Microstrategy loss hinged on expert witness

In Microstrategy, Inc. v. Business Objects, S.A., the Federal Circuit Court of Appeals recently upheld in part, and reversed in part, a decision by the United States District Court for the Eastern District of Virginia. The dispute between MicroStrategy and Business Objects primarily involved Microstategy's U.S. Patent No. 6,260,050 (the '050 patent) and four business tort claims including: Misappropriation of Trade Secrets, Tortious Interference with Contract, violation of the Computer Fraud and Abuse Act, and willful and maliciously injure to trade, business, profession and reputation.. The Federal Circuit agreed with the district court's finding regarding all of the issues other than the determination that the non-solicitation clause was invalid and unenforceable as a matter of Virginia Law. The failure of MicroStategy's case centered upon their inability to properly use an expert witness. Microstategy relied upon an expert witness and his prepared report to prove damages. The district court found that the initial report did not consider relevant factors in its damage analysis and did not link any single instance of misconduct to a specified amount of damages. Without the report to support the expert's testimony, the district court would not allow the expert to testify.The district court excluded the expert report based on the determination that the expert had used a flawed analysis. He had failed to include factors such as Microstategy's accounting problems. These problems required downward readjustments of MicroStrategy's 1997-1999 financial reports and lead to a 62 percent drop in stock in one day, and eventually falling from $313 per share to 49 cents per share. Instead of attributing any damages to the market instability or the introduction of new products by Business Objects, the expert attributed all damages to Business Objects alleged misappropriation of trade secrets and violation of MicroStrategy's patent rights. The failure to account for other factors caused the report to be excluded.Because the expert report was excluded and the expert's testimony not allowed, MicroStrategy was unable to prove causation or show the amount of damages with any reasonable certainty. When MicroStrategy was unable to prove these elements, they were unable to prove any of their business tort claims. And as the district court had already determined, and the Federal Circuit sustained, that Business Objects had not infringed MicroStrategy's patent, MicroStrategy is left with no recourse against Business Objects.This case illustrates just how important it is to find and retain competent expert witnesses when pursuing legal remedies. Just because an expert tells you what you want to hear does not make them the most effective witness.For the complete decision, log on to http://fedcir.gov/opinions/04-1572.pdf


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