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Return Date: No return date scheduled
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Location: No hearing scheduled FILED
6/27/2019 10:02 AM
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS DOROTHY BROWN
CIRCUIT CLERK
COUNTY DEPARTMENT, LAW DIVISION
COOK COUNTY, IL
FILED DATE: 6/27/2019 10:02 AM 2015CH15891
2015CH15891
SS&C TECHNOLOGIES, INC., ) 5573823
)
Plaintiff, ) Case No. 2015-CH-15891
)
v. )
) Judge Thomas R. Mulroy
)
BRADLEY ROSSA, and )
CLEARWATER ANALYTICS, LLC, )
)
Defendants. )
PLAINTIFF’S OPPOSITION TO CLEARWATER’S POST-TRIAL MOTION FOR
JUDGMENT NOTWITHSTANDING THE VERDICT OR, IN THE ALTERNATIVE,
FOR A REMITTITUR OF COMPENSATORY AND PUNITIVE DAMAGES
Dated: June 27, 2019
Stephen Fishbein (pro hac vice) Samuel B. Isaacson (Cook County Firm No.
Christopher LaVigne (pro hac vice) 39770)
Thomas R. Makin (pro hac vice) Matthew W. Walch (Cook County Firm No.
SHEARMAN & STERLING LLP 39770)
599 Lexington Avenue LATHAM & WATKINS LLP
New York, New York 10022 330 North Wabash Ave. Suite 2800
Telephone: (212) 848-4424 Chicago, Illinois 60611
Facsimile: (646) 848-4424 Telephone (312) 876-7700
E-mail: stephen.fishbein@shearman.com Facsimile: (312) 993-9767
christopher.lavigne@shearman.com E-mail: samuel.isaacson@lw.com
thomas.makin@shearman.com matthew.walch@lw.com
Ryan Shores (pro hac vice)
SHEARMAN & STERLING LLP
401 9th Street, NW
Washington, DC 20004
Telephone: (202) 508-8058
Facsimile: (202) 661-7483
E-mail: ryan.shores@shearman.com
Attorneys for Plaintiff SS&C Technologies, Inc.
TABLE OF CONTENTS
Page
FILED DATE: 6/27/2019 10:02 AM 2015CH15891
INTRODUCTION ...........................................................................................................................1
BACKGROUND .............................................................................................................................2
I. Reasonable Royalty Damages..................................................................................2
II. Punitive Damages ....................................................................................................5
ARGUMENT ...................................................................................................................................7
I. ITSA Leaves Reasonable Royalty and Punitive Damages to the Jury. ...................7
II. Clearwater’s Request for JNOV or Remittitur as to the Reasonable Royalty
Damages Should Be Rejected. ...............................................................................10
III. Clearwater’s Request for JNOV or Remittitur on Punitive Damages Should
Be Rejected. ...........................................................................................................13
IV. Clearwater’s Request to “Apportion” the Punitive Damages Should Be
Rejected..................................................................................................................15
CONCLUSION ..............................................................................................................................15
i
TABLE OF AUTHORITIES
Page
FILED DATE: 6/27/2019 10:02 AM 2015CH15891
Cases
Aguilar-Santos v. Briner, 70 N.E.3d 779, 410 Ill. Dec. 652 (1st Dist. 2017) ................................13
Aguilera v. Mount Sinai Hosp. Med. Ctr., 293 Ill. App. 3d 967, 229 Ill. Dec. 65
(1st Dist. 1997).........................................................................................................................10
Aurora Internal Med., Ltd. v. Moore, No. 06-CH-0911 (Cir. Ct. Kane Cty. filed
June 2, 2006) ..............................................................................................................................7
Bagcraft Corp. v. Indus. Comm’n, 302 Ill. App. 3d 334, 705 N.E. 2d 919, 235 Ill.
Dec. 736 (3d Dist. 1998) ............................................................................................................8
Chemetall GMBH v. ZR Energy, Inc., No. 99 C 4334, 2002 WL 23826 (N.D. Ill.
Jan. 8, 2002) .........................................................................................................................8, 10
De Lage Landen Operational Servs. LLC v. Third Pillar Sys., LLC, No. 09-2439,
2011 U.S. Dist. LEXIS 46397 (E.D. Pa. Apr. 28, 2011) ...........................................................9
F.L. Walz, Inc. v. Hobart Corp., 224 Ill. App. 3d 727, 167 Ill. Dec. 42 (3d Dist.
1992) ............................................................................................................................11, 12, 13
Fogt v. 1-800-Pack-Rat, LLC, 74 N.E.3d 186, 2017 IL App (1st) 10583 (1st Dist.
2017) ........................................................................................................................................14
Franz v. Calaco Dev. Corp., 352 Ill.App.3d 1129, 288 Ill. Dec. 669 (2d Dist.
2004) ........................................................................................................................................15
GF Mann Agency v. David Agency Ins., No. 00 L 724, 2004 WL 3327337 (18th
Ill. Cir. Du Page Cty. Jan. 15. 2004) ..........................................................................................7
Inland Steel Prods. Co. v. MPH Mfg. Corp., 25 F.R.D. 238 (N.D. Ill. 1959) .................................8
Int’l Adhesive Coating Co v. Bolton Emerson Int’l, Inc., 851 F.2d 540 (1st Cir.
1988) ........................................................................................................................................11
Jefferson v. Mercy Hosp. & Med. Ctr, 2018 IL App (1st) 162219, N.E. 3d 173,
420 Ill. Dec. 599 (1st Dist. 2018).............................................................................................10
JL. Simmons Co., Inc., ex rel Hartford Ins. Grp. V. Firestone Tire & Rubber Co.,
108 Ill. 2d 106 ..........................................................................................................................11
Kleiss v. Cassida, 297 Ill. App. 3d 165, 231 Ill. Dec. 700 (4th Dist. 1998) ..................................10
Loitz v. Remington Arms Co., 563 N.E. 2d 397, 138 Ill. 2d 404 (1990) ........................................14
ii
Lorillard v. Pons, 434 U.S. 575 (1978) ...........................................................................................8
Mangren Research & Dev. Co. v. Nat’l Chem. Co., No. 93-C-2948, 1995 WL
FILED DATE: 6/27/2019 10:02 AM 2015CH15891
33102 (N.D. Ill. Jan. 26, 1995), aff’d 87 F.3d 937 (7th Cir. 1996)............................................8
Marston v. Walgreen Co., 389 Ill.App.3d 337, 330 Ill. Dec. 38 (2009) ........................................15
Martin v. Heinold Commodities, 163 Ill. 2d 33, 205 Ill. Dec. 443 (1994) ......................................9
Mook v. Johnson, 110 N.E.3d 208, 2018 IL App (3d) 170229 (3d Dist. 2018) ......................13, 14
Newbery v. James, 35 Eng. Rep. 1011 (Ch. 1817) ..........................................................................9
Pepsi Co. v. Redmond, 54 F.3d 1262 (7th Cir. 1995) ......................................................................9
Pichler v. UNITE, 542 F.3d 380 (3d Cir. 2008) ........................................................................8, 10
Price v. Philip Morris, Inc., 341 Ill.App.3d 941, 276 Ill. Dec. 183 (1st Dist. 2003).....................15
Rogers v. Loether, 467 F.2d 1110 (7th Cir. 1972) .........................................................................10
Tyco Electronics Corp. v. Illinois Tool Works, Inc., 384 Ill.App.3d 830, 324
Ill.Dec. 261 (1st Dist. 2008).....................................................................................................13
Young v. Alden Gardens of Waterford, LLC, 2015 IL App (1st) 131887, 391 Ill.
Dec. 361 (1st Dist. 2015) ...................................................................................................12, 13
Statutes
765 ILCS 1065/4 ................................................................................................................2, 7, 9, 13
Cal. Civ. Code § 3426.3 ...................................................................................................................9
Ill. Trade Secrets Act ............................................................................................................. passim
iii
INTRODUCTION
After three-plus years of litigation and two weeks of trial, a jury found that Clearwater
FILED DATE: 6/27/2019 10:02 AM 2015CH15891
willfully and maliciously stole SS&C’s trade secrets, and awarded SS&C $44 million—including
$16 million in reasonable royalty damages and $28 million in punitive damages. Clearwater now
asks this Court to nullify the jury’s determinations through recycled arguments that the Court has
rejected many times. Because these arguments remain baseless—and the evidence
overwhelmingly supports the jury’s verdict—Clearwater’s post-trial motions should be denied.
Clearwater’s primary argument is that only a judge, and not a jury, can determine
reasonable royalty and punitive damages under the Illinois Trade Secret Act (“ITSA”). Despite
asserting this argument now four times in this case, Clearwater still cannot identify a single case
in which a court applying ITSA has ever held that these damages issues should be decided by
a judge. In fact, the uniform practice under ITSA—dating back over two decades—is for the jury
to award damages. This Court’s decision to follow this longstanding practice remains correct.
Next, Clearwater asks this Court to undo the jury’s reasonable royalty award because Dr.
Putnam, SS&C’s damages expert, supposedly “outsourced” his damages calculation to “SS&C
management.” Mot. 10. This “outsourcing” argument is a cut and paste from Clearwater’s pretrial
motion to exclude Dr. Putnam’s opinion, which this Court correctly rejected because it is
completely normal—indeed, often desirable—for an expert to rely on the party for inputs. See infra
at 11–12 (collecting Illinois cases). The jury considered the “outsourcing” and other criticisms of
Dr. Putnam scattered throughout Clearwater’s Motion, gave them whatever weight they deserved,
and ultimately awarded $16 million in compensatory damages—a number in between the
competing expert damages values in the case. To now impose by fiat the lower damages figure
offered by Clearwater’s expert—as Clearwater’s Motion requests—would violate Illinois law and
be an affront to the jury that spent two weeks resolving this case.
1
Finally, Clearwater argues that the jury’s punitive damages award is “not supported by the
evidence and is grossly excessive.” Mot. 12. That argument fails with even a cursory examination
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of the record. As this Court well knows, the evidence of Clearwater’s reprehensible conduct was
so overwhelming that Clearwater itself was forced to admit (at the eleventh hour during trial) to
“willful and malicious” trade secret misappropriation—the only criterion for punitive damages
under ITSA. 765 ILCS 1065/4(b). Missing from Clearwater’s motion is any reference to the
undisputed reason for Clearwater’s startling admission—so as to keep the jury (as opposed to the
judge) from knowing that Clearwater was in fact a repeat offender, having intentionally stolen
SS&C’s trade secrets at least once before. Clearwater argued that such evidence “could not be
more prejudicial” and would “invite the jury” to award significant damages. Ex. 1, Trial Tr.
1401:6-12. For its part, the Court opined that the evidence against Clearwater on this point was
“ugly evidence” and agreed not to admit that evidence for punitive damages purposes only on the
condition that Clearwater make its preclusive admission of willful and malicious theft. Id. 1400:1,
1417-1420. Based on such a record, Clearwater simply cannot now claim an insufficient basis for
an award of punitive damages. The jury’s punitive damages award also was within the limit defined
by ITSA (no more than two times compensatory damages) and significantly less than the “run-
away” awards that have triggered post-trial scrutiny by Illinois courts. There is no basis—in law
or fact—for the Court to undo the jury’s determination.
BACKGROUND
I. Reasonable Royalty Damages
ITSA provides three forms of damages: actual loss to plaintiff, unjust enrichment to
defendant, or a reasonable royalty. 765 ILCS 1065/4(a). Here, SS&C chose to pursue reasonable
royalty damages. As both sides agreed, such damages are (1) based on a hypothetical negotiation
between the thief and the victim at the time of the theft; and (2) informed by various “factors”
2
drawn from the case law. Id. 1078-80, 2244, 2277-96. At Clearwater’s urging, the Court
instructed the jury to consider the factors from both the University Computing and Georgia
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Pacific cases. Id. 2435-37. Not surprisingly, the parties’ damages experts diverged as to which
factors were most important, and how they impacted the ultimate calculation.
SS&C’s Damages Analysis. Dr. Putnam, SS&C’s expert, found the University
Computing factors most relevant because they are tailored to the trade secret context, id.
1206:13-17, but also considered the Georgia-Pacific patent factors insofar as they applied. Id.
1200-1209. Among the University Computing factors, Dr. Putnam found the most important was
“the total value of the secret to SS&C, including SS&C’s development costs and the importance
of the secret to SS&C’s business.” Id. 1080:11-20, 2436. He also considered the qualitative
effect of other University Computing factors—e.g., “the change in [the parties’] competitive
positions”—finding they favored a higher royalty. Id. 1080-81, 1127-28.
Using SS&C’s development costs as his baseline for damages, Dr. Putnam made separate
cost calculations for (1) the stolen sales and marketing information (primarily, the “pipelines”)
and (2) the stolen product information. As to the former, Dr. Putnam explained that he calculated
SS&C’s development costs by “begin[ning] with numbers that we know are accurate” drawn
from SS&C’s audited “general ledger.” Id. 1085. He then “move[d] progressively downwards to
specialize to the information that’s found just on the pipelines and then value[d] that information
as it existed in August of 2015.” Id. 1085. Specifically:
• Dr. Putnam first obtained his top line cost numbers from Patrick Pedonti, the CFO of
SS&C, who drew the data from SS&C’s general ledger. Mr. Pedonti also testified at trial.
Id. 1108-09, 1314-26. The total sales and marketing costs were $934.5 million, including
“131.8 million in 2015” alone. Id. 1114-15.
• At Dr. Putnam’s direction, SS&C further reduced these costs “by about $180 million” in
order to remove expenditures “not directly related to developing individual customers.”
3
Id. 1116. In addition, Dr. Putnam, together with an accountant, “found a further $47
million in reductions,” bringing the sales and marketing costs to $707.8 million. Id. 1117.
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• Dr. Putnam then asked SS&C Vice President Tim Reilly to assist in determining the
relative value of the cost to develop the stolen pipelines versus the costs of marketing to
existing clients. Id. 1222–23. Mr. Reilly surveyed the top SS&C salespeople, arriving at
80% of the value assigned to pipelines. Id. 1228–31. To account for this determination
and to avoid any contention that SS&C overstated relevant expenditures, Dr. Putnam
ultimately removed 25% of the sales and marketing spend, reducing it to $510.3 million.
Id. 1118–19.
• Last, Dr. Putnam recognized that the older expenditures were more likely to relate to
“stale” data and, thus, applied a 30% depreciation rate, lowering the cumulative amount
to $201.8 million. Id. 1264–68.
Dr. Putnam also provided contextual support for his $201.8 million number, comparing
his figure to SS&C’s prior acquisitions of Advent and GlobeOp and referencing SS&C CEO Bill
Stone’s testimony about those acquisitions, which entailed hundreds of millions of dollars
allocated to acquiring pipeline information. Id. 1129–31.
With respect to the stolen product documents, Dr. Putnam testified that he performed a
similar analysis based on data provided by the people most knowledgeable at SS&C, including
Barbara Arnold and David Reid (both of whom testified at trial). Id. 1121–23. After applying a
depreciation rate for “staleness,” Dr. Putnam arrived at product-related damages of $2.65
million, bringing the entire damages total to $204.45 million. Id. 1124–25.
Consistent with its trial theme (“phantom damages”), Clearwater vigorously attacked Dr.
Putnam and his analysis at trial using the same arguments made in its Motion here. Mot. 10-11.
Clearwater’s counsel also elicited testimony from Dr. Putnam regarding what the damages would
be if the royalty were structured as a monthly payment (as opposed to a one-time perpetual
license) and if Clearwater used the trade secrets for only two months. Ex. 1, Trial Tr. 1199-1208.
Dr. Putnam said that the “rental rate” under these conditions would amount to $11.56 million,
which Clearwater touted to the jury. Id. 1204:6-11.
4
Clearwater’s Damages Analysis. Dr. Varner, Clearwater’s expert, offered a damages
number of $2.05 million. To begin, Dr. Varner testified—like Dr. Putnam—that many of the
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reasonable royalty factors had a qualitative effect, but only one factor—the “catch all” factor—
had a quantitative effect on his damages amount. See id. 2278-2310; 2363. Using this catch-all
factor as a hook, Dr. Varner calculated what it would cost Clearwater hypothetically to develop
information similar to what was stolen. Id. 2350:4-21. As to the stolen pipelines, Dr. Varner
estimated that it takes Clearwater 3.2 hours to “package” a potential client name and to develop
that prospect into a “qualified” prospect such that it would go onto a pipeline. Id. 2299-2304,
2363-69. Then, Dr. Varner assumed—based on a Clearwater witness shown to be unreliable—
that Clearwater would have to perform this process for 4 prospects for every 1 that would end up
on its pipeline, therefore requiring 12.8 hours (4 x 3.2 hours) for each pipeline entry. Id. 2303-04,
2368-71. At a fully burdened Clearwater hourly rate, this would be $2.05 million for the 1,957
qualified entries on the stolen pipelines. Id. 2306-08.
SS&C, however, confronted Dr. Varner with evidence that contradicted his 4 to 1 success
ratio—the critical assumption underlying his calculation. For example, Dr. Varner was shown
sworn deposition testimony from Clearwater salesperson Kevin Tiemann that only 1% of the
companies he called made it onto the pipeline. Id. 2370-72. Dr. Varner admitted that, if Mr.
Tiemann were correct, Dr. Varner’s damages figure would rise to $51 million. Id. 2371-72. Dr.
Varner was also shown the trial testimony of SS&C’s former salesperson Justin Kern and an
internal Clearwater document discussing success ratios. After being presented with all of this
evidence, Dr. Varner ultimately agreed that, if the alternative success ratios were correct, then his
damages figure would rise to $102 million (or more). Id. 2372-77.
II. Punitive Damages
5
In the section of its Motion entitled “Evidence Relevant to the Amount of Punitive
Damages,” Clearwater incredibly fails to mention the most relevant evidence: its admission that
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the theft was willful and malicious. Clearwater made this admission to prevent evidence of its
recidivism from reaching the jury. Specifically, as explained in an offer of proof, Richard Pullara
(a former SS&C and current Clearwater employee) admitted that he had warned Tyler Haws
(Clearwater’s Director of Sales) to purge information obtained in a prior theft from SS&C.
Nevertheless, Haws disregarded this warning, kept the stolen information from 2012, and did the
same thing again in 2015. Id. 1372:16-1379:21.
But there was even more—indeed, much more—than just Clearwater’s astounding
admission supporting punitive damages. At trial, SS&C presented evidence of:
• Clearwater’s bad faith relating to the trade secret theft, including the size and scale of the
theft, Clearwater’s lighting-round “interview” process for hiring Bradley Rossa, and that
Clearwater’s founders (the Borens) and executive (Justin Reed) specifically discussed
Rossa bringing SS&C stolen information (a Portia user list) to Clearwater during his
finalist “interview” to join Clearwater. Ex. 2, PX-144.
• The glee of Clearwater’s employees as they celebrated how they would “get rich” and
“cash in” on the stolen “Paper Gold,” which they widely circulated throughout
Clearwater. Ex. 1, Trial Tr. 708 (Ex. 3, Gilkey 3/2/16 Dep. Tr. 73:13-74:6); Ex. 1, Trial
Tr. 606 (Ex. 4, Rossa 2/4/16 Dep. Tr. 66:17-67).
• Clearwater’s cover up, including use of personal e-mail accounts to transmit the stolen
information, Ex. 5, PX-145, admonishments to keep the stolen information “off the
Clearwater emails chains”, Ex. 6, PX-73, and, after the lawsuit was filed, destruction of
evidence by Tyler Haws and others. Ex. 7, PX-138. 1
• Clearwater’s bad faith in defending the case, including Clearwater employees lying under
oath (e.g., the Borens and Reed denied under oath that Rossa discussed a list of Portia
users with Rossa during his interview, Ex. 1 Trial Tr. 1445:16-19, 1690:14-19; 880:17-
22, even though notes taken by their own General Counsel reflect that they told her there
had been such a discussion, Ex. 2, PX-144), and refusing to take responsibility for
1
Notably, Haws wrote a note to himself after the lawsuit was filed that included “Delete my Gmail files” and “Give
[Ryan] Gilkey and Justin [Reed] heads up to remove anything.” Ex. 7, PX-138. Despite Haws’ attempt to cover his
tracks by asserting that “delete” really meant “archive,” Ex. 1, Trial Tr. 707 (Ex. 8, 10/28/2016 Haws Dep. Tr.
117:13-117:21), Brittany Pfister testified that Haws directed Ryan Gilkey to throw away a copy of the Advent
pipeline. Ex. 1, Trial Tr. 1862:15-19.
6
Clearwater’s brazen misconduct (e.g., Justin Reed claiming that Clearwater was
“spam[med]” by Rossa, Ex. 1, Trial Tr. 901:19-20).
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Although ITSA contains only one criterion for punitive damages—“willful and
malicious” misconduct—Clearwater requested a jury instruction on punitive damages that lists
various considerations (e.g., reprehensibility of the conduct), and the Court agreed to give the
instruction. See Jury Instruction on Punitive Damages, Ex. 1, Trial Tr. 2438-40. The jury, acting
on Clearwater’s proffered instruction, awarded $28 million in punitive damages—within ITSA’s
limit of twice the compensatory damages award. 765 ILCS 1065/4(b).
ARGUMENT
I. ITSA Leaves Reasonable Royalty and Punitive Damages to the Jury.
Through three pre-trial filings—a motion in limine, proposed jury instructions, and a
“bench brief”—Clearwater repeatedly asked this Court for something unprecedented under
ITSA: to take away from the jury the decision to award reasonable royalty and punitive damages.
Mot. 5–8; Ex. 9, 4/2/19 Pre-Trial Conference Tr. 19:17–20:4. There is nothing new in
Clearwater’s current request, which remains unprecedented and contrary to Illinois law.
Most importantly, Clearwater still cannot identify a single case in which a court applying
ITSA has adopted its interpretation and required reasonable royalty and punitive damages to be
decided by the judge. Nor can Clearwater refute that the uniform, longstanding practice under
ITSA is for the jury to decide damages. 2 See GF Mann Agency v. David Agency Ins., No. 00 L
724, 2004 WL 3327337 (18th Ill. Cir. Du Page Cty. Jan. 15. 2004) (Jury Instructions)
(instructing jury on ability to award reasonable royalty and punitive damages); Aurora Internal
Med., Ltd. v. Moore, No. 06-CH-0911 (Cir. Ct. Kane Cty. filed June 2, 2006) (Jury Instructions)
2
Clearwater says that SS&C relies “primarily on federal cases.” Mot. 4 n.2. But it is Clearwater that cannot identify
any Illinois case applying ITSA—state or federal—and repeatedly cites federal cases from other jurisdictions. Only
SS&C has cited Illinois cases—state and federal—applying ITSA, which uniformly have sent damages to the jury.
7
(jury may award “reasonable royalty for defendants’ unauthorized use of the trade secret” and
punitive damages); Chemetall GMBH v. ZR Energy, Inc., No. 99 C 4334, 2002 WL 23826, at *1
FILED DATE: 6/27/2019 10:02 AM 2015CH15891
(N.D. Ill. Jan. 8, 2002) (jury instructed that they may increase damages to plaintiff up to twice
the amount of compensatory damages if defendants’ conduct was willful and malicious);
Mangren Research & Dev. Co. v. Nat’l Chem. Co., No. 93-C-2948, 1995 WL 33102, at *1 (N.D.
Ill. Jan. 26, 1995), aff’d 87 F.3d 937 (7th Cir. 1996) (surveying Illinois law and holding “the
actual decision whether to award [punitive] damages and amount is for the jury” under ITSA).
The fact that Clearwater’s tired argument never has been adopted under ITSA is no
surprise, as it rests on the fundamentally false premise that “the court” necessarily means “the
judge.” See, e.g., Pichler v. UNITE, 542 F.3d 380, 387 n.9 (3d Cir. 2008) (“Because ‘the court’
can refer to the judge, the jury, or some combination of the two, we reject UNITE’s argument
that the language evinces Congress’s clear intention to abrogate the jury trial right for punitive
damages”); Lorillard v. Pons, 434 U.S. 575, 585 (1978) (holding the term “court” provided a
statutory jury trial right). Instead, as the case law recognizes, it is necessary to examine the
context in which “the court” is used to resolve whether it references the Judge or jury. Id.
Here, § 4 of ITSA uses “the court” in the context of defining available “Damages for
misappropriation”—“the court may award damages measured in terms of reasonable royalty”
and “the court may award exemplary damages.” Since common law, it has been settled that
“damages” for misappropriation of trade secrets (and other claims) are “clearly legal in nature”
and, thus, belong to the jury. See, e.g., Inland Steel Prods. Co. v. MPH Mfg. Corp., 25 F.R.D.
238, 243 (N.D. Ill. 1959). That is dispositive because “[t]he judiciary will not interpret a statute
in a manner that will abrogate the common law unless such intent is clearly gleaned from the
language of the statute.” Bagcraft Corp. v. Indus. Comm’n, 302 Ill. App. 3d 334, 338-39, 705
8
N.E. 2d 919, 922, 235 Ill. Dec. 736, 739 (3d Dist. 1998)). Certainly, the reference in § 4 of ITSA
to “the court”—a term that can refer to a judge or jury, depending on context—is not a “clear”
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intention to abrogate the common law rule that a jury may award “damages” for trade secret
theft. See also Pepsi Co. v. Redmond, 54 F.3d 1262, 1269 (7th Cir. 1995) (“The ITSA mostly
codifies rather than modifies the common law doctrine that proceeded it.”). 3
Unable to cite any ITSA case or rebut Illinois’ practice of incorporating common law,
Clearwater once again turns to decisions from other states applying different trade secret statutes.
Mot. 6-9. For example, in arguing that reasonable royalty damages are for the judge, Clearwater
cites three federal cases applying the California trade secret statute (“CUTSA”). Mot. 6. But
unlike § 4 of ITSA, which says “the court may award damages” in the form of a reasonable
royalty, CUTSA says the “court may order payment” of a reasonable royalty. Cal. Civ. Code
§ 3426.3. As one of Clearwater’s own cited cases explains, drawing this very textual distinction:
“While a jury makes findings, it does not ‘order payment.’ That is the role of the Judge.” De
Lage Landen Operational Servs. LLC v. Third Pillar Sys. LLC, No. 09-2439, 2011 U.S. Dist.
LEXIS 46397 (E.D. Pa. Apr. 28, 2011). 4 In any event, the task for this Court is to apply Illinois’
trade secret statute—ITSA. As to ITSA, many courts—for decades—have sent reasonable
royalty and punitive damages to the jury.
3
Clearwater continues to assert that Illinois treats “reasonable royalty as an equitable remedy.” Mot. 7. Neither
federal case cited by Clearwater contains any analysis of § 4 of ITSA, and Illinois’ legislature made abundantly clear
through § 4 that a reasonable royalty is one form of “damages”—classic legal relief. 765 ILCS 1065/4.
4
De Lage held that the plaintiff had a right to a jury trial under the Seventh Amendment. So does SS&C under the
Illinois Constitution. In Martin v. Heinold Commodities, the Illinois Supreme Court held that claims brought under
the Consumer Fraud Act were not subject to the Illinois Constitution’s right to a jury trial because that statute created
a cause of action “unknown to the common law.” 163 Ill. 2d 33, 76, 205 Ill. Dec. 443, 464 (1994). By contrast, ITSA
codified a long-standing trade secrets cause of action, which flowed from English common law and thus predated
Illinois’ Constitution. See, e.g., Newbery v. James, 35 Eng. Rep. 1011, 1013 (Ch. 1817); see also Martin, 163 Ill. 2d
at 73–74 (jury trial right “attaches in those actions where such right existed under the English common law”).
9
Finally, the fact that a judge can award attorney’s fees under § 5 of ITSA (identifying
three scenarios when “the court may award” fees), while a jury may award damages under § 4 of
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ITSA, is perfectly consistent with the principle that “the court” “can refer to “the judge, the jury,
or some combination of the two” depending on context. Pichler, 542 F.3d at 387 n.9. Indeed, the
Seventh Circuit rejected Clearwater’s same argument with respect to a statute that allowed “the
court” to award damages and fees in the same sentence, citing the historical practice of sending
damages to the jury and constitutional concerns that would be implicated by not doing so. See
Rogers v. Loether, 467 F.2d 1110, 1122 (7th Cir. 1972). Consistent with Rogers, juries regularly
determine damages in ITSA cases, while judges decide fee requests. See, e.g., Chemetall GMBH,
2002 WL 23826, at *1-2 (jury determined damages but Judge assessed request for fees under
ITSA). That is the path this Court correctly
Preview
Return Date: No return date scheduled Hearing Date: No hearing scheduled Courtroom Number: No hearing scheduled Location: No hearing scheduled FILED 6/27/2019 10:02 AM IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS DOROTHY BROWN CIRCUIT CLERK COUNTY DEPARTMENT, LAW DIVISION COOK COUNTY, IL FILED DATE: 6/27/2019 10:02 AM 2015CH15891 2015CH15891 SS&C TECHNOLOGIES, INC., ) 5573823 ) Plaintiff, ) Case No. 2015-CH-15891 ) v. ) ) Judge Thomas R. Mulroy ) BRADLEY ROSSA, and ) CLEARWATER ANALYTICS, LLC, ) ) Defendants. ) PLAINTIFF’S OPPOSITION TO CLEARWATER’S POST-TRIAL MOTION FOR JUDGMENT NOTWITHSTANDING THE VERDICT OR, IN THE ALTERNATIVE, FOR A REMITTITUR OF COMPENSATORY AND PUNITIVE DAMAGES Dated: June 27, 2019 Stephen Fishbein (pro hac vice) Samuel B. Isaacson (Cook County Firm No. Christopher LaVigne (pro hac vice) 39770) Thomas R. Makin (pro hac vice) Matthew W. Walch (Cook County Firm No. SHEARMAN & STERLING LLP 39770) 599 Lexington Avenue LATHAM & WATKINS LLP New York, New York 10022 330 North Wabash Ave. Suite 2800 Telephone: (212) 848-4424 Chicago, Illinois 60611 Facsimile: (646) 848-4424 Telephone (312) 876-7700 E-mail: stephen.fishbein@shearman.com Facsimile: (312) 993-9767 christopher.lavigne@shearman.com E-mail: samuel.isaacson@lw.com thomas.makin@shearman.com matthew.walch@lw.com Ryan Shores (pro hac vice) SHEARMAN & STERLING LLP 401 9th Street, NW Washington, DC 20004 Telephone: (202) 508-8058 Facsimile: (202) 661-7483 E-mail: ryan.shores@shearman.com Attorneys for Plaintiff SS&C Technologies, Inc. TABLE OF CONTENTS Page FILED DATE: 6/27/2019 10:02 AM 2015CH15891 INTRODUCTION ...........................................................................................................................1 BACKGROUND .............................................................................................................................2 I. Reasonable Royalty Damages..................................................................................2 II. Punitive Damages ....................................................................................................5 ARGUMENT ...................................................................................................................................7 I. ITSA Leaves Reasonable Royalty and Punitive Damages to the Jury. ...................7 II. Clearwater’s Request for JNOV or Remittitur as to the Reasonable Royalty Damages Should Be Rejected. ...............................................................................10 III. Clearwater’s Request for JNOV or Remittitur on Punitive Damages Should Be Rejected. ...........................................................................................................13 IV. Clearwater’s Request to “Apportion” the Punitive Damages Should Be Rejected..................................................................................................................15 CONCLUSION ..............................................................................................................................15 i TABLE OF AUTHORITIES Page FILED DATE: 6/27/2019 10:02 AM 2015CH15891 Cases Aguilar-Santos v. Briner, 70 N.E.3d 779, 410 Ill. Dec. 652 (1st Dist. 2017) ................................13 Aguilera v. Mount Sinai Hosp. Med. Ctr., 293 Ill. App. 3d 967, 229 Ill. Dec. 65 (1st Dist. 1997).........................................................................................................................10 Aurora Internal Med., Ltd. v. Moore, No. 06-CH-0911 (Cir. Ct. Kane Cty. filed June 2, 2006) ..............................................................................................................................7 Bagcraft Corp. v. Indus. Comm’n, 302 Ill. App. 3d 334, 705 N.E. 2d 919, 235 Ill. Dec. 736 (3d Dist. 1998) ............................................................................................................8 Chemetall GMBH v. ZR Energy, Inc., No. 99 C 4334, 2002 WL 23826 (N.D. Ill. Jan. 8, 2002) .........................................................................................................................8, 10 De Lage Landen Operational Servs. LLC v. Third Pillar Sys., LLC, No. 09-2439, 2011 U.S. Dist. LEXIS 46397 (E.D. Pa. Apr. 28, 2011) ...........................................................9 F.L. Walz, Inc. v. Hobart Corp., 224 Ill. App. 3d 727, 167 Ill. Dec. 42 (3d Dist. 1992) ............................................................................................................................11, 12, 13 Fogt v. 1-800-Pack-Rat, LLC, 74 N.E.3d 186, 2017 IL App (1st) 10583 (1st Dist. 2017) ........................................................................................................................................14 Franz v. Calaco Dev. Corp., 352 Ill.App.3d 1129, 288 Ill. Dec. 669 (2d Dist. 2004) ........................................................................................................................................15 GF Mann Agency v. David Agency Ins., No. 00 L 724, 2004 WL 3327337 (18th Ill. Cir. Du Page Cty. Jan. 15. 2004) ..........................................................................................7 Inland Steel Prods. Co. v. MPH Mfg. Corp., 25 F.R.D. 238 (N.D. Ill. 1959) .................................8 Int’l Adhesive Coating Co v. Bolton Emerson Int’l, Inc., 851 F.2d 540 (1st Cir. 1988) ........................................................................................................................................11 Jefferson v. Mercy Hosp. & Med. Ctr, 2018 IL App (1st) 162219, N.E. 3d 173, 420 Ill. Dec. 599 (1st Dist. 2018).............................................................................................10 JL. Simmons Co., Inc., ex rel Hartford Ins. Grp. V. Firestone Tire & Rubber Co., 108 Ill. 2d 106 ..........................................................................................................................11 Kleiss v. Cassida, 297 Ill. App. 3d 165, 231 Ill. Dec. 700 (4th Dist. 1998) ..................................10 Loitz v. Remington Arms Co., 563 N.E. 2d 397, 138 Ill. 2d 404 (1990) ........................................14 ii Lorillard v. Pons, 434 U.S. 575 (1978) ...........................................................................................8 Mangren Research & Dev. Co. v. Nat’l Chem. Co., No. 93-C-2948, 1995 WL FILED DATE: 6/27/2019 10:02 AM 2015CH15891 33102 (N.D. Ill. Jan. 26, 1995), aff’d 87 F.3d 937 (7th Cir. 1996)............................................8 Marston v. Walgreen Co., 389 Ill.App.3d 337, 330 Ill. Dec. 38 (2009) ........................................15 Martin v. Heinold Commodities, 163 Ill. 2d 33, 205 Ill. Dec. 443 (1994) ......................................9 Mook v. Johnson, 110 N.E.3d 208, 2018 IL App (3d) 170229 (3d Dist. 2018) ......................13, 14 Newbery v. James, 35 Eng. Rep. 1011 (Ch. 1817) ..........................................................................9 Pepsi Co. v. Redmond, 54 F.3d 1262 (7th Cir. 1995) ......................................................................9 Pichler v. UNITE, 542 F.3d 380 (3d Cir. 2008) ........................................................................8, 10 Price v. Philip Morris, Inc., 341 Ill.App.3d 941, 276 Ill. Dec. 183 (1st Dist. 2003).....................15 Rogers v. Loether, 467 F.2d 1110 (7th Cir. 1972) .........................................................................10 Tyco Electronics Corp. v. Illinois Tool Works, Inc., 384 Ill.App.3d 830, 324 Ill.Dec. 261 (1st Dist. 2008).....................................................................................................13 Young v. Alden Gardens of Waterford, LLC, 2015 IL App (1st) 131887, 391 Ill. Dec. 361 (1st Dist. 2015) ...................................................................................................12, 13 Statutes 765 ILCS 1065/4 ................................................................................................................2, 7, 9, 13 Cal. Civ. Code § 3426.3 ...................................................................................................................9 Ill. Trade Secrets Act ............................................................................................................. passim iii INTRODUCTION After three-plus years of litigation and two weeks of trial, a jury found that Clearwater FILED DATE: 6/27/2019 10:02 AM 2015CH15891 willfully and maliciously stole SS&C’s trade secrets, and awarded SS&C $44 million—including $16 million in reasonable royalty damages and $28 million in punitive damages. Clearwater now asks this Court to nullify the jury’s determinations through recycled arguments that the Court has rejected many times. Because these arguments remain baseless—and the evidence overwhelmingly supports the jury’s verdict—Clearwater’s post-trial motions should be denied. Clearwater’s primary argument is that only a judge, and not a jury, can determine reasonable royalty and punitive damages under the Illinois Trade Secret Act (“ITSA”). Despite asserting this argument now four times in this case, Clearwater still cannot identify a single case in which a court applying ITSA has ever held that these damages issues should be decided by a judge. In fact, the uniform practice under ITSA—dating back over two decades—is for the jury to award damages. This Court’s decision to follow this longstanding practice remains correct. Next, Clearwater asks this Court to undo the jury’s reasonable royalty award because Dr. Putnam, SS&C’s damages expert, supposedly “outsourced” his damages calculation to “SS&C management.” Mot. 10. This “outsourcing” argument is a cut and paste from Clearwater’s pretrial motion to exclude Dr. Putnam’s opinion, which this Court correctly rejected because it is completely normal—indeed, often desirable—for an expert to rely on the party for inputs. See infra at 11–12 (collecting Illinois cases). The jury considered the “outsourcing” and other criticisms of Dr. Putnam scattered throughout Clearwater’s Motion, gave them whatever weight they deserved, and ultimately awarded $16 million in compensatory damages—a number in between the competing expert damages values in the case. To now impose by fiat the lower damages figure offered by Clearwater’s expert—as Clearwater’s Motion requests—would violate Illinois law and be an affront to the jury that spent two weeks resolving this case. 1 Finally, Clearwater argues that the jury’s punitive damages award is “not supported by the evidence and is grossly excessive.” Mot. 12. That argument fails with even a cursory examination FILED DATE: 6/27/2019 10:02 AM 2015CH15891 of the record. As this Court well knows, the evidence of Clearwater’s reprehensible conduct was so overwhelming that Clearwater itself was forced to admit (at the eleventh hour during trial) to “willful and malicious” trade secret misappropriation—the only criterion for punitive damages under ITSA. 765 ILCS 1065/4(b). Missing from Clearwater’s motion is any reference to the undisputed reason for Clearwater’s startling admission—so as to keep the jury (as opposed to the judge) from knowing that Clearwater was in fact a repeat offender, having intentionally stolen SS&C’s trade secrets at least once before. Clearwater argued that such evidence “could not be more prejudicial” and would “invite the jury” to award significant damages. Ex. 1, Trial Tr. 1401:6-12. For its part, the Court opined that the evidence against Clearwater on this point was “ugly evidence” and agreed not to admit that evidence for punitive damages purposes only on the condition that Clearwater make its preclusive admission of willful and malicious theft. Id. 1400:1, 1417-1420. Based on such a record, Clearwater simply cannot now claim an insufficient basis for an award of punitive damages. The jury’s punitive damages award also was within the limit defined by ITSA (no more than two times compensatory damages) and significantly less than the “run- away” awards that have triggered post-trial scrutiny by Illinois courts. There is no basis—in law or fact—for the Court to undo the jury’s determination. BACKGROUND I. Reasonable Royalty Damages ITSA provides three forms of damages: actual loss to plaintiff, unjust enrichment to defendant, or a reasonable royalty. 765 ILCS 1065/4(a). Here, SS&C chose to pursue reasonable royalty damages. As both sides agreed, such damages are (1) based on a hypothetical negotiation between the thief and the victim at the time of the theft; and (2) informed by various “factors” 2 drawn from the case law. Id. 1078-80, 2244, 2277-96. At Clearwater’s urging, the Court instructed the jury to consider the factors from both the University Computing and Georgia FILED DATE: 6/27/2019 10:02 AM 2015CH15891 Pacific cases. Id. 2435-37. Not surprisingly, the parties’ damages experts diverged as to which factors were most important, and how they impacted the ultimate calculation. SS&C’s Damages Analysis. Dr. Putnam, SS&C’s expert, found the University Computing factors most relevant because they are tailored to the trade secret context, id. 1206:13-17, but also considered the Georgia-Pacific patent factors insofar as they applied. Id. 1200-1209. Among the University Computing factors, Dr. Putnam found the most important was “the total value of the secret to SS&C, including SS&C’s development costs and the importance of the secret to SS&C’s business.” Id. 1080:11-20, 2436. He also considered the qualitative effect of other University Computing factors—e.g., “the change in [the parties’] competitive positions”—finding they favored a higher royalty. Id. 1080-81, 1127-28. Using SS&C’s development costs as his baseline for damages, Dr. Putnam made separate cost calculations for (1) the stolen sales and marketing information (primarily, the “pipelines”) and (2) the stolen product information. As to the former, Dr. Putnam explained that he calculated SS&C’s development costs by “begin[ning] with numbers that we know are accurate” drawn from SS&C’s audited “general ledger.” Id. 1085. He then “move[d] progressively downwards to specialize to the information that’s found just on the pipelines and then value[d] that information as it existed in August of 2015.” Id. 1085. Specifically: • Dr. Putnam first obtained his top line cost numbers from Patrick Pedonti, the CFO of SS&C, who drew the data from SS&C’s general ledger. Mr. Pedonti also testified at trial. Id. 1108-09, 1314-26. The total sales and marketing costs were $934.5 million, including “131.8 million in 2015” alone. Id. 1114-15. • At Dr. Putnam’s direction, SS&C further reduced these costs “by about $180 million” in order to remove expenditures “not directly related to developing individual customers.” 3 Id. 1116. In addition, Dr. Putnam, together with an accountant, “found a further $47 million in reductions,” bringing the sales and marketing costs to $707.8 million. Id. 1117. FILED DATE: 6/27/2019 10:02 AM 2015CH15891 • Dr. Putnam then asked SS&C Vice President Tim Reilly to assist in determining the relative value of the cost to develop the stolen pipelines versus the costs of marketing to existing clients. Id. 1222–23. Mr. Reilly surveyed the top SS&C salespeople, arriving at 80% of the value assigned to pipelines. Id. 1228–31. To account for this determination and to avoid any contention that SS&C overstated relevant expenditures, Dr. Putnam ultimately removed 25% of the sales and marketing spend, reducing it to $510.3 million. Id. 1118–19. • Last, Dr. Putnam recognized that the older expenditures were more likely to relate to “stale” data and, thus, applied a 30% depreciation rate, lowering the cumulative amount to $201.8 million. Id. 1264–68. Dr. Putnam also provided contextual support for his $201.8 million number, comparing his figure to SS&C’s prior acquisitions of Advent and GlobeOp and referencing SS&C CEO Bill Stone’s testimony about those acquisitions, which entailed hundreds of millions of dollars allocated to acquiring pipeline information. Id. 1129–31. With respect to the stolen product documents, Dr. Putnam testified that he performed a similar analysis based on data provided by the people most knowledgeable at SS&C, including Barbara Arnold and David Reid (both of whom testified at trial). Id. 1121–23. After applying a depreciation rate for “staleness,” Dr. Putnam arrived at product-related damages of $2.65 million, bringing the entire damages total to $204.45 million. Id. 1124–25. Consistent with its trial theme (“phantom damages”), Clearwater vigorously attacked Dr. Putnam and his analysis at trial using the same arguments made in its Motion here. Mot. 10-11. Clearwater’s counsel also elicited testimony from Dr. Putnam regarding what the damages would be if the royalty were structured as a monthly payment (as opposed to a one-time perpetual license) and if Clearwater used the trade secrets for only two months. Ex. 1, Trial Tr. 1199-1208. Dr. Putnam said that the “rental rate” under these conditions would amount to $11.56 million, which Clearwater touted to the jury. Id. 1204:6-11. 4 Clearwater’s Damages Analysis. Dr. Varner, Clearwater’s expert, offered a damages number of $2.05 million. To begin, Dr. Varner testified—like Dr. Putnam—that many of the FILED DATE: 6/27/2019 10:02 AM 2015CH15891 reasonable royalty factors had a qualitative effect, but only one factor—the “catch all” factor— had a quantitative effect on his damages amount. See id. 2278-2310; 2363. Using this catch-all factor as a hook, Dr. Varner calculated what it would cost Clearwater hypothetically to develop information similar to what was stolen. Id. 2350:4-21. As to the stolen pipelines, Dr. Varner estimated that it takes Clearwater 3.2 hours to “package” a potential client name and to develop that prospect into a “qualified” prospect such that it would go onto a pipeline. Id. 2299-2304, 2363-69. Then, Dr. Varner assumed—based on a Clearwater witness shown to be unreliable— that Clearwater would have to perform this process for 4 prospects for every 1 that would end up on its pipeline, therefore requiring 12.8 hours (4 x 3.2 hours) for each pipeline entry. Id. 2303-04, 2368-71. At a fully burdened Clearwater hourly rate, this would be $2.05 million for the 1,957 qualified entries on the stolen pipelines. Id. 2306-08. SS&C, however, confronted Dr. Varner with evidence that contradicted his 4 to 1 success ratio—the critical assumption underlying his calculation. For example, Dr. Varner was shown sworn deposition testimony from Clearwater salesperson Kevin Tiemann that only 1% of the companies he called made it onto the pipeline. Id. 2370-72. Dr. Varner admitted that, if Mr. Tiemann were correct, Dr. Varner’s damages figure would rise to $51 million. Id. 2371-72. Dr. Varner was also shown the trial testimony of SS&C’s former salesperson Justin Kern and an internal Clearwater document discussing success ratios. After being presented with all of this evidence, Dr. Varner ultimately agreed that, if the alternative success ratios were correct, then his damages figure would rise to $102 million (or more). Id. 2372-77. II. Punitive Damages 5 In the section of its Motion entitled “Evidence Relevant to the Amount of Punitive Damages,” Clearwater incredibly fails to mention the most relevant evidence: its admission that FILED DATE: 6/27/2019 10:02 AM 2015CH15891 the theft was willful and malicious. Clearwater made this admission to prevent evidence of its recidivism from reaching the jury. Specifically, as explained in an offer of proof, Richard Pullara (a former SS&C and current Clearwater employee) admitted that he had warned Tyler Haws (Clearwater’s Director of Sales) to purge information obtained in a prior theft from SS&C. Nevertheless, Haws disregarded this warning, kept the stolen information from 2012, and did the same thing again in 2015. Id. 1372:16-1379:21. But there was even more—indeed, much more—than just Clearwater’s astounding admission supporting punitive damages. At trial, SS&C presented evidence of: • Clearwater’s bad faith relating to the trade secret theft, including the size and scale of the theft, Clearwater’s lighting-round “interview” process for hiring Bradley Rossa, and that Clearwater’s founders (the Borens) and executive (Justin Reed) specifically discussed Rossa bringing SS&C stolen information (a Portia user list) to Clearwater during his finalist “interview” to join Clearwater. Ex. 2, PX-144. • The glee of Clearwater’s employees as they celebrated how they would “get rich” and “cash in” on the stolen “Paper Gold,” which they widely circulated throughout Clearwater. Ex. 1, Trial Tr. 708 (Ex. 3, Gilkey 3/2/16 Dep. Tr. 73:13-74:6); Ex. 1, Trial Tr. 606 (Ex. 4, Rossa 2/4/16 Dep. Tr. 66:17-67). • Clearwater’s cover up, including use of personal e-mail accounts to transmit the stolen information, Ex. 5, PX-145, admonishments to keep the stolen information “off the Clearwater emails chains”, Ex. 6, PX-73, and, after the lawsuit was filed, destruction of evidence by Tyler Haws and others. Ex. 7, PX-138. 1 • Clearwater’s bad faith in defending the case, including Clearwater employees lying under oath (e.g., the Borens and Reed denied under oath that Rossa discussed a list of Portia users with Rossa during his interview, Ex. 1 Trial Tr. 1445:16-19, 1690:14-19; 880:17- 22, even though notes taken by their own General Counsel reflect that they told her there had been such a discussion, Ex. 2, PX-144), and refusing to take responsibility for 1 Notably, Haws wrote a note to himself after the lawsuit was filed that included “Delete my Gmail files” and “Give [Ryan] Gilkey and Justin [Reed] heads up to remove anything.” Ex. 7, PX-138. Despite Haws’ attempt to cover his tracks by asserting that “delete” really meant “archive,” Ex. 1, Trial Tr. 707 (Ex. 8, 10/28/2016 Haws Dep. Tr. 117:13-117:21), Brittany Pfister testified that Haws directed Ryan Gilkey to throw away a copy of the Advent pipeline. Ex. 1, Trial Tr. 1862:15-19. 6 Clearwater’s brazen misconduct (e.g., Justin Reed claiming that Clearwater was “spam[med]” by Rossa, Ex. 1, Trial Tr. 901:19-20). FILED DATE: 6/27/2019 10:02 AM 2015CH15891 Although ITSA contains only one criterion for punitive damages—“willful and malicious” misconduct—Clearwater requested a jury instruction on punitive damages that lists various considerations (e.g., reprehensibility of the conduct), and the Court agreed to give the instruction. See Jury Instruction on Punitive Damages, Ex. 1, Trial Tr. 2438-40. The jury, acting on Clearwater’s proffered instruction, awarded $28 million in punitive damages—within ITSA’s limit of twice the compensatory damages award. 765 ILCS 1065/4(b). ARGUMENT I. ITSA Leaves Reasonable Royalty and Punitive Damages to the Jury. Through three pre-trial filings—a motion in limine, proposed jury instructions, and a “bench brief”—Clearwater repeatedly asked this Court for something unprecedented under ITSA: to take away from the jury the decision to award reasonable royalty and punitive damages. Mot. 5–8; Ex. 9, 4/2/19 Pre-Trial Conference Tr. 19:17–20:4. There is nothing new in Clearwater’s current request, which remains unprecedented and contrary to Illinois law. Most importantly, Clearwater still cannot identify a single case in which a court applying ITSA has adopted its interpretation and required reasonable royalty and punitive damages to be decided by the judge. Nor can Clearwater refute that the uniform, longstanding practice under ITSA is for the jury to decide damages. 2 See GF Mann Agency v. David Agency Ins., No. 00 L 724, 2004 WL 3327337 (18th Ill. Cir. Du Page Cty. Jan. 15. 2004) (Jury Instructions) (instructing jury on ability to award reasonable royalty and punitive damages); Aurora Internal Med., Ltd. v. Moore, No. 06-CH-0911 (Cir. Ct. Kane Cty. filed June 2, 2006) (Jury Instructions) 2 Clearwater says that SS&C relies “primarily on federal cases.” Mot. 4 n.2. But it is Clearwater that cannot identify any Illinois case applying ITSA—state or federal—and repeatedly cites federal cases from other jurisdictions. Only SS&C has cited Illinois cases—state and federal—applying ITSA, which uniformly have sent damages to the jury. 7 (jury may award “reasonable royalty for defendants’ unauthorized use of the trade secret” and punitive damages); Chemetall GMBH v. ZR Energy, Inc., No. 99 C 4334, 2002 WL 23826, at *1 FILED DATE: 6/27/2019 10:02 AM 2015CH15891 (N.D. Ill. Jan. 8, 2002) (jury instructed that they may increase damages to plaintiff up to twice the amount of compensatory damages if defendants’ conduct was willful and malicious); Mangren Research & Dev. Co. v. Nat’l Chem. Co., No. 93-C-2948, 1995 WL 33102, at *1 (N.D. Ill. Jan. 26, 1995), aff’d 87 F.3d 937 (7th Cir. 1996) (surveying Illinois law and holding “the actual decision whether to award [punitive] damages and amount is for the jury” under ITSA). The fact that Clearwater’s tired argument never has been adopted under ITSA is no surprise, as it rests on the fundamentally false premise that “the court” necessarily means “the judge.” See, e.g., Pichler v. UNITE, 542 F.3d 380, 387 n.9 (3d Cir. 2008) (“Because ‘the court’ can refer to the judge, the jury, or some combination of the two, we reject UNITE’s argument that the language evinces Congress’s clear intention to abrogate the jury trial right for punitive damages”); Lorillard v. Pons, 434 U.S. 575, 585 (1978) (holding the term “court” provided a statutory jury trial right). Instead, as the case law recognizes, it is necessary to examine the context in which “the court” is used to resolve whether it references the Judge or jury. Id. Here, § 4 of ITSA uses “the court” in the context of defining available “Damages for misappropriation”—“the court may award damages measured in terms of reasonable royalty” and “the court may award exemplary damages.” Since common law, it has been settled that “damages” for misappropriation of trade secrets (and other claims) are “clearly legal in nature” and, thus, belong to the jury. See, e.g., Inland Steel Prods. Co. v. MPH Mfg. Corp., 25 F.R.D. 238, 243 (N.D. Ill. 1959). That is dispositive because “[t]he judiciary will not interpret a statute in a manner that will abrogate the common law unless such intent is clearly gleaned from the language of the statute.” Bagcraft Corp. v. Indus. Comm’n, 302 Ill. App. 3d 334, 338-39, 705 8 N.E. 2d 919, 922, 235 Ill. Dec. 736, 739 (3d Dist. 1998)). Certainly, the reference in § 4 of ITSA to “the court”—a term that can refer to a judge or jury, depending on context—is not a “clear” FILED DATE: 6/27/2019 10:02 AM 2015CH15891 intention to abrogate the common law rule that a jury may award “damages” for trade secret theft. See also Pepsi Co. v. Redmond, 54 F.3d 1262, 1269 (7th Cir. 1995) (“The ITSA mostly codifies rather than modifies the common law doctrine that proceeded it.”). 3 Unable to cite any ITSA case or rebut Illinois’ practice of incorporating common law, Clearwater once again turns to decisions from other states applying different trade secret statutes. Mot. 6-9. For example, in arguing that reasonable royalty damages are for the judge, Clearwater cites three federal cases applying the California trade secret statute (“CUTSA”). Mot. 6. But unlike § 4 of ITSA, which says “the court may award damages” in the form of a reasonable royalty, CUTSA says the “court may order payment” of a reasonable royalty. Cal. Civ. Code § 3426.3. As one of Clearwater’s own cited cases explains, drawing this very textual distinction: “While a jury makes findings, it does not ‘order payment.’ That is the role of the Judge.” De Lage Landen Operational Servs. LLC v. Third Pillar Sys. LLC, No. 09-2439, 2011 U.S. Dist. LEXIS 46397 (E.D. Pa. Apr. 28, 2011). 4 In any event, the task for this Court is to apply Illinois’ trade secret statute—ITSA. As to ITSA, many courts—for decades—have sent reasonable royalty and punitive damages to the jury. 3 Clearwater continues to assert that Illinois treats “reasonable royalty as an equitable remedy.” Mot. 7. Neither federal case cited by Clearwater contains any analysis of § 4 of ITSA, and Illinois’ legislature made abundantly clear through § 4 that a reasonable royalty is one form of “damages”—classic legal relief. 765 ILCS 1065/4. 4 De Lage held that the plaintiff had a right to a jury trial under the Seventh Amendment. So does SS&C under the Illinois Constitution. In Martin v. Heinold Commodities, the Illinois Supreme Court held that claims brought under the Consumer Fraud Act were not subject to the Illinois Constitution’s right to a jury trial because that statute created a cause of action “unknown to the common law.” 163 Ill. 2d 33, 76, 205 Ill. Dec. 443, 464 (1994). By contrast, ITSA codified a long-standing trade secrets cause of action, which flowed from English common law and thus predated Illinois’ Constitution. See, e.g., Newbery v. James, 35 Eng. Rep. 1011, 1013 (Ch. 1817); see also Martin, 163 Ill. 2d at 73–74 (jury trial right “attaches in those actions where such right existed under the English common law”). 9 Finally, the fact that a judge can award attorney’s fees under § 5 of ITSA (identifying three scenarios when “the court may award” fees), while a jury may award damages under § 4 of FILED DATE: 6/27/2019 10:02 AM 2015CH15891 ITSA, is perfectly consistent with the principle that “the court” “can refer to “the judge, the jury, or some combination of the two” depending on context. Pichler, 542 F.3d at 387 n.9. Indeed, the Seventh Circuit rejected Clearwater’s same argument with respect to a statute that allowed “the court” to award damages and fees in the same sentence, citing the historical practice of sending damages to the jury and constitutional concerns that would be implicated by not doing so. See Rogers v. Loether, 467 F.2d 1110, 1122 (7th Cir. 1972). Consistent with Rogers, juries regularly determine damages in ITSA cases, while judges decide fee requests. See, e.g., Chemetall GMBH, 2002 WL 23826, at *1-2 (jury determined damages but Judge assessed request for fees under ITSA). That is the path this Court correctly