Page 60 - Economic Damages Calculation

Microstrategy Inc. v. Business Objects

This case involved a dispute between two developers of business intelligence software. fn 66 The plaintiff
accused the defendant of misappropriation of trade secrets, tortious interference with an employment
contract and violation of the Computer Fraud and Abuse Act, and retained a damages expert who at-
tributed all losses experienced by the plaintiff to the actions of the defendant.

The court ruled that the plaintiff's expert ignored significant factors that precluded the alleged tort
claims, including

• the plaintiff's severe financial problems following the bursting of the dot.com bubble;

• the restatement of its 1997–1999 financial statements, which led to a 62% one-day drop in the
company’s stock price;

• the eventual drop in the company’s stock price from $313 to $0.49 per share;

• an investigation by the U.S. Securities and Exchange Commission;

• a series of class action lawsuits by investors;

• the layoff of two-thirds of the plaintiff’s workforce; and

• a reduction in the company’s marketing budget by half.

The plaintiff argued that because each of the previous events took place during or prior to 1999 and its
expert used 2000 as the base year for his damage calculation, none of the events would have had any
impact on the company’s post-2000 losses. The court ruled, however, that the plaintiff’s expert provided
no basis for his assumption that these events, which were far reaching in scope and breadth, had no lin-
gering effects. In addition, he also failed to account for the introduction of new products by the defend-
ant.

[The Plaintiff’s expert’s] report ignored any significant factor that might have attributed [the
Plaintiff’s] difficulties to factors other than the torts. Thus, the district court properly perceived
that [the Plaintiff’s expert’s] report did not accurately link the alleged damages to the torts. In-
stead the record suggests that other market factors caused most, if not all, of the damage to [the
Plaintiff], which highlights the need for reliable proof of the specific amount attributable to the
alleged tortious acts.

In this case, the record shows that the excluded expert report did not link a single loss to a specif-
ic misconduct and ignored significant factors that might have excluded the torts as the reason for
the losses. For these reasons, the district court was well within its discretion to exclude it. fn 67

fn 66 Microstrategy Inc. v. Business Objects, S.A., 429 F. 3d 1344 (Fed. Cir. 2005).

fn 67 Id. at 1354-56.

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