judge conducted a three-day voir dire of Roy

Weinstein, LightLab's designated expert on the issue of lost

profits damages.    After the hearing, she excluded Weinstein's

opinion of lost profits beyond April 28, 2014 (the expiration

date of the April 29, 2008, agreement between LightLab and

Axsun), as well as Weinstein's opinion on LightLab's lost

profits for any future generation (post Version 6) LightLab

product containing an Axsun laser.    She did not preclude his

opinion as to other aspects of lost profits, but cautioned that

a proper foundation would be required as to his use of so-called

"Revenue Reduction Percentage Factors" and related matters.      She

also indicated that she would have to be satisfied as to the

reliability of information provided by Warren Clark, III,
                                                                    8

LightLab's chief financial officer, before such information

could be used as a basis for Weinstein's opinion.

     The judge explained that she excluded Weinstein's opinion

as to lost profits after April 28, 2014, because it was not

based on a demonstrated reliable methodology capable of being

validated and tested, particularly as to quantification of a

"first mover" advantage.   She also concluded that his opinon was

too speculative and conjectural as a matter of law.   She based

this on (1) the absence of approval of LightLab's product by any

regulators in the United States, Japan, South Korea, or China;

(2) the purely speculative assumption that LightLab would be the

market leader in OCT technology through 2038; (3) LightLab's

lack of success in obtaining financing; (4) the absence of

evidence that the defendants' conduct caused a loss of sales for

LightLab anywhere in the world; and (5) LightLab's inability to

identify with precision the nature of any new product for which

it sought future lost profits damages.   In light of this ruling,

LightLab determined that it could not proceed with evidence of

lost profits at the damages trial, but that it would proceed

with evidence of other damages.   It made an offer of proof as to

lost profits damages to preserve its appellate rights.   On April

7, 2010, the parties stipulated that LightLab was entitled to

nonlost profits damages in the amount of $200,000 for sixty
                                                                        9

nonconforming (non-Version 6) lasers supplied by Axsun during

2009.     These developments obviated the need for a damages trial.

     c.    Injunctive relief phase.   The judge next conducted a

jury-waived trial to determine whether LightLab was entitled to

permanent injunctive relief to prevent use or disclosure by

Axsun and Volcano of asserted trade secrets and confidential

methods and documents described in items 1-5 of its thirty-item

"trade secret list."     This list was distinct from the trade

secrets presented to the jury during the liability phase,

namely, the Version 5 and Version 6 specifications and the Alpha

6 prototype.     LightLab's claims for permanent injunctive relief

were based in common law and G. L. c. 93, § 42.     Without

expressly deciding whether items 1-5 were trade secrets or

confidential information, the judge determined that "[t]here is

no direct evidence that either defendant has threatened to use

or disclose any trade secret set forth in [i]tems 1-5.     Instead,

LightLab primarily relies upon the jury's findings on

misappropriation [Version 5 and Version 6 specifications and the

Alpha 6 prototype -- not included here] and the defendants'

prelitigation conduct as circumstantial evidence that Axsun and

Volcano intended to commit 'further wrongs.'     However, that

evidence falls short of meeting LightLab's burden of proof.       The

circumstances surrounding [the prelitigation conduct] were

materially different.     The inference which LightLab urges be
                                                                  10

drawn that the defendants intend to use alleged trade secrets in

[i]tems 1-5 . . . is essentially conjecture."   The judge

concluded her written decision on this phase of the litigation

by saying "LightLab has not proven by a preponderance of the

credible evidence that the defendants have used or disclosed or

presently intend to use or disclose the purported trade secrets

and confidential information in [i]tems 1-5 so as to warrant

permanent injunctions."

     Consideration of the remaining items on the Trade Secret

List arose on the defendants' renewed motion for summary

judgment, which was decided after the trial on items 1-5.

Although the judge acknowledged that in the earlier motion for

summary judgment she had ruled that "use" is an essential

element of trade secret misappropriation claims under

Massachusetts law, she considered evidence of the defendants'

intent to use the alleged trade secrets in deciding the renewed

motion for summary judgment.   She addressed the items in four

groupings, some of which overlapped.   The judge concluded, as

she did in her ruling after the jury-waived trial on items 1-5,

that any evidence of the defendants' prelitigation use of items

in the first and third groups, alone, did not warrant an

inference of likely further use of the items.   To infer

otherwise, she reasoned, would be mere conjecture.
                                                                   11

     LightLab relied on an Axsun patent application as proof of

use of the items in the second group.   The judge determined that

there was insufficient credible evidence that Axsun used or

disclosed LightLab's alleged trade secrets in its patent

application.   She relied in part on her findings as to a similar

argument raised in the trial on items 1-5.    In that proceeding

she had credited the testimony of Axsun's director of advanced

products and technology to the effect that Axsun had not used

information obtained from LightLab in its patent application but

instead relied on its own concepts.   The judge thus concluded

that there was insufficient evidence of use of the items in the

second group to establish misappropriation.

     Addressing the items in the fourth group, which LightLab

argued should be protected because of Volcano's stated intent to

use all the confidential information and trade secrets LightLab

gave to Axsun, the judge noted that the argument was not

supported by affidavit, and LightLab's unsworn assertions could

not support an inference that LightLab either gave Axsun these

alleged trade secrets or that Axsun's OCT know-how was informed

by the alleged trade secrets.   Finally, the judge determined

that Volcano's stated intent to leverage Axsun's OCT technical

knowledge, alone, was not sufficient to support a reasonable

inference that it in fact acted on that intent.   The judge thus
                                                                  12

allowed the defendants' renewed motion for summary judgment as

to the remaining items on LightLab's trade secret list.

     d.    General Laws c. 93A phase.   The final phase of the

litigation concerned issues arising under G. L. c. 93A, § 11.

After a hearing, the judge adopted the findings of the jury from

the liability phase.    She further found that both Axsun and

Volcano had committed wilful or knowing violations of G. L.

c. 93A, § 2.    She assessed pursuant to G. L. c. 93A, § 11,

double damages against each defendant based on the parties'

stipulation of monetary damages in the amount of $200,000, for

total damages of $600,000, with interest, plus reasonable

attorney's fees and costs.    The parties stipulated to the amount

of $4.5 million in attorney's fees and costs.     These amounts

have been paid.

     e.    Amended final judgment.   The amended final judgment

reflected the jury's verdict on LightLab's claims and the

stipulation as to damages, together with statutory interest

thereon.    It also reflected the decision on the G. L. c. 93A

claim and order for punitive damages, together with the award of

attorney's fees and costs.

     The amended final judgment awarded LightLab permanent

injunctive relief for the trade secrets the jury found had been

misappropriated, namely, specifications for the Version 5 and

Version 6 lasers, and the Alpha 6 prototype.     In addition, Axsun
                                                                  13

and Volcano were enjoined from merging before certain prescribed

dates contained in the exclusivity and confidentiality

provisions of the April 29, 2008, agreement between Axsun and

LightLab; and both defendants were ordered to return or destroy

all documents Axsun received from LightLab containing alleged

trade secrets.

     The amended final judgment included a declaration that:

          "1. Under the Axsun-LightLab Tunable Laser
     Development and Supply Agreement, First Amendment, dated
     April 29, 2008 (the 'Contract'), as modified, Axsun is to
     deliver to LightLab tunable lasers conforming to LightLab
     Purchase Order No. 209-1009, dated January 6, 2009, and the
     Version 6.0 specification referenced therein.

          "2. The term 'Laser' as used in the Contract means
     all Axsun's tunable lasers for use in optical coherence
     tomography imaging systems."

     The judge who entered final judgment denied LightLab's

motion requesting that the amended final judgment include a

declaration that paragraph 3 (ii) of the agreement dated April

29, 2008, bars sales of "Lasers" to Volcano Corporation and

Terumo Corporation, regardless of the field of use for which the

"Lasers" are intended, consistent with the earlier decision on a

motion for summary judgment concerning contract interpretation.

     2.   Exclusion of expert testimony.   The plaintiffs argue

that the judge erred in excluding Weinstein's opinion testimony

as to lost profits after April 28, 2014, because the methodology

he used did not meet the requirements of Daubert v. Merrell Dow

Pharms., Inc., 509 U.S. 579 (1993), and Commonwealth v. Lanigan,
                                                                     14

419 Mass. 15 (1994). 2   Specifically, they assert that Weinstein

used the discounted cash flow (DCF) method to calculate lost

profits, "probably the most common method used to calculate a

plaintiff's lost profits."    R.F. Reilly & R.P. Schweihs,

Handbook of Advanced Business Valuation 274 (2000).     They argue

that because Weinstein's opinion was based on a generally

accepted methodology, the judge's gatekeeping role should have

ended, and the matter given to the jury to weigh upon

consideration of the opinion after being subjected to cross-

examination, contrary evidence, and instruction on the burden of

proof.   See Daubert, 509 U.S. at 596.   The defendants also

contend that the judge erred in her ruling that Weinstein's

opinion is too speculative as a matter of law.    We review the

judge's decision to exclude Weinstein's opinion as to lost

profits after April 28, 2014, under the abuse of discretion

standard.    See Canavan's Case, 432 Mass. 304, 311-312 (2000).

     The defendant asserts that a Daubert-Lanigan inquiry should

end once a determination has been made that an expert's

methodology is generally accepted.    This is not entirely

correct.    Faced with a proffer of expert 3 testimony, the trial

     2
       In Commonwealth v. Lanigan, 419 Mass. 15, 26 (1994), "[w]e
accept[ed] the basic reasoning of the Daubert [v. Merrill Dow
Pharms., Inc., 509 U.S. 579 (1993),] opinion because it is
consistent with our test of demonstrated reliability."
     3
       The principle in Daubert is not limited to expert
scientific knowledge, but applies to all technical or
                                                                    15

judge "must rule first on any challenge to the validity of any

process or theory underlying a proffered opinion.    'This entails

a preliminary assessment of whether the reasoning or methodology

underlying the testimony is scientifically valid and of whether

that reasoning or methodology properly can be applied to the

facts in issue'" (emphasis added).   Lanigan, 419 Mass. at 26,

quoting Daubert, 509 U.S. at 592-593.   "[N]othing in either

Daubert or the Federal Rules of Evidence requires a district

court to admit opinion evidence that is connected to existing

data only by the ipse dixit of the expert."    Canavan's Case, 432
Mass. at 315, quoting Kumho Tire Co. v. Carmichael, 526 U.S.
137, 157 (1999).    Indeed, the United States Supreme Court noted

that "scientists typically distinguish between 'validity' (does

the principle support what it purports to show?) and

'reliability' (does application of the principle produce

consistent results?) . . . .   Although 'the difference between

accuracy, validity, and reliability may be such that each is

distinct from the other by no more than a hen's kick,' our

reference here is to evidentiary reliability -- that is,

trustworthiness."   (Citations omitted.)   Daubert, 509 U.S. at

590 n.9.   Thus, reliability is as much a part of the broader

determination of admissibility of the expert's opinion as it is

of the determination as to the reliability of the methodology

specialized knowledge appropriate for expert testimony.    Kumho
Tire Co. v. Carmichael, 526 U.S. 137, 147 (1999).
                                                                  16

employed, and trial judges "have considerable leeway in deciding

in a particular case how to go about determining whether

particular expert testimony is reliable."   Kumho Tire Co., 526
U.S. at 152.

     Here, the aspect of Weinstein's opinion that the judge

singled out as lacking a demonstrated reliable methodology

capable of being validated and tested was quantification of the

"first mover advantage."   LightLab argues that first mover

advantage is not a loss-quantifying methodology, but an

assumption about market behavior, supported by Weinstein's

professional observations and scholarly articles that he drew on

to evaluate the reasonableness of Clark's projections.     The only

support cited by LightLab is Bilsky v. Kappos, 130 S. Ct. 3218,

3254 (2010) (Stevens, J., concurring in the judgment), a patent

application case, where Justice Stevens said in a concurring

opinion that "firms that innovate often capture long-term

benefits from doing so, thanks to various first mover

advantages."   That case did not involve lost profits, and

Justice Stevens also observed, "Concededly, there may be some

methods of doing business that do not confer sufficient first-

mover advantages."   Id. at 3254 n.51 (Stevens, J., concurring in

the judgment).   Significantly, Weinstein acknowledged that

nothing in the economic literature supports quantifying lost

profits based on first mover advantage.   Weinstein gave
                                                                  17

conflicting and inconsistent testimony on this point, including

statements in his affidavit, about whether "first mover

advantage" was part of the economic theory he used to arrive at

his opinion on lost profits, or whether it was an assumption he

used to evaluate the reasonableness of Clark's projections.     The

judge determined here that Weinstein's use of the first mover

advantage principle was part of his methodology.   We defer to

that determination.   Her conclusion that Weinstein's use of

first mover advantage in his methodology rendered that

methodology incapable of being validated and tested was well

within her discretion.   Her conclusion that Weinstein's

methodology for determining lost profits failed to satisfy the

Daubert-Lanigan analysis was not an abuse of discretion.

     The plaintiffs also challenge the judge's separate and

distinct conclusion that Weinstein's opinion was "too

speculative and conjectural as a matter of law."   This part of

her analysis is independent of, and different from, the Daubert-

Lanigan analysis, as the judge observed.   It has long been a

part of our common law of evidence that although "courts are not

to determine which side of a [technical] dispute is sound where

each side is supported by reason and logic[,] . . . an opinion

given by an expert will be disregarded where it amounts to no

more than mere speculation or a guess from subordinate facts

that do not give adequate support to the conclusion reached."
                                                                    18

(Citations omitted.)   Sevigny's Case, 337 Mass. 747, 751 (1958).

See Daubert, 509 U.S. at 596.   A judge's discretion in excluding

such opinion testimony "is often applied in the context of

expert prediction of profits to be made from startup business

ventures."    Van Brode Group, Inc. v. Bowditch & Dewey, 36 Mass.

App. Ct. 509, 520 (1994).   We address the five factors cited by

the judge in support of her conclusion that Weinstein's opinion

was too speculative.

     a.   The conclusion that Weinstein assumed LightLab would be

the market leader in OCT technology through 2038 is erroneous.

He did not make that assumption.   What he did assume, however,

was that LightLab would be growing its customer base only until

2014, when its contract with Axsun expired, at which point it

would level off, and profits would decline until 2038, and

become negligible.   There are at least two obvious flaws in this

assumption.   The first is that Weinstein assumed, without

foundation, that beginning in 2014 each OCT customer of LightLab

would replace the LightLab OCT product it had acquired with a

new LightLab OCT product every six years, until 2038.   Weinstein

had not conducted a market study to support this assumption, nor

did he evaluate likely products of potential future competitors.

This dubious assumption about brand loyalty is further weakened

by the fact that Axsun is free to sell lasers to LightLab's

coronary imaging competitors after April 28, 2014.   Second, from
                                                                   19

the time LightLab was formed in 1999, until the time of the

damages phase of the trial in April 2010, LightLab never turned

a profit.   It had no track record of profitable sales even of

its existing OCT products.    Where there was no profit even

during the contract term with Axsun, there is no reason to

believe sales would be profitable after the contract ended.

     b.   The judge pointed to the fact that LightLab could

identify no lost sales resulting from the defendants' conduct.

LightLab counters by saying lost sales had not been anticipated

before Weinstein was expected to testify, as the impact of

losing the development relationship with Axsun was not expected

to be felt until later.    Lost sales can be highly probative of

lost profits caused by a party's misconduct, and the absence of

lost sales may be highly probative of the speculative nature of

a claim of damages.    Cf. Northern Assocs., Inc. v. Kiley, 57
Mass. App. Ct. 874, 886 (2003) (testimony on lost profits claim

correctly excluded as speculative where expert did not identify

any lost clients).    Moreover, the implication of damages not

being felt until the end of LightLab's development relationship

with Axsun is that there can be no damages after 2014 because

there is no contractual relationship or guarantee extending such

a relationship beyond 2014.    After April 28, 2014, Axsun is free

to discontinue any OCT development relationship with LightLab.

Absent damages before that date, it makes no sense that there
                                                                  20

would be damages after that date.   Finally, the absence of any

evidence of lost sales, together with evidence that LightLab's

OCT sales in 2009, after Volcano acquired Axsun, exceeded

LightLab's projections, support the judge's reasoning that

Weinstein's opinion is grounded in speculation.

     c.   The judge cited the lack of regulatory clearance in the

United States, Japan, South Korea, and China for LightLab's

latest product as evidence of the speculative nature of

Weinstein's opinion.   LightLab argues that, among other

witnesses, a former chief counsel of the Food and Drug

Administration would have testified that LightLab was positioned

to receive the regulatory clearances in the United States for

LightLab's current model in 2010 and 2011 and that there were no

obstacles to their issuance.   The judge declined to continue the

damages trial to await this clearance.   Although a jury might

have accepted the testimony about the likelihood of LightLab

obtaining regulatory clearance in the United States for its

current model OCT product, clearances for future products, as

yet undeveloped, remained speculative.   They were an important

aspect of LightLab's claim for lost profits.   The level of

speculation as to regulatory clearances after 2014 is profound.

     d.   LightLab argues that its chief executive officer and

chief financial officer would have testified that LightLab had

access to sufficient funding from its parent company for its
                                                                   21

business expansion.   However, it had not received any guarantee

that such funding would continue beyond 2010.    The record

supports the judge's conclusion that availability of needed

funding for LightLab's long-term development was speculative,

and inasmuch as Weinstein's opinion of lost profits depended on

such funding, his opinion was similarly speculative.

     e.   The judge did not err in concluding that Weinstein's

inability to identify "precisely the type of hypothetical new

product" for which LightLab seeks damages was a factor that

contributed to the speculative nature of his opinion.     Weinstein

acknowledged that he had not been provided with any information

concerning the direction LightLab would have pursued in

developing next generation OCT products.   Warren Clark, who

supplied Weinstein with forecasts of LightLab's profitability

through 2014, was similarly uninformed.    Moreover, Weinstein had

no information concerning other contingencies, such as whether

LightLab's physical plant, sales team, and distribution

structure could support a future system.

     LightLab has cited no case in which an expert was permitted

to testify about future lost profits based on an as-yet

uninvented product.   The case of DSC Communications Corp. v.

Next Level Communications, 107 F.3d 322, 329 (5th Cir. 1997),

cited by LightLab, involved expert testimony about a product

that had been invented but not yet marketed.    In that case the
                                                                    22

plaintiff had a strong history of profitable sales, and its

forecasted profits were supported by "intensive market

research."   Id.   Here, there is no history of profitable sales,

only losses; and there has been no market research.

     Where LightLab had no history of profitable sales and could

point to no lost sales, where Weinstein's opinion depended on

as-yet undeveloped new products, where LightLab had no

regulatory clearance for its future products, and where it had

no guaranteed funding needed to launch a sales and marketing

infrastructure for its new products, we conclude that the judge

did not abuse her discretion in determinating that Weinstein's

opinion should be excluded as grounded in speculation.

     Before leaving this subject, we express our concern that

traditional lost profits analysis as a measure of damages may

not be an adequate model for analyzing harm caused by

misappropriation of the trade secrets of a "start-up" business.

Such businesses often operate for years without profit.   This

fact should not render them "damage proof."   In this case

LightLab recovered other significant damages and attorney's

fees.   We recognize that other theories of damages may lend

themselves to misappropriation of trade secret cases and that

such theories may be ripe for testing in our courts.    See, e.g.,

Ritchey & McCallum, Enforcement of Trade Secret Rights and
                                                                    23

Noncompetition Agreements, at 23-32 (American Bar Association

2002).

     3.   Denial of permanent injunctive relief.   LightLab argues

that the judge erred in declining to issue permanent injunctions

to protect its trade secrets.    Specifically, LightLab contends

that the judge applied a "use" test to each specific secret on

its thirty-item trade secret list in deciding whether a

permanent injunction should issue.    We are satisfied that the

judge in fact considered whether the defendants intended to use

or disclose the claimed trade secrets, and that she correctly

applied the law.

     Trial judges have broad discretion to grant or deny

injunctive relief, Johnson v. Martignetti, 374 Mass. 784, 794

(1978), and we review a judge's decision for an abuse of that

discretion.   See Curtiss-Wright Corp. v. Edel-Brown Tool & Die

Co., 381 Mass. 1, 11 (1980).    A permanent injunction should not

be granted to prohibit acts that there is no reasonable basis to

fear will occur.    See Lydia E. Pinkham Med. Co. v. Gove, 303
Mass. 1, 14 (1939).    See also Shaw v. Harding, 306 Mass. 441,

449-450 (1940).    Here, LightLab relied exclusively on the

defendants' past conduct, without showing any likelihood that it

would reoccur.    Having been stopped in their tracks, it appeared

to the judge that the defendants had learned their lesson and

probably would not reoffend.    This would not have precluded
                                                                   24

LightLab from returning to court should the need arise again.

There has been no showing that the judge abused her discretion.

     4.   Declaratory relief.   Having requested declaratory

relief and having prevailed on its motion for summary judgment

on the interpretation of its contract with Axsun, LightLab was

entitled to a declaration to the same effect.      See Boston v.

Massachusetts Bay Transp. Auth., 373 Mass. 819, 829 (1977).

Thus, because the rights of the parties were not declared, we

order that the amended judgment be modified to include a

declaration as follows:

     "It is further ORDERED, ADJUDGED, and DECLARED that Section
     3 of the Asxun-LightLab Tunable Laser Development and
     Supply Agreement (First Amendment), dated April 29, 2008
     (the Agreement), bars Axsun Technologies, Inc., from
     supplying tunable lasers to Volcano Corporation in all
     fields of use, and not just in the field of human coronary
     artery imaging, during such periods of time that LightLab
     Imaging, Inc.'s exclusive right described in Section 3(i)
     of the Agreement is in effect."

As so modified, the judgment of the Superior Court is affirmed.

                                     So ordered.