Economics Expert Witness’ Testimony Limited Because His Zero Damages Opinion is Irrelevant
Posted on October 25, 2024 by Expert Witness Profiler
Plaintiff I-Mab Biopharma (“I-Mab” or “Plaintiff”) brought trade secret misappropriation claims against Defendants Inhibrx, Inc. (“Inhibrx”) and Brendan Eckelman (“Dr. Eckelman” and collectively with Inhibrx, “Defendants”).
Plaintiff asserted that Defendants misappropriated nine trade secrets (that correspond to molecules designed to treat cancer) that are referred to herein as Trade Secret 1, Trade Secret 2, Trade Secret 4, Trade Secret 5, Trade Secret 6, Trade Secret 7, Trade Secret 8, Trade Secret 9 and Trade Secret 10.
Plaintiff sought to exclude three categories of Defendants’ damages expert Dr. Richard Manning‘s opinions.
Economics Expert Witness
Dr. Richard Manning’s expertise includes economic valuation and damages, intellectual property, breach of contract, fraud, and other commercial litigation. He provides testimony and consultation in all these areas and on securities litigation, tax, antitrust and competition, and public policy.
Discussion by the Court
A. Manning’s reliance on the “Book of Wisdom” doctrine
Under the reasonable royalty framework of damages permitted under the Defend Trade Secrets Act, parties rely upon a hypothetical negotiation analysis to “attempt to ascertain the royalty upon which the parties would have agreed had they successfully negotiated an agreement just before [misappropriation] began.” The hypothetical negotiation must attempt to “recreate the ex ante licensing negotiation scenario and to describe the resulting agreement.”
However, the analysis “permits and often requires a Court to look to events and facts that occurred thereafter and that could not have been known to or predicted by the hypothesized negotiators.” Facts that post-date the hypothetical negotiation may sometimes be relied upon in a reasonable royalty analysis as part of the “Book of Wisdom.”
Plaintiff asserted that Manning’s opinions based on events that occurred years after the date of the hypothetical negotiation in November 2021 should be excluded because he improperly utilizes the Book of Wisdom. According to Plaintiff, while the Book of Wisdom would permit an expert to rely on post-negotiation evidence to demonstrate a party’s actual state of mind in November 2021, Manning does not rely on such evidence in this way—and instead improperly uses it to replace the inquiry into what the parties would have anticipated.
Plaintiff asserted that Manning improperly used the Book of Wisdom with respect to two types of post-negotiation evidence: (1) evidence regarding Inhibrx’s decision to terminate INBRX-105 in January 2024 (“opinions relating to INBRX-105’s termination”) and (2) changes at I-Mab that took place in 2022 through 2024 (“opinions relating to later-occurring events at I-Mab”).
1. Opinions relating to INBRX-105’s termination
Parties’ Position
Defendants argued that it would be nonsensical to use I-Mab’s information to modify INBRX-105 when doing so would require starting over on manufacturing and toxicity development to support an entirely new IND application and filing that new application with the FDA.
The Court refused to exclude Manning’s opinions relating to INBRX-105’s termination for two main reasons. First, as Defendants point out, it was Plaintiff’s damages expert who initially opined about INBRX-105’s termination, stating that it “does not change the parties’ perspectives and negotiating positions as of a hypothetical negotiation in November 2021.” As a general matter, it is of course appropriate for an expert’s rebuttal report to respond to another expert’s opinions. And Manning does just that in at least certain of the challenged portions of his report.
Beyond that, Plaintiff’s argument is that at the time of the hypothetical negotiation, Defendants viewed INBRX-105 “as having significant value” and therefore the decision to terminate the program in January 2024 does not reflect what the parties were thinking in November 2021 (and thus Manning’s related opinions must be excluded). But Defendants are of course permitted to point to evidence to rebut the notion that they viewed INBRX-105 as having significant value in November 2021. Indeed, Defendants point out that Plaintiff’s own experts opine that leading up to the hypothetical negotiation, Inhibrx was concerned about INBRX-105’s likelihood of success.
Court’s Decision
In that vein, Defendants argued that Manning’s opinions relating to INBRX-105’s termination are consistent with Defendants’ views in November 2021 that there was much uncertainty regarding the development of INBRX-105. The Court concluded that it was not an improper use of the Book of Wisdom. In the end, it will be up to the jury to ultimately decide, based on all of the evidence, how Defendants viewed the INBRX-105 program at the time of the hypothetical negotiation.
Opinions relating to later occurring events at I-Mab
Plaintiff also moved to exclude Manning’s reliance on changes at I-Mab that occurred after the November 2021 hypothetical negotiation, including its decreasing stock price in 2022, termination of its partnership with AbbVie in September 2023 and I-Mab’s restructuring in April 2024; Plaintiff argued that this was improper use of the Book of Wisdom.
The two paragraphs at issue in Manning’s rebuttal report discuss I-Mab’s termination of its partnership with AbbVie and related decreasing stock price, and they are clearly responding to points made by Plaintiff’s experts regarding I-Mab’s partnership with AbbVie. Similarly, the two paragraphs at issue in Manning’s supplemental report relate to I-Mab’s restructuring and respond to points made by Plaintiff’s damages expert regarding this event.
The Court, once again, held that it is proper for Manning to respond to opinions raised by Plaintiff’s experts.
Manning’s opinion regarding “actual damages”
The DTSA provides that damages for misappropriation may be quantified in two ways: (1) damages for actual loss plus unjust enrichment or (2) a reasonable royalty.
Manning opined that he cannot rule out the conclusion that Plaintiff’s “actual damages” are zero (the “zero damages opinion”). Plaintiff argued that Manning’s zero damages opinion should be excluded as irrelevant because Plaintiff’s damages claims are not based on actual loss, and even if Plaintiff’s actual damages were zero, Plaintiff would still be entitled to a reasonable royalty.
The Court agrees with Plaintiff that Defendants ignored the “actual words” that Manning used, as he did not opine in the zero damages opinion that Plaintiff’s “reasonable royalty damages” are zero (nor do Defendants point to anywhere else in Manning’s report where he opined that Plaintiff’s reasonable royalty damages should be zero). Nor did Defendants explain why an opinion that Plaintiff’s “actual damages . . . are zero” should be interpreted to actually mean that Plaintiff’s “reasonable royalty damages are zero.”
Moreover, the Court agreed with Plaintiff that Manning does not seem to provide any facts or analysis in support of the zero damages opinion.
Held
Plaintiff sought to exclude three categories of Dr. Richard Manning’s opinions. The third category was about Manning’s alternative damages theory but the Court reserved decision on the third category until it resolved Plaintiff’s motion to exclude the opinions of Roland Newman. One of Plaintiff’s arguments is that Manning’s alternative damages theory should be excluded because Manning relied only on a conversation with Newman in support. The Court granted this portion of Plaintiff’s Daubert motion regarding Manning’s opinions.
In conclusion, the Court granted in part and denied in part the Plaintiff’s motion to exclude Manning’s opinions.
Key Takeaway:
Manning did not improperly utilizes the Book of Wisdom. Also, it is of course appropriate for an expert’s rebuttal report to respond to another expert’s opinions. And Manning does just that in at least certain of the challenged portions of his report. However, Manning’s zero damages opinion was excluded as the Court agreed with Plaintiff that Manning does not seem to provide any facts or analysis in support of the zero damages opinion.
Case Details:
| Case Caption: | I-Mab Biopharma V. Inhibrx, Inc. Et Al |
| Docket Number: | 1:22cv276 |
| Court: | United States District Court, Delaware |
| Order Date: | October 17, 2024 |
