A district judge in Texas admitted the testimony of a trade secrets expert witness, taking into consideration his extensive and specialized experience.
Plaintiff BHI, a leader in the energy industry providing project management and staffing support to the nuclear, fossil, wind, hydro, and government energy markets accused the Defendants KVP Energy Services, Dustin Coble, Welborn “Ross” Glover, Roy Glover, and Shelby Walker of misappropriating BHI’s trade secrets by using the trade secrets in conjunction with their work at KV during their BHI employment. In other words, they allegedly committed corporate espionage, stole confidential information, trade secrets, and equipment from BHI, and wrongfully interfered with BHI’s customers and contractual relations.
On August 3, 2023, the Defendants designated James Pooley as an expert witness to offer opinions concerning whether BHI took reasonable measures to protect its alleged trade secrets. Pooley’s initial report did not include any opinions as BHI was yet to identify the purported trade secrets that it alleged were misappropriated by any Defendant(s). Pooley supplemented his report on September 18, 2023 and explained that despite BHI not identifying with particularity the purported trade secrets that it alleged were misappropriated by any Defendant(s), it had provided some limited discovery comprising information relevant to his assessment of whether BHI had implemented reasonable measures to protect those alleged trade secrets.
Although discovery closed on November 2, 2023, the parties stipulated to extend the deposition deadline beyond the close of discovery.
Pooley was deposed on November 13, 2023.
Trade Secrets Expert Witness
James Pooley has devoted the majority of his career to trade secret protection and management. Over the decades, he has gained extensive experience in designing and managing systems for trade secret protection. He has published numerous books regarding trade secrets, including his 800-page treatise “Trade Secrets,” which he has continuously updated since its publication in 1997.
In 2015, Pooley published a business book, Secrets: Managing Information Assets in the Age of Cyberespionage, which focuses on managing information asset security—the same topic he has been asked to opine on here. On the same subject, he has also written the introductory chapter (“Information Security in the Modern Enterprise”) for the Computer and Information Security Handbook Third Ed. (Morgan Kaufmann, 2017). He has published numerous articles and regular newsletters regarding trade secrets. He has taught trade secret law and litigation at law schools, including several years at Santa Clara University in the 1980s and 14 years at the University of California at Berkeley.
Pooley has also taught trade secret and patent law and procedure to state and federal judges. He was the founding Chair, and is now Chair Emeritus, of the Sedona Conference Working Group on Trade Secrets. He also co-chairs the International Chamber of Commerce’s Trade Secret Task Force; in this role, he oversaw the publication of a 2019 report, Protecting Trade Secrets, which provides guidance to businesses on what measures they should take to benefit from the protections afforded to them under US and EU law. Pooley has previously served as President of the American Intellectual Property Association and as Chairman of the National Inventors Hall of Fame.
Discussion by the Court
Plaintiff BHI Energy I Power Services LLC filed a motion to strike the expert report and exclude the testimony of James Pooley.
BHI argued that (1) Pooley’s opinions invaded the province of the fact finder, (2) Pooley had failed to demonstrate that his opinions and testimony were based on reliable methods, (3) Pooley’s opinions were based on insufficient facts, and (4) Pooley had failed to provide all materials and facts that he considered in forming his opinion.
On December 5, 2023, Pooley supplemented his report a second time. Specifically, he supplemented his report to incorporate additional information not available until after his first supplemental report.
Pooley’s second supplement report is his first proper expert designation
BHI added a new argument: it contended Defendants had not properly designated Pooley until December 5, 2023, when Defendants disclosed Pooley’s second supplemental report. The Court agreed and, in a separate Memorandum Opinion and Order entered that day, granted BHI’s motion to designate an expert to rebut Pooley’s second supplemental expert report and testimony. BHI further contended that this second supplemental report had been disclosed well past the August 3, 2023 deadline and suffered from the same flaws as the tentative, first supplemental report that had been BHI’s focus in the opening motion to strike.
A court generally will not consider arguments raised for the first time in a reply brief.
But the Court will exercise its discretion and consider the new arguments here because Pooley’s expert report has been a moving target. Because of the parties’ discovery disputes, Pooley has offered no opinions to tentative opinions to complete opinions. And the Defendants designated the second supplemental report with Pooley’s complete opinions while the motion to strike was pending.
According to Rule 26, the tentative, first supplemental report is not a proper expert report because it is not a “complete” statement of Pooley’s opinions. Were that all that Defendants had produced for Pooley, his reports and testimony would be subject to being stricken.
But Pooley’s second supplemental report is complete, and BHI does not challenge it as untimely – at least not beyond noting that his proper designation was first made months after the Court’s deadline.
Pooley’s opinions do not invade the province of the finder of fact
BHI contended that Pooley can testify as an expert to the measures one may take to protect trade secrets but cannot reach a conclusion as to whether BHI’s measures were reasonable because this is left for the finder of fact to determine.
The Court could not agree. BHI explained that “a determination of whether or not a party’s measures to protect its trade secrets were reasonable to guard its secrecy is a fact question.” Were it a question of law, BHI might have a winning argument.
Since experts can give their opinions on ultimate issues, the Court found that Pooley may permissibly do so here to assist the trier of fact in understanding the evidence or determining a factual issue.
Defendants have shown that Pooley’s methods are reliable
BHI asserted that Defendants provided no support as to the reliability of the methods which Pooley utilized in forming his opinions.
And, Defendants argued, “BHI did not deny the reliability of the publications Pooley authored or co-authored that contributed to the lens of expertise through which he viewed the case materials” and “did not cite any authority in support of its dubious notion that an accomplished and widely sought-out expert in the field was not entitled to rely upon his own scholarly or professional publications in rendering an opinion.”
Rule 702 did not prohibit an expert from reaching an opinion based on the expert’s experience. A witness’ experience, studies and education, combined with a review of the relevant materials can provide a reliable basis for expert testimony.
The Court found that Defendants had met their burden to show that Pooley’s expert opinion, based on his experience, training, research, scholarship, and actual practice in the field of trade secret protection, reflected a reliable application of the principles and methods that he explained he had applied to the facts of the case.
Pooley’s opinions are based on sufficient facts
BHI argued Defendants had not shown that Pooley’s testimony was based on sufficient facts or data because Pooley had not spoken with any representative of BHI regarding the measures taken by BHI to protect its trade secrets and had only interviewed two former BHI employees. In doing so, he had not discussed the actual measures that BHI was taking to protect its trade secrets.
For the reasons that Defendants persuasively explain, Pooley considered sufficient facts and data through, among other sources, deposition testimony.
Pooley sufficiently disclosed facts and data considered in forming his opinions
When Pooley supplemented his report a second time, he incorporated additional information that was not available until after his first supplemental report, including the transcripts of nineteen depositions, BHI’s supplemental interrogatory responses, and supplemental document production.
BHI describes these as only “generic statements,” complaining that “Pooley’s report did not disclose exactly what Pooley looked at and considered” to enable BHI to know “what exactly he considered in forming his opinions,” and asserted that “BHI cannot know what exactly Pooley considered without access to his file.” But BHI complained, at bottom, not of deficiencies in listing the sources on which Pooley relied but in Defendant’s failing to produce all documents and facts that Pooley considered in forming his expert opinions. The Court held that it was grounds for a motion to compel, not a motion to strike an expert’s opinion or testimony.
Held
The Court denied the Plaintiff BHI Energy I Power Services LLC’s motion to strike the expert report and exclude the testimony of James Pooley.
Key Takeaways:
- For expert testimony on topics that lack “the exactness of hard science methodologies,” courts should consider factors such as the expert’s “professional experience, education, training, and observations.”
- Experts can give their opinions on ultimate issues. Pooley may permissibly do so here to assist the trier of fact in understanding the evidence or determining a factual issue.
Case Details:
| Case Caption: | Bhi Energy I Power Services Llc V. Kvp Holdings Llc Et Al |
| Docket Number: | 3:22cv1981 |
| Court Name: | United States District Court, Texas Northern |
| Order Date: | April 24, 2024 |
Leave a Reply