MSC.Software Corporation v. Altair Engineering, Incorporated
2:07-cv-12807
E.D. Mich.Feb 13, 2017Background
- MSC sued Altair for misappropriation of three technical trade secrets (TTS); a jury verdict for MSC was set aside and the court granted Altair a new trial on damages.
- After remand, Altair disclosed damages expert Dr. Christopher Vellturo; MSC moved in limine to exclude his report and testimony.
- The Court referred the Daubert/Rule 702 challenge to a Special Master, who recommended denying MSC’s motion; MSC objected and the district court conducted de novo review.
- Vellturo offered two damages theories under Michigan’s Uniform Trade Secrets Act: unjust enrichment (costs to remove/ redesign) and a reasonable royalty tied to MotionSolve’s share of HyperWorks usage/revenue.
- Vellturo’s methodology relied on: usage logs, customer support (Spectrum) data, interviews with Altair application engineers (AEs) and engineers, Altair’s ISV compensation formula, and Altair technical reports; he concluded minimal damages (about $36,591).
- The Special Master and the court found Vellturo’s methods sufficiently reliable under Rule 702; most of MSC’s challenges were deemed attacks on weight/credibility, not admissibility.
Issues
| Issue | Plaintiff's Argument (MSC) | Defendant's Argument (Altair) | Held |
|---|---|---|---|
| Use of AE interviews / hearsay | AE statements are hearsay and unreliable; cannot form basis for expert opinion | AEs provided firsthand observations reasonably relied upon by economists; interviews consistent with other data | Admissible; reliance on interviews is proper and goes to weight, not exclusion |
| Reliance on customer usage data / reporting-license representativeness | Reporting-license sample may be biased; data insufficient to apportion HyperWorks revenue to MotionSolve | Sample appears representative; multiple independent measures corroborate MotionSolve usage share | Admissible; methodological disputes go to weight, not exclusion |
| Use/interpretation of Spectrum (customer inquiry) data | Spectrum analysis cannot reliably show limited MotionSolve usage | Spectrum findings are consistent with other sources and support Vellturo’s conclusions | Admissible; challenges are for cross-examination |
| GAAP / accounting standards | Allocation by usage (not price) violates GAAP; methodology noncompliant | GAAP does not control allocation of bundled software revenue; ISV usage-based approach is industry-accepted | Admissible; GAAP issues affect credibility/weight, not reliability |
| Reliance on Altair employees (Subramanian) and Horstmann report | Relying on trial witnesses and technical expert leads to unreliable/embellished opinions | Sources are verifiable; discrepancies can be tested at trial; Horstmann material supported by Altair evidence | Admissible; issues go to cross-examination and weight |
| Apportionment / burden-shifting in reasonable-royalty analysis | Vellturo failed to properly apportion and consider MSC’s negotiating position | Vellturo considered MSC’s position and explained limited leverage; apportionment methodology explained | Admissible; apportionment disputes reserved for trial; not a Daubert exclusion |
| Claim customers still use older versions with TTS | If customers still use prior versions, Vellturo’s limited-damage conclusion is unreliable | Court previously found TTS removed; limited evidence MSC cites is unpersuasive or mischaracterized | Not a basis to exclude; factual disputes for trial and largely resolved against MSC |
Key Cases Cited
- Daubert v. Merrell Dow Pharm., 509 U.S. 579 (gatekeeper role for expert admissibility under Rule 702)
- Kumho Tire Co. v. Carmichael, 526 U.S. 137 (Rule 702 applies to all expert testimony; flexible reliability inquiry)
- I4i Ltd. P’ship v. Microsoft Corp., 598 F.3d 831 (Daubert/Rule 702 exclude unreliable opinions; methodology disputes often go to weight)
- Apple Inc. v. Motorola, Inc., 757 F.3d 1286 (competing expert methodologies typically subject to cross-examination and go to weight)
- Pluck v. BP Oil Pipeline Co., 640 F.3d 671 (expert opinion lacking sufficient facts/data may be excluded as conjecture)
- Greenwell v. Boatwright, 184 F.3d 492 (if methodology/principles are valid, conclusions are presumed scientifically valid)