Case 2:12-cv-00147-WCB Document 402 Filed 09/06/17 Page 1 of 11 PageID #: 14585
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`MARSHALL DIVISION
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`Case No. 2:12-CV-00147-WCB
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`SABATINO BIANCO, M.D.,
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` Plaintiff,
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`GLOBUS MEDICAL, INC.,
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` Defendant.
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`MEMORANDUM OPINION AND ORDER
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`The plaintiff in this case, Sabatino Bianco, M.D., has moved to have the defendant,
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`Globus Medical, Inc., held in civil contempt for failing to comply with a portion of the Court’s
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`judgment. This order is entered in connection with an upcoming hearing in the civil contempt
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`proceeding. Before the Court is Dr. Bianco’s motion in limine seeking to exclude evidence
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`disputing the existence of Dr. Bianco’s trade secret and its misappropriation. Dkt. No. 384. The
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`Court GRANTS the motion in part and DENIES the motion in part.
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`Dr. Bianco’s motion is directed to a report prepared by Dr. John Peloza, an expert for
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`Globus, and the testimony that Dr. Bianco expects Dr. Peloza will offer at the contempt hearing.
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`Dr. Bianco complains that a significant portion of Dr. Peloza’s report (and thus his expected
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`testimony) addresses issues that were previously resolved in this litigation and are not properly
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`before the Court in the present proceeding.
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`BACKGROUND
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`Dr. Bianco, a spinal surgeon, filed suit against Globus in 2012. In his complaint, Dr.
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`Bianco raised a number of claims stemming from his dealings with Globus in connection with
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`Dr. Bianco’s idea regarding a device that could be used in spinal surgery. The idea was directed
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`to a continuously and reversibly expandable spacer, or implant, that could be placed between
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`adjacent vertebrae in a patient’s spine after diseased disc material had been removed from the
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`inter-vertebral space. The height of the device, according to Dr. Bianco’s idea, could be
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`manipulated so that it could be lowered during insertion and then raised to the desired height
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`after placement, thereby maintaining the proper distance between the two adjacent vertebrae. Dr.
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`Bianco’s idea included various other features of the inter-vertebral spacer as well.
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`Following a five-day trial, the jury returned a verdict in Dr. Bianco’s favor on his claim
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`of trade secret misappropriation. The jury entered a verdict for $4,295,760 in damages, and the
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`Court entered judgment on that verdict. In addition, the Court entered an order respecting
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`ongoing royalties, since the jury’s verdict assessed liability only up to the date of trial. The
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`Court’s judgment imposed an ongoing royalty of 5% of the net sales of the three products that
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`were at issue—Globus’s Caliber, Caliber-L, and Rise devices. The judgment required Globus to
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`make royalty payments on those products for a period of 15 years from June 30, 2007. In
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`addition, the judgment provided that the 5% ongoing royalty obligation would apply to “products
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`that are not colorably different from those products.” Dkt. No. 315, at 2.
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`The Court subsequently denied Globus’s motion for judgment as a matter of law. Dkt.
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`No. 338. On Globus’s appeal, the Federal Circuit affirmed the judgment without opinion. 610
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`Case 2:12-cv-00147-WCB Document 402 Filed 09/06/17 Page 3 of 11 PageID #: 14587
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`F. App’x 1032 (2015). Globus petitioned for a writ of certiorari, and the Supreme Court denied
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`the petition. 136 S. Ct. 2489 (2016).
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`The parties arranged to make the requisite royalty payments on a quarterly basis
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`beginning as of October 1, 2014. In 2016, however, a dispute arose as to whether Globus was
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`liable for royalty payments on the sales of two of its other products, the Rise-L spacer and the
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`Altera spacer. When counsel for Dr. Bianco protested to Globus regarding the failure of
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`payment for those products, Globus filed suit in the United States District Court for the Eastern
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`District of Pennsylvania, seeking a declaratory judgment that it was not liable for those payments
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`under this Court’s judgment. Dr. Bianco then filed a motion with this Court seeking an order to
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`show cause why Globus should not be held in civil contempt for failing to abide by the terms of
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`this Court’s judgment. Meanwhile, the Pennsylvania court requested briefing from the parties as
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`to why it should not transfer the declaratory judgment suit to the Eastern District of Texas.
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`Following briefing of the transfer issue, the Pennsylvania court stayed the declaratory judgment
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`action pending resolution of the contempt proceeding before this Court. An evidentiary hearing
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`in the contempt proceeding is now scheduled for September 11, 2017.
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`The parties have recently informed the Court that they have resolved their dispute
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`regarding the Rise-L device. Thus, only the royalties relating to the Altera device remain in
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`dispute.
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`DISCUSSION
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`In his motion in limine, Dr. Bianco seeks to exclude any evidence, including testimony
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`from Dr. Peloza, that is related to the existence or misappropriation of Dr. Bianco’s trade secret.
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`Those issues, Dr. Bianco argues, have already been conclusively decided, and the contempt
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`proceeding is not an appropriate forum in which to seek to relitigate those issues. In response,
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`Globus contends that it is not seeking to relitigate issues settled by the judgment in this case, but
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`that it intends to offer evidence, including testimony from Dr. Peloza, that is relevant to the issue
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`of contempt. In particular, Globus argues that the evidence in question, including “state of the
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`art” evidence, is admissible for three reasons: (1) it will provide context to identify “colorable
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`differences” in technology; (2) it will bear on the question whether Dr. Bianco’s trade secret
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`remained protected and protectable at the time of a subsequent use; and (3) it is relevant to
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`equitable issues such as mitigating circumstances, Globus’s good faith, and the appropriate
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`remedy if contempt is found. Dkt. No. 395, at 1.
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`Because the contempt proceeding will be held before the Court and without a jury, the
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`Court will be liberal in allowing the parties to introduce evidence, subject to the Court’s later
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`determining whether that evidence is relevant and helpful in resolving the issue before the Court,
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`which is whether the Altera device is or is not more than colorably different from the Caliber,
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`Caliber-L, and Rise devices that were adjudicated during the trial.1 With that said, and for the
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`1 Dr. Bianco has noted the Court’s use, in the judgment, of the phrase “products that are
`not colorably different from” the adjudicated products, and has suggested that the Court intended
`to use the phrase “products that are ‘not more than colorably different.’” Dkt. No. 357, at 1 n.1.
`The Court recognizes that different courts have used the term “colorable” in different ways in
`making the same point—that a prohibition applicable to a particular object extends to objects that
`are not meaningfully different from that object. A number of courts have used the same verbal
`formulation used in the judgment in this case—“not colorably different.” See Power
`Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., 843 F.3d 1315, 1325 (Fed. Cir. 2016)
`(quoting a district court order); Nichia Corp. v. Everlight Elecs. Co., No. 2;13-cv-702, 2016 WL
`3110142, at *2 (E.D. Tex. Jan. 25, 2016); VirnetX Inc. v. Apple Inc., No. 6:13-cv-211, 2014 WL
`12672822, at *5 (E.D. Tex. Mar. 6, 2014); Fractus, S.A. v. Samsung Elecs. Co., No. 6:09-cv-
`203, 2013 WL 1136964, at *2 (E.D. Tex. Mar. 15, 2013); Mondis Tech. Ltd. v. Chimei Innolux
`Corp., No. 2:11-cv-378, 2012 WL 1554645, at *2 (E.D. Tex. Apr. 30, 2012); Synqor, Inc. v.
`Artesyn Techs., Inc., No. 2:07-cv-497, 2011 WL 3624957, at *16 (E.D. Tex. Aug. 17, 2011);
`Soverain Software LLC v. Newegg Inc., 836 F. Supp. 2d 462, 484 (E.D. Tex. 2010); see also Eli
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`guidance of the parties, however, the Court will make the following observations regarding the
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`proper uses for which the evidence at the contempt hearing may be offered.
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`1. Context
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`Globus first argues that Dr. Peloza’s evidence regarding the state of the art will be useful
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`in providing the context for deciding whether the Altera device is merely a colorable imitation of
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`the Caliber, Caliber-L, and Rise products. Dkt. No. 395, at 7-8. The Court will allow evidence
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`that is relevant for that purpose, with the caveat discussed below.
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`It may be
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`that evidence regarding devices available from Globus and other
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`manufacturers, as well as technology available to the industry but not incorporated into any
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`commercial devices, will be helpful to the Court in determining whether the Altera device is not
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`more than colorably different from the Caliber, Caliber-L, and Rise products. When determining
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`whether two products are similar, it is frequently useful to consider other art in the field to assist
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`Lilly & Co. v. Perrigo Co., 202 F. Supp. 3d 918, 1029 (S.D. Ind. Aug. 22, 2016); Arcelor Mittal
`USA LLC v. AK Steel Corp., No. 13-685, 2016 WL 1588492, at *4 (D. Del. Apr. 19, 2016);
`Jerry Harvey Audio Holding, LLC v. 1964 Ears, LLC, No. 6:14-cv-2083, 2016 WL 7177548
`(M.D. Fla. Mar. 28, 2016); Arnold v. Scales, No. 3:15-cv-45, 2016 WL 6155173, at *1 (M.D.
`Ga. Feb. 5, 2016); M-I LLC v. FPUSA, LLC, No. 15-cv-406, 2015 WL 6738823, at *17 n.8
`(W.D. Tex. Nov. 4, 2015); Asetek Danmark A/S v. CMI USA, No. 13-cv-457, 2015 WL
`5568360, at *20 (N.D. Cal. Sept. 22, 2015); CTE Global, Inc. v. Novozymes A/S, No. 15-C 181,
`2015 WL 2330223, at *3 (N.D. Ill. May 14, 2015); Server Tech., Inc. v. Am. Power Conversion
`Corp., No. 3:06-cv-698, 2015 WL 1308617, at *5 (D. Nev. Mar. 31, 2014). Other courts,
`including the Federal Circuit in the patent context, have used the terms “colorable imitation,”
`“not more than colorably different,” and “no more than a colorable difference” to capture the
`same concept. See, e.g., Pac. Coast Marine Windshields, Ltd. v. Malibu Boats, LLC, 739 F.3d
`694, 700 (Fed. Cir. 2014); TiVo Inc. v. Echostar Corp., 646 F.3d 869, 881-82 (Fed. Cir. 2011)
`(en banc); Abbott Labs. v. TorPharm, Inc., 503 F.3d 1372, 1381 (Fed. Cir. 2007). Justice Story,
`an authority always worth paying attention to, used the term in the latter fashion, writing in the
`patent context: “Mere colorable alterations of a machine are not sufficient to protect the
`defendant.” Odiorne v. Winkley, 18 F. Cas. 581, 582 (1814). In this order, the Court will follow
`Justice Story’s lead regarding the verbal formulation of the principle. The Court notes, however,
`that the language in the judgment was designed to convey the same concept and have the same
`effect as the “no more than colorable” or “not merely colorable” formulations.
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`in the comparison process. See, e.g., Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665, 676-
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`78 (Fed. Cir. 2008) (en banc) (“Particularly in close cases, it can be difficult to answer the
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`question whether one thing is like another without being given a frame of reference.”).
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`Importantly, however, the use of such evidence to provide context does not authorize its use to
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`contravene findings already made by the jury as to the existence of Dr. Bianco’s trade secret and
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`Globus’s misappropriation of that trade secret.
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`Globus argues that because there was “no definitive prior ruling explaining what Dr.
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`Bianco’s trade secret was, nor how exactly that trade secret was specifically incorporated into
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`Caliber, Caliber-L, and Rise,” Dkt. No. 395, at 8, clarification of the meaning of “colorable
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`difference” is needed. It cannot be sufficient, Globus argues, that any Globus implant that is
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`continuously and reversibly expandable is merely a colorable imitation of Caliber, Caliber-L, and
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`Rise, “no matter what the specific differences and advancements in technology are.” The state of
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`the art, according to Globus, will show that “the public domain contained numerous designs for
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`such an implant before 2007 and certainly before 2012.” Id. at 9. That passage in Globus’s brief
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`suggests that Globus intends to argue that continuously and reversibly expandable implants were
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`found in the prior art, and that such evidence will establish that Dr. Bianco’s trade secret has
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`either ceased to be a trade secret, that his trade secret can no longer be held to have been
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`misappropriated by Globus, or that the trade secret was never so broad as to encompass any
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`continuously and reversibly expandable implant.
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`The Court rejects that argument.
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` The jury’s verdict established that Globus
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`misappropriated Dr. Bianco’s trade secret and used it in developing the Caliber, Caliber-L, and
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`Rise spacers. It was therefore appropriate for the royalty remedy to extend to those products,
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`regardless of whether there were other similar designs available to Globus at the time. As for the
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`extension of the remedy to products that were merely colorable imitations of the three
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`adjudicated products, that provision was necessary to avoid evasion of the decree. It was not a
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`separate ground of liability that, when applied, needed to be predicated on a separate finding that
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`Dr. Bianco’s trade secret continued to exist and that Globus misappropriated it. Thus, even if
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`continuously and reversibly expandable spacers were commonplace by 2012 (or even if they
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`were known in 2007), that would not affect Globus’s liability for sales of products that were
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`merely colorable versions of Caliber, Caliber-L, and Rise, the products for which Globus was
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`found to have used Dr. Bianco’s trade secret. And finally, the question of the scope of Dr.
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`Bianco’s trade secret is not pertinent in this contempt proceeding. The question before the Court
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`is not whether the Altera device would have given rise to liability if it had been at issue at the
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`trial, but whether the Altera device is merely a colorable imitation of the three adjudicated
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`products.
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`2. Subsequent Changes in the State of the Art
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`Globus next makes the closely related argument that, in a trade secret case,
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`“developments in the state of the art occurring after an alleged disclosure of confidential
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`information directly impact the ongoing viability of a trade secret,” and therefore are relevant to
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`contempt. Dkt. No. 395, at 9. As authority for that proposition, Globus cites the district court
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`opinion in In re Wilson, 248 B.R. 745 (M.D.N.C. 2000).
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`Globus reads the Wilson case to stand for the proposition that a defendant found liable
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`for trade secret misappropriation can avoid contempt by showing “that the adjudicated trade
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`secret had entered the public domain by the time it was used in connection [with] a subsequent
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`product,” and “that the defendant had obtained the information used in the subsequent product
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`through lawful means.” Dkt. No. 395, at 9. Applying that principle in this case, Globus argues
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`that it is entitled to defend against the charge of contempt by showing that the concept of a
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`continuously and reversibly expandable implant was publicly available and was actually known
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`to Globus from independent sources, months before Altera’s development began. A close
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`reading of the Wilson case, however, shows that the case does not support Globus’s
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`characterization of it.
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`The district court in Wilson observed that there had been an initial finding that the
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`defendant had illegally appropriated the plaintiff’s trade secrets and an injunction against further
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`use of the trade secrets. Although by the time of the contempt proceeding, the processes in
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`question were “readily available in the public domain, and therefore were no longer trade
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`secrets,” 248 B.R. at 749, that finding did not provide a complete defense to the contempt
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`charge, because there was “no finding that [the defendant’s] present use of the processes is not
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`simply a continuation of the misappropriation and, therefore, a violation of the bankruptcy
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`court’s original injunction,” id. at 749-50. The court explained:
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`Once a process has been adjudicated a trade secret, the law protects that secret
`from those who obtain it illegally. This is the essence of misappropriation, which
`is defined as the “acquisition, disclosure, or use of a trade secret of another . . .
`unless such trade secret was arrived at by independent development, reverse
`engineering, or was obtained from another person with a right to disclose the trade
`secret.”
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`248 B.R. at 750. The defendant could avoid a contempt finding, the court ruled, only if it could
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`show that the process in question “was (1) no longer a trade secret and (2) [the defendant] had
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`obtained the process lawfully.” Id. Quoting with approval from an Indiana case, the court added
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`that “it is no defense to claim that one’s product could have been developed independently of
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`plaintiff’s, if in fact it was developed by using plaintiff’s proprietary designs.” Id. (quoting
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`Amoco Prod. Co. v. Laird, 622 N.E.2d 912, 918 (Ind. 1993)).
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`The burden described by the Wilson court is a heavy one that requires the defendant to
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`prove that it did not use the plaintiff’s original trade secret in the products that are the subject of
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`the contempt proceedings. It is not a defense for the defendant simply to show that the original
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`trade secrets are now in the public domain. The defendant must further show that it developed
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`its accused products without using the plaintiff’s original trade secrets.
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`In any event, the defense described by the court in Wilson does not apply in this case.
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`Instead of an injunction against the use of the adjudicated trade secret, the Court in this case
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`adopted a remedy that was narrower in one respect and broader in another. It was narrower in
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`that there was no general injunction against use of the adjudicated trade secret, but only a royalty
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`for sales of the adjudicated products. It was broader in that it covered not only those products,
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`but also merely colorable imitations of those products. In effect, the Court’s judgment began
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`with the proposition that Globus had committed actionable trade secret misappropriation with
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`respect to the adjudicated products. The judgment then conclusively presumed that products
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`only colorably different from those products were the result of the same trade secret
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`misappropriation. Thus, in this setting the option discussed in the Wilson case of proving that
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`the new products were not produced by exploiting the misappropriated trade secret is not
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`available to Globus. What is available to Globus is the defense that the Altera device is not
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`merely a colorable imitation of the adjudicated products.
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`3. Ongoing Use of a Protected Trade Secret
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`Based on authority from the patent law context, Globus argues that before finding Globus
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`in contempt of the Court’s order, “there must be a second finding that the new product uses a
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`trade secret.” Dkt. No. 395, at 11. In making that argument, Globus relies on TiVo Inc. v.
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`Echostar Corp., where the Federal Circuit held that in order to prove contempt in a patent case,
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`the patentee must show not only that the product in question is merely a colorable version of the
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`product previously held to infringe, but also that the new product infringes the patent. 646 F.3d
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`at 883. In the patent law context, an injunction against infringement obviously requires proof
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`that the new product infringes. The ongoing royalty order entered in this case, however, did not
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`premise liability on proof of further misappropriation. As noted above, the purpose of the
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`“colorably different” clause in the order was to ensure that, for a period of 15 years from July 1,
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`2007, Globus would have a royalty obligation to Dr. Bianco with regard to the three named
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`products and any other products that are no more than trivially different from those products.
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`Thus, proof of an ongoing trade secret and proof of further misappropriation is not relevant in
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`this case.
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`4. Equitable Considerations
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`While the Court is skeptical that the evidence of other technologies will be of substantial
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`value in assessing equitable considerations that might apply to any sanction imposed upon a
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`finding of contempt, the Court will nonetheless consider the evidence offered by Globus to the
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`extent that it bears on any such equitable issues.
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`In sum, Dr. Bianco’s motion in limine is granted in part, to the extent that the evidence
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`targeted by Dr. Bianco’s motion is admissible only for the limited purposes authorized in this
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`order.
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`IT IS SO ORDERED.
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`SIGNED this 6th day of September, 2017.
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`_____________________________
`WILLIAM C. BRYSON
`UNITED STATES CIRCUIT JUDGE
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