48 Cal.App.5th 129

Cal. Ct. App.

2020

I. FACTUAL AND PROCEDURAL BACKGROUND

A. Underlying Dispute, Jury Trial (2003), and First Appeal

B. Jury Trial on Misappropriation Damages (2008) and Second Appeal

C. Reasonable Royalty Trial (2012-2015) and Present Appeal

1. Royalty Trial, Phase I

2. Royalty Trial, Phase II

a. Ajaxo's Royalty Models and Koo's Expert Testimony

b. E*Trade's Experts Reject Imposition of Any Royalty

3. Closing Briefs and E*Trade's Motion to Strike

4. Trial Court's Statement of Decision

D. Ajaxo's Motion for a New Trial

E. Ajaxo's Motion to Strike Costs

II. DISCUSSION

A. Framework to Assess a Reasonable Royalty Under the CUTSA

B. The Appellate Burden in a Failure-of-Proof Case

C. It Was Within the Trial Court's Discretion To Deny Ajaxo a Royalty

1. The Award of a Reasonable Royalty Pursuant to Section 3426.3, Subdivision (b) Is Discretionary

2. Ajaxo Fails to Accurately Portray the Record Evidence

3. The Available Evidence Did Not Compel a Reasonable Royalty Award

a. The Trial Court Did Not Abuse its Discretion in Deeming the Alleged Spoliation of Evidence and the Apportionment of Actual Trade Secret Value Relevant to Any Reasonable Royalty Award

b. The Trial Court Did Not Abuse its Discretion in Refusing to Assess a Royalty Based on the Available Evidence

c. The Trial Court Did Not Abuse its Discretion in Rejecting a Reasonable Royalty Based on the Value-Added Developer Distribution Model

d. The Trial Court Did Not Abuse its Discretion in Excluding Expert Testimony on Royalty Theories That Were Not Timely Disclosed

e. Summary

D. The Trial Court Did Not Err In Denying Ajaxo a New Trial

a. The Court Did Not Err in Applying the Georgia-Pacific Factors

b. The Trial Court Did Not Err in Its Award of Damages

c. Summary

E. The Trial Court Did Not Err in its Prevailing Party Determination and Costs Award

III. DISPOSITION

Notes

AJAXO, INC., Plaintiff and Appellant, v. E*TRADE FINANCIAL CORPORATION, Defendant and Respondent. AJAXO, INC., Plaintiff and Appellant, v. E*TRADE GROUP, INC., Defendant and Respondent.

H042999 (Santa Clara County Super. Ct. No. CV793529); H043530

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SIXTH APPELLATE DISTRICT

Filed 4/23/20

CERTIFIED FOR PUBLICATION

FACTUAL AND PROCEDURAL BACKGROUND ................................................................ 2
1. Underlying Dispute, Jury Trial (2003) and First Appeal ................................................ 2
2. Jury Trial on Misappropriation Damages (2008) and Second Appeal ............................ 6
3. Reasonable Royalty Trial (2012-2015) and Present Appeal ............................................ 8
  1. Royalty Trial, Phase I ................................................................................................... 9
  2. Royalty Trial, Phase II ................................................................................................. 14
    1. Ajaxo‘s Royalty Models and Koo‘s Expert Testimony............................................ 16

1. E*Trade‘s Experts Reject Imposition of Any Royalty ................................................ 19
1. Closing Briefs and E*Trade‘s Motion to Strike ........................................................... 22
2. Trial Court‘s Statement of Decision ............................................................................ 24
D. Ajaxo‘s Motion for a New Trial ........................................................................................ 25
E. Ajaxo‘s Motion to Strike Costs ........................................................................................ 26

DISCUSSION .......................................................................................................................... 28
1. Framework to Assess a Reasonable Royalty Under the CUTSA ..................................... 28
2. The Appellate Burden in a Failure-of-Proof Case ............................................................ 32
3. It Was Within the Trial Court‘s Discretion To Deny Ajaxo a Royalty ............................. 34
  1. The Award of a Reasonable Royalty Pursuant to Civil Code Section 3426.3, subdivision (b) Is Discretionary ..................................................................................... 34
  2. Ajaxo Fails to Accurately Portray the Record Evidence ............................................... 35
  3. The Available Evidence Did Not Compel a Reasonable Royalty Award .................... 36
    1. The Trial Court Did Not Abuse its Discretion in Deeming the Alleged Spoliation of Evidence and the Apportionment of Actual Trade Secret Value Relevant to Any Reasonable Royalty Award ............................................................. 39
    2. The Trial Court Did Not Abuse its Discretion in Refusing to Assess a Royalty Based on the Available Evidence ................................................................ 46
    3. The Trial Court Did Not Abuse its Discretion in Rejecting a Reasonable Royalty Based on the Value-Added Developer Distribution Model ......................... 48
    4. The Trial Court Did Not Abuse its Discretion in Excluding Expert Testimony on Royalty Theories That Were Not Timely Disclosed ............................ 56
    5. Summary ................................................................................................................. 62

D. The Trial Court Did Not Err In Denying Ajaxo a New Trial ............................................ 64
1. The Court Did Not Err in Applying the Georgia-Pacific Factors ................................. 65
2. The Court Did Not Err by Awarding Inadequate Damages .......................................... 71
3. Summary ....................................................................................................................... 76
E. The Trial Court Did Not Err in its Prevailing Party Determination and Costs Award ................................................................................................................................... 76

DISPOSITION ......................................................................................................................... 85

A jury in 2003 found defendant E*Trade Financial Corp. (E*Trade) liable for trade secret misappropriation and for breach of a mutual nondisclosure agreement with plaintiff Ajaxo, Inc. (Ajaxo). The jury awarded damages only on the breach of contract cause of action after the trial court granted a nonsuit on the issue of damages for trade secret misappropriation. An appeal before this court led to a remand for a second trial on damages for the misappropriation. The jury in that 2008 trial found no net damages for unjust enrichment and awarded nothing to Ajaxo. The trial court then denied Ajaxo‘s request to seek a reasonable royalty under the California Uniform Trade Secret Act (Civ. Code, §§ 3426-3426.11 (CUTSA)).¹ A second appeal followed, and this court reversed. We held that the trial court had the discretion to award payment of a reasonable royalty pursuant to section 3426.3, subdivision (b), which states that “[i]f neither damages nor unjust enrichment caused by misappropriation are provable, the court may order payment of a reasonable royalty . . . .” We remanded the matter for the trial court to exercise its discretion under the statute. The trial court held a bench trial on remand to determine whether Ajaxo was entitled to a reasonable royalty and in what amount, if any. It ultimately declined to award any royalty to Ajaxo. It entered judgment for E*Trade and awarded E*Trade its costs as the prevailing party in the action.

On appeal, Ajaxo challenges the trial court‘s failure to award it a reasonable royalty for E*Trade‘s willful and malicious trade secret misappropriation. Ajaxo also challenges the denial of its motion for a new trial and the award of costs in favor of E*Trade. Among the issues raised, we decide whether the trial court abused its discretion by declining to award any reasonable royalty despite the available evidence from which a reasonable royalty theoretically might have been derived. We consider the court‘s findings on the evidence, its application of apportionment principles from patent law, its exclusion of expert testimony and analysis of Ajaxo‘s royalty model, and its treatment of

what are commonly called the ”Georgia-Pacific factors” for determining a royalty rate in intellectual property disputes. (See Georgia-Pacific Corp. v. United States Plywood Corp. (S.D.N.Y. 1970) 318 F.Supp. 1116 (Georgia-Pacific).)

We also decide whether the trial court erred in its prevailing party determination and costs award, an issue that requires us to reconcile the meaning of a “prevailing party . . . in any action or proceeding” (Code Civ. Proc., § 1032, subd. (b)) with the practical effect of Ajaxo having already obtained full satisfaction of what became a separate, final judgment in its favor following the remittitur in 2006 from the first appeal, including costs awarded at that time.

We conclude as to the reasonable royalty that the trial court did not abuse its discretion in denying a royalty under the CUTSA based upon Ajaxo‘s failure to carry its burden of proof and to support its royalty theories with credible, reliable, non-speculative evidence. As to the other issues raised on appeal, we find no reversible error and will affirm the judgment and the award of costs in favor of E*Trade.

I. FACTUAL AND PROCEDURAL BACKGROUND

An extensive recitation of the facts and history of the case may be found in this court‘s prior decisions, Ajaxo Inc. v. E*Trade Group Inc. (2005) 135 Cal.App.4th 21 (Ajaxo I) and Ajaxo Inc. v. E*Trade Financial Corp. (2010) 187 Cal.App.4th 1295 (Ajaxo II). We summarize what is necessary for an understanding of the issues on appeal.

A. Underlying Dispute, Jury Trial (2003), and First Appeal

The dispute arose in 1999 when Ajaxo offered to license its software to E*Trade. (Ajaxo II, supra, 187 Cal.App.4th at p. 1300.) E*Trade, an internet-based financial services company, wanted its clients to be able to access their online stock trading accounts using what at the time were new web-enabled wireless phones. (Ibid.) E*Trade was looking to partner with a company that could provide the wireless stock trading

capability. (Ibid.) Ajaxo‘s founder, Sing Koo,² had developed a sophisticated technology for wireless transactions called ” ‘Wirelessproxy XO’ ” that among other things supported Internet-based stock trading using wireless devices. (Ajaxo I, supra, 135 Cal.App.4th at p. 27.)

In September 1999, E*Trade and Ajaxo entered a mutual nondisclosure agreement agreeing to protect and hold confidential each other‘s proprietary information. (Ajaxo I, supra, 135 Cal.App.4th at pp. 27-28.) Ajaxo proceeded with several technology demonstrations. (Id. at pp. 28-31.) E*Trade inquired whether Ajaxo was seeking a ” ‘venture partner.’ ” (Id. at p. 30.) Ajaxo was not, but it proposed terms to license Wirelessproxy XO to E*Trade for $860,000. (Ibid.) E*Trade communicated that it was working on a counter proposal, and Koo continued responding to requests for detailed technical information. (Id. at pp. 30-31.) In late October 1999, E*Trade made a counter offer of $200,000 with an option for an additional $200,000 per ” ‘device platform,’ ” which Koo understood as referring to the type of wireless device on which the software would be designed to run. (Id. at p. 32 & fn. 14.) E*Trade withdrew its counter offer shortly after, stating among other reasons that Ajaxo was too small to be an E*Trade partner. (Id. at p. 32.)

The next month, E*Trade selected Everypath, Inc. (Everypath), as its wireless vendor. (Ajaxo I, supra, 135 Cal.App.4th at p. 33Ajaxo II, supra, 187 Cal.App.4th at p. 1300.) In March 2000, E*Trade and Everypath entered into a service provider agreement for Everypath to develop and implement E*Trade‘s wireless trading

capability. (Ibid.) E*Trade paid Everypath $40,000 for its product (Ajaxo I, supra, at p. 33) and agreed to pay an additional $30,000 monthly service fee for up to 4,000 concurrent data users.

Ajaxo sued E*Trade and Everypath in October 2000. (Ajaxo I, supra, 135 Cal.App.4th at p. 40section 3426.3 of the CUTSA. (Ajaxo I, supra, at p. 40.) It also alleged breach of the nondisclosure agreement by E*Trade and sought compensatory damages. (Ibid.)

The case was tried to a jury in 2003. ( Ajaxo I, supra, 135 Cal.App.4th at p. 25Id. at pp. 33, 34, 36.) Ajaxo‘s expert witness testified in the first trial that Everypath‘s technology processes were ” ‘almost identical to’ ” Ajaxo‘s processes (id. at p. 34) and that based on his review of the Everypath source code library, “it would have been very difficult for Everypath to develop independently the wirelessproxy technology in two months” (id. at p. 35).

Ajaxo relied in the first trial on an unjust enrichment measure of damages for its misappropriation claim. (Ajaxo II, supra, 187 Cal.App.4th at p. 1301Ibid.) The trial court still allowed the issue of liability for misappropriation to go to the jury, recognizing that if the jury were to find liability for misappropriation, Ajaxo might be entitled to reasonable royalties under section 3426.3, subdivision (b) of the CUTSA. (Ajaxo II, supra, at p. 1301.)

The jury in the first trial returned a special verdict in Ajaxo‘s favor. (Ajaxo I, supra, 135 Cal.App.4th at p. 40Id. at pp. 25, 40.) The jury further found both E*Trade and Everypath liable for trade secret misappropriation but, because of the nonsuit, the jury did not award damages on the misappropriation cause of action. (Ibid.; Ajaxo II, supra, 187 Cal.App.4th at p. 1301Ajaxo I, supra, 135 Cal.App.4th at p. 41Ibid.) The trial court denied other posttrial motions, including E*Trade‘s motion for a new trial and for judgment notwithstanding the verdict, and the first appeal followed. (Ibid.)

On appeal in Ajaxo I, this court agreed with Ajaxo that the trial court erred in granting a nonsuit on damages for the trade secret misappropriation cause of action. (Ajaxo I, supra, 135 Cal.App.4th at pp. 63-64id. at p. 63) such that the evidence presented on the breach of the nondisclosure agreement “directly addressed the degree to which E*Trade was unjustly enriched by its action of disclosing Ajaxo‘s trade secrets and proprietary information” (ibid.). Having concluded that substantial evidence existed to support Ajaxo‘s claim for damages for the trade secret misappropriation, we reversed the judgment and remanded the cause to the trial court for a new trial on damages for misappropriation.3 (Id. at pp. 63-64, 69.) We rejected the parties’ other contentions on appeal. (Id. at p. 69.)

B. Jury Trial on Misappropriation Damages (2008) and Second Appeal

The remanded case proceeded against E*Trade.⁴ The question before the jury at the second trial was the extent of unjust enrichment to E*Trade resulting from its misappropriation of Ajaxo‘s trade secret. (Ajaxo II, supra, 187 Cal.App.4th at p. 1299Id. at p. 1303.)

Ajaxo sought to prove more than $300 million in unjust enrichment to E*Trade. (Ajaxo II, supra, 187 Cal.App.4th at p. 1299Id. at p. 1302.) Ajaxo‘s expert did not consider E*Trade‘s actual profits from wireless trading or the fact that no more than one-half of 1 percent of E*Trade clients ever traded on wireless devices. (Ibid.) The trial court denied a motion for nonsuit on the issue of unjust enrichment. (Ibid.)

E*Trade then produced evidence that its wireless trading strategy ” ‘didn‘t pan out.’ ” (Ajaxo II, supra, 187 Cal.App.4th at p. 1303Ibid.)

The jury awarded Ajaxo no damages. In a special verdict, the jury valued E*Trade‘s benefit from the misappropriation at $3,990,852 and calculated E*Trade‘s

relevant to the issue in this appeal of the trial court‘s prevailing party determination and costs award. We discuss it in more detail post (part II.E.).

reasonable expenses in achieving the benefit at $6,411,761, resulting in a net loss of approximately $2.4 million. (Ajaxo II, supra, 187 Cal.App.4th at p. 1303section 3426.3, subdivision (b).5 E*Trade opposed the request, arguing that a royalty award was not available because evidence in the record to support a measure of damages for either actual losses or unjust enrichment made those damages ” ‘provable’ ” within the meaning of the statute. (Ajaxo II, supra, at p. 1303Ibid.) The trial court accordingly denied Ajaxo‘s request for reasonable royalties and entered judgment in favor of E*Trade. (Ibid.)

This court reversed. (Ajaxo II, supra, 187 Cal.App.4th at p. 1316Ajaxo II, we considered whether unjust enrichment was ” ‘provable’ ” within the meaning of section 3426.3, subdivision (b) where the jury‘s verdict showed E*Trade was not enriched. (Ajaxo II, supra, at p. 1309section 3426.3, subdivision (b) was intended to allow “for reasonable royalties when the plaintiff could not prove any loss and the defendant ‘made no actual profits.’ ” (Ajaxo II, supra, at p. 1311Id. at pp. 1311-1312.) We concluded that

“where a defendant has not realized a profit or other calculable benefit as a result of his or her misappropriation of a trade secret, unjust enrichment is not provable within the meaning of section 3426.3, subdivision (b), whether the lack of benefit is determined as a matter of law or as a matter of fact.” (Id. at p. 1313.) We also rejected E*Trade‘s argument that Ajaxo‘s actual losses were provable. (Id. at p. 1315.)

Ajaxo II outlined some evidence that could allow the trial court to determine ” ‘what royalty, if any, would be reasonable under the circumstances.’ ” (Ajaxo II, supra, 187 Cal.App.4th at p. 1313, quoting Unilogic, Inc. v. Burroughs Corp. (1992) 10 Cal.App.4th 612, 628.) We recognized that “[e]vidence of the negotiations between the parties pertaining to the licensing of Ajaxo‘s software and evidence of the price E*Trade paid for the license it obtained from Everypath could have served as a starting point for the trial court‘s estimate of what the parties would have agreed was a fair licensing price at the time the misappropriation occurred.” (Ajaxo II, supra, at p. 1313.) In sum, Ajaxo II held that “since neither actual loss nor unjust enrichment is provable, the trial court had discretion pursuant to section 3426.3, subdivision (b) to order payment of a reasonable royalty.” (Id. at p. 1315.) We remanded the matter for the trial court “to exercise its discretion in that regard.” (Ibid.)

C. Reasonable Royalty Trial (2012-2015) and Present Appeal

The parties disagreed on remand about how to implement the ruling in Ajaxo II and the discretionary language of section 3426.3, subdivision (b). The trial court ultimately bifurcated the proceedings. It interpreted Ajaxo II as requiring it to exercise its discretion first as to whether Ajaxo is entitled to royalties, and second as to the amount if any. It therefore set for trial the “sole issue” of “whether Ajaxo is entitled to any monetary award based on a royalty claim” (phase I trial). The second phase of trial “to determine the amount of any such award” would be contingent on the determination of Ajaxo‘s entitlement to a royalty award (phase II trial).

The parties exchanged further written discovery, designated and deposed experts, and agreed that previously-admitted testimony and exhibits would be admissible if relevant and offered by a party. The phase I trial spanned several days in 2012 and 2013; the trial court received live testimony from seven witnesses, transcripts from 19 witnesses, and more than 125 admitted exhibits. The phase II trial took place in December 2014. In the end, the trial court issued a 33-page statement of decision denying a reasonable royalty. We summarize the positions taken at trial, the evidence submitted, and the trial court‘s rulings as are pertinent to the issues raised on appeal.

1. Royalty Trial, Phase I

Ajaxo focused on this court‘s determination that Ajaxo had presented enough evidence in the second trial for a reasonable royalty determination. (Ajaxo II, supra, 187 Cal.App.4th at p. 1313disclosure of the trade secret to Everypath, for which the jury in the first trial awarded $1.29 million in contract damages for breach of the nondisclosure agreement, as well as E*Trade‘s use of the trade secret via the wireless stock trading platform developed by Everypath, for which the jury in the second trial calculated a benefit of almost $4 million to E*Trade that it otherwise would not have achieved. Ajaxo argued that discretion under the statute did not mean a reasonable royalty could be withheld when so proven, and that the record established Ajaxo‘s entitlement to proceed to a phase II trial on the nature and amount of a reasonable royalty.

Ajaxo further contended that it had not been compensated for the trade secret misappropriation, which warranted separate damages from the contract damages awarded in the first trial, and that E*Trade‘s lack of profit from wireless trading did not preclude a reasonable royalty award under California law. Ajaxo also sought to repudiate any claim

that its founder, Sing Koo, had destroyed relevant evidence or employed obstructive tactics that undermined Ajaxo‘s ability to prove its claim to a reasonable royalty amount. Ajaxo contended that the spoliation issue, which stemmed from the destruction of source code and computer hardware earlier in the litigation, had been fully adjudicated in the first trial with the jury‘s rejection of E*Trade‘s unclean hands defense, and was again addressed and rejected by the trial court in the second trial in connection with E*Trade‘s unsuccessful motion for terminating sanctions.

E*Trade in contrast contended that Ajaxo had engaged in a pattern of “purposeful destruction of evidence and knowing provision of false and obstructionist testimony” which prevented any fair assessment of the factors to determine a royalty and precluded a royalty award under the unclean hands doctrine. E*Trade focused on the fact that as a result of actions taken by Ajaxo‘s principals, Koo and his wife Connie Chun, the company had retained no relevant financial data and had “systematically destroyed every single vestige” of Ajaxo‘s wireless application, including source code and documentation. E*Trade contended that it was impossible to evaluate the royalty claim without these materials because there was no way to identify those parts of the software that consisted of Ajaxo‘s trade secret and to assign a relative value.

E*Trade also argued that Ajaxo had been fully compensated for all detriment proximately caused by the misappropriation of its trade secret, which consisted of E*Trade‘s disclosure of the trade secret to Everypath—for which E*Trade paid full satisfaction of the $1.29 million awarded for breach of the nondisclosure agreement—and of Everypath‘s use of the trade secret disclosed by E*Trade, for which Ajaxo separately obtained a $90 million default judgment against Everypath. E*Trade also challenged the notion that a royalty award could be based on Everypath‘s use of the trade secret and pointed to the trial court‘s prior rulings that rejected attempts by Ajaxo to hold E*Trade liable for Everypath‘s use. E*Trade posited that even assuming a royalty was proper, the record evidence demonstrated any reasonable amount to be less than and fully

encompassed within the amount already paid to Ajaxo by E*Trade, particularly given the lack of any profit to E*Trade from wireless trading. E*Trade urged the trial court to end the proceedings after phase I, which it argued was well within its discretion under Ajaxo II and section 3426.3, subdivision (b).

The trial court denied Ajaxo‘s request to move to phase II based on the existing record. The parties proceeded with the phase I trial to the court, in which both sides introduced live testimony, prior trial and deposition transcripts, and previously-admitted exhibits.

Ajaxo relied on Koo as its sole witness and designated expert on entitlement to royalties. The trial court qualified Koo over E*Trade‘s objection as an expert on reasonable royalties and licensing, noting that questions about his qualifications and his position as a party would go to the weight of the evidence. Koo testified that there were three models or theories that could determine an award of royalties. These were the ” ‘enterprise direct use’ ” model, the ” ‘end-user subscription’ ” model, and the ” ‘value-added developer distribution’ ” model.⁶ Koo described how each model could be applied to E*Trade‘s use of Ajaxo‘s trade secret and used to assess a reasonable royalty. Koo also testified about license agreements between Ajaxo and several third party companies, focusing on a Hong Kong company called Infocast, as a means to establish a royalty amount for the misappropriated trade secret.

E*Trade objected to Koo‘s testimony about the royalty models, claiming that he did not disclose those opinions or the basis for them in his expert disclosure or deposition before trial. The trial court overruled the objection without prejudice to a later motion to strike, which E*Trade filed at the close of phase I and which we discuss in detail post (part I.C.3.).

Regarding E*Trade‘s destruction of evidence claims, Koo testified that a laptop used as Ajaxo‘s development server was subject to a demand for inspection in January 2006 in litigation involving another company founded by Koo called KC Multimedia. After the inspection had begun, a lawyer for KC Multimedia called Koo to tell him the hard drive had been “wiped clean . . . .” Koo ordered the lawyers to halt the inspection until he could get there; by the time he had arrived, the expert who had conducted the inspection had packed up his items and left. Koo testified that the server‘s hard disk was encrypted, which would make it unreadable when removed from the computer. He “freaked out” when he saw what the expert had done. The laptop was returned to Koo after the KC Multimedia litigation ended, but it would not turn on so he disposed of it.

E*Trade designated several witnesses who had been involved in earlier stages of the case to testify about the destruction of the source code and documentation containing or reflecting Ajaxo‘s trade secret. Robert Stillerman testified as a computer forensic expert who had been retained in 2005 in the KC Multimedia litigation to image the hard drive of Ajaxo‘s development server. He testified that he had followed the agreed upon protocol but had not been able to access the drive and believed it had been erased or encrypted. Stillerman opined that developers usually use versioning software to back up source code, and that source code is needed to evaluate a trade secret implemented through a software program.

E*Trade also called Lynell Phillips, a computer forensics expert who had been retained by KC Multimedia and was present to observe Stillerman‘s inspection of the hard drive in 2006. Phillips testified that she did not believe that Stillerman had damaged

the hard drive but rather that the drive was password protected or encrypted. Both Stillerman and Phillips testified that their understanding at the time was that Koo had ordered the inspection to end, which had prevented them from making additional attempts to access the drive.

Defense forensic expert Peter Garza testified for E*Trade as an expert in electronic discovery, forensic computer analysis and inspection, and the preservation of evidence. He opined that contrary to Ajaxo‘s claims, the inspection by Stillerman did not damage or erase Ajaxo‘s development server. He also testified that the encryption claimed by Koo was not available yet for that model and operating system, and therefore Koo could not have enabled it on the development server.

E*Trade also proffered David Klausner, an expert in valuation of computer software programming and intellectual property who had been previously retained by E*Trade for the second trial on misappropriation damages. Klausner testified that having reviewed the available remaining documentation of Ajaxo‘s trade secret, as well as the trial and deposition testimony of Koo and of Ajaxo‘s technical expert in the first trial, Earl Rennison, he did not have enough information to evaluate Ajaxo‘s trade secret. Klausner identified several factors that he could not assess without Ajaxo‘s source code—which was lost when Koo destroyed the development server—including the wireless application‘s scalability, usability, maintainability, uniqueness, or completeness. Klausner opined that it was not possible to value the trade secret without its source code or equivalent documentation.

E*Trade also offered excerpts of prior testimony of both Chun and Koo, highlighting what it argued were irreconcilable conflicts in evidence on such subjects as whether Ajaxo‘s Wirelessproxy XO product was identical to a later-developed Ajaxo product called “Smart Agent” or the Smart Agent toolkit, whether Ajaxo in 2001 executed licensing agreements with various third parties to use Wirelessproxy software despite the apparent nonexistence of any written executed agreements, and whether

Ajaxo and E*Trade ever agreed upon price and terms for the would-be licensing agreement.

Phase I ended with the parties’ submission of written closing argument and E*Trade‘s motion to strike the undisclosed expert testimony of Sing Koo. The trial court issued a short, written order in May 2014 making what it determined was “an extremely close call” to proceed to the second phase of trial. It cautioned that its decision was “not meant to suggest that Ajaxo is entitled to any royalty at all but rather that” the testimony received, prior trial results, and appellate court decisions in Ajaxo I and Ajaxo II required an “inquiry into value . . . .” The trial court stated that the evidence admitted in phase I would be considered in phase II. It reserved a decision on E*Trade‘s motion to strike until the end of phase II.

2. Royalty Trial, Phase II

Phase II of the royalty trial began in December 2014. Ajaxo contended that it was entitled to a reasonable royalty of $65,660,000. Ajaxo‘s expert, Sing Koo, calculated the amount using two proposed royalty models and introduced a third model as an alternative. Ajaxo also sought exemplary damages of $131,320,000 pursuant to section 3426.3, subdivision (c), based on the jury‘s finding in the first trial of willful and malicious misappropriation.⁷

E*Trade rejected any royalty amount. It argued that Ajaxo had exponentially inflated whatever limited value could be reasonably discerned from the record and had undermined its ability to prove a reasonable royalty due to the destruction of its own

evidence. E*Trade moved to exclude two of Koo‘s expert opinions as inadmissible and premised on unproven, unprovable, or demonstrably false facts. E*Trade also moved to exclude those parts of Koo‘s opinions that were not properly disclosed during expert discovery. The trial court indicated that it would consider E*Trade‘s objections to Koo‘s testimony in a motion to strike filed with the closing brief.

E*Trade countered Koo‘s opinions with two of its own experts. Bruce McFarlane, testifying as an expert in assessing reasonable royalty damages, opined that the flaws and deficiencies in Koo‘s analysis rendered his royalty opinion incorrect and unreliable. Terry Lloyd, testifying as an expert in financial analysis, accounting, and valuing intellectual property including reasonable royalty analysis, opined that he was unable to develop a reasonable royalty opinion because too many critical factors were missing from the record, including a way to identify the trade secret, evidence of the trade secret‘s value, and evidence that E*Trade actually used the trade secret after having disclosed it to Everypath.

The parties designated thousands more pages of prior testimony and evidence. We attempt to distill the material presented during phase II of the royalty trial into two thematic categories. These are Koo‘s expert testimony and proposed royalty models, and E*Trade‘s experts’ rejection of any royalty amount.⁸

a. Ajaxo‘s Royalty Models and Koo‘s Expert Testimony

Ajaxo expressed the $65,660,000 royalty as the sum of two types of non-overlapping, claimed trade secret use. These were (1) E*Trade‘s direct use of the trade secret with its own customers, which Ajaxo valued at $41.5 million under the “enterprise direct use” model, and (2) E*Trade‘s disclosure to Everypath and Everypath‘s implementation of the trade secret in products sold to 92 customers, which Ajaxo valued at $24,160,000 under the “value-added developer distribution” model. Ajaxo presented an alternative model to its enterprise direct use model, which it termed the “end-user subscription” model, valued at approximately $3.3 billion. Ajaxo framed these figures as “conservative” because the enterprise direct use model assumed fewer concurrent users than E*Trade had actually anticipated at the time, and the value-added developer distribution model assumed only one license for each of Everypath‘s 92 customers, though a prudent business practice would have required multiple licenses for customers.

Koo testified that the factors he considered in forming his opinion of a reasonable royalty included Ajaxo‘s licensing practices, E*Trade‘s use of the misappropriated trade secret, and the Georgia-Pacific factors, referring to a patent-infringement case commonly cited for its list of factors relevant to determining a royalty rate in intellectual property licensing. (Georgia-Pacific, supra, 318 F.Supp. 1116.) Koo explained that Wirelessproxy XO was a software toolkit available for developers with a developer license to create their own wireless applications, and Ajaxo‘s later-developed Smart Agent toolkit was the same technology rebranded. Koo said that in his mind Smart Agent was “always a synonym to Wirelessproxy XO.” Both programs contained the trade secrets in this case and nothing more. Koo opined that in 1999, Ajaxo‘s Wirelessproxy XO was the only front-end solution for wireless access to a back-end web server like E*Trade‘s stock trading platform, and that as of the first trial in 2003, only Ajaxo and Everypath could provide that capability.

Koo described how E*Trade‘s misappropriation of the Ajaxo trade secret and use of Everypath‘s resulting wireless application applied to each of the royalty models. He based the enterprise direct use and value-added developer distribution models on an April 2000 transaction between Ajaxo and Hong Kong-based Infocast for Ajaxo‘s Smart Agent toolkit. Infocast paid Ajaxo a $700,000 license fee for the right to incorporate Smart Agent into Infocast‘s products and to offer runtime licenses at retail price to its customers. Ajaxo received $255,000, or 50 percent of a runtime license fee that totaled $510,000 over three years, for a runtime license between Infocast and a company called Chong Hing Securities.

Mapped onto a hypothetical licensing arrangement with E*Trade, Koo explained that for the value-added developer distribution model, E*Trade would be the hypothetical trade secret owner and Everypath would take Infocast‘s position as the value-added reseller. Koo calculated, based on prior evidence, that Everypath had deployed Ajaxo‘s trade secret in its software toolkit to 92 customers between the time of the misappropriation and the first trial in 2003. Koo applied the pricing from Ajaxo‘s license with Infocast and concluded as to that model that Everypath would have owed E*Trade $700,000 for the master-developer license and 50 percent of a $510,000 runtime license fee for each of the 92 deployments to its customers, for a total of $24,160,000.

Koo also mapped the Infocast license onto the enterprise direct use model for E*Trade‘s direct use of the appropriated technology, developed by Everypath, for its stock trading platform. Koo estimated that E*Trade had a minimum 4,000 concurrent user capacity in April 2000 based on its development and service provider agreement with Everypath. Koo compared that user capacity to the Infocast license, which accommodated 50 concurrent users, and calculated that E*Trade would have required a minimum of 80 runtime licenses (4,000 ÷ 50 = 80) at $510,000 each, plus the master license for $700,000, for a total of $41.5 million.

Koo also described a third “end-user subscription” model patterned after a service in which Ajaxo had functioned as an application service provider for customers of a certain Fidelity brokerage group to access their accounts. The fee for the service was $30 per month per customer. Applying that model, Koo testified that an E*Trade customer wishing to use the wireless trading service would pay a monthly subscription fee, which he apportioned by 50 percent to arrive at what he believed was a reasonable royalty rate for the relevant time. Because E*Trade had provided wireless trading access to its entire customer base, Koo multiplied the royalty rate by the total number of customer accounts over the six year period that E*Trade offered Everypath‘s service, arriving at a total royalty amount of $3,353,613,580. This model was an alternative to the enterprise direct use model, because both measured a royalty based on E*Trade‘s direct use.

On cross-examination, Koo agreed that his opinions of a royalty amount based on the end-user subscription model and enterprise direct use model were not set forth in his expert report or deposition testimony. He acknowledged that in developing his royalty opinion, he did not use the figures contained in either parties’ licensing proposals during the period of negotiations between Ajaxo and E*Trade. And he admitted that his royalty calculations did not rely on positions taken by the parties during the negotiations, like the fact that E*Trade proposed a $200,000 licensing option per device platform serving up to 20,000 unique users, or that Ajaxo never indicated a 50 concurrent user limitation for its application.

Koo also acknowledged on cross-examination that his royalty opinion did not consider the financial terms of E*Trade‘s actual service agreement with Everypath. Nor did he utilize evidence in the record regarding actual usage of the wireless trading platform by E*Trade customers. He instead relied on E*Trade‘s total accounts reported in 10-K filings. He agreed that the license fees paid by Infocast for Ajaxo‘s Smart Agent toolkit and the runtime license to Chong Hing were the only instances in which Ajaxohad received those prices for its Smart Agent product. Koo reiterated that Wirelessproxy XO was “the same thing” as Smart Agent despite his prior testimony from a 2002 deposition describing Smart Agent as an ““evolution“” of Wirelessproxy. Koo also testified that the value-added developer distributor model assumed that all of the 92 purported customers of Everypath used the Ajaxo trade secret, though he did not review Everypath‘s actual pricing or the terms of individual customer agreements. As for the subscription model, Koo agreed with defense counsel‘s assessment that actual customer usage of the subscription service was “extremely small.”

Koo opined that the financial terms that existed between E*Trade and Everypath were not a reliable source of information in formulating his opinion on a reasonable royalty, because their position as infringers undermined the reasonableness of their mindset in negotiating terms. Koo confirmed that the code and all copies of the application that Ajaxo had built for E*Trade and for other applications were gone at the time of trial.

b. E*Trade‘s Experts Reject Imposition of Any Royalty

McFarlane and Lloyd, E*Trade‘s experts during phase II of the royalty trial, rejected these asserted models for a reasonable royalty.

McFarlane opined that multiple flaws and deficiencies rendered Koo‘s royalty analysis unreliable and his royalty rate “simply wrong.” He identified six explicit assumptions that Koo‘s model relied on to arrive at his $65.66 million reasonable royalty amount. One assumption was that in using the Infocast-Ajaxo agreement as a benchmark for the hypothetical negotiation with E*Trade, Koo did not adjust for differences, even though Infocast‘s license to the Smart Agent toolkit was for “an actual software” whereas E*Trade‘s license for Wirelessproxy XO would have covered the trade secret only. McFarlane explained that this was a “fundamental difference” that Koo did not account for. Koo also did not account for maintenance, upgrade, diagnostic, and installationservices that the $700,000 Infocast license expressly included. McFarlane opined that Koo‘s model failed to isolate the trade secret and apportion the value as required for a reliable and accurate royalty measure. McFarlane believed that the actual negotiations between Ajaxo and E*Trade in late 1999 offered a “particularly probative” source for a royalty analysis; but Koo did not take these actual negotiations into account in his calculations.

McFarlane opined that another flaw in Koo‘s royalty analysis was the assumption about the total number of concurrent users, which failed to consider the extent of documented, actual use by E*Trade brokerage customers. McFarlane found the assumption that E*Trade would need to purchase a separate runtime license for every set of 50 concurrent users to be “completely counter factual” to the various agreements that Ajaxo held with entities like Infocast and Fidelity, none of which limited concurrent users per runtime license. McFarlane criticized Koo‘s reliance on the Infocast-Chong Hing agreement for this assumption, noting the copy of the agreement in the record was incomplete, and the language regarding 50 concurrent users did not appear in the section on license fee. McFarlane pointed out similar problems with Koo‘s reliance on the Chong Hing agreement for his assumption that Everypath customers would hypothetically pay $510,000 for a runtime license. He also disagreed with Koo‘s application of that amount—which in the Infocast agreement with Chong Hing represented the sum of three runtime licenses over three years—to Everypath‘s 92 customers without reviewing those contracts and considering the terms of use for each one.

McFarlane strongly disagreed with Koo‘s dismissal of the transactions between E*Trade and Everypath based on their role as infringers. He testified that damage experts routinely and properly consider what an alleged infringer has offered or paid for the subject technology. McFarlane also explained that under California‘s head start rule, codified in section 3426, a court may order payment of a reasonable royalty for no longerthan the period of time the use could have been prohibited. McFarlane testified that Koo greatly over-estimated reasonable royalty damages by failing to consider the head start period, which evidence from the 2008 trial suggested would have set an economic cap on what E*Trade as a prudent licensee would be willing to pay for the trade secret.

Lloyd‘s testimony centered on the nonavailability of the information he needed to determine a reasonable royalty rate. He opined that the primary defect was the absence of any definition of the misappropriated trade secret or evidence of its economic value. According to Lloyd, the record contained “conflicting descriptions” of what the trade secret may have been or what it did; but there was no example of it. He explained that the source code was necessary to identify the trade secret and apportion its value, because according to testimony at various points by Chun and Koo, Wirelessproxy XO contained components of earlier Wirelessproxy technology owned by Koo‘s other company, KC Multimedia, and also was not the same as the Smart Agent toolkit later licensed to Infocast. Yet the source code had been destroyed. Lloyd also stated that he had not been able to review the financial records needed to assess income history and distinguish income from, for example, consulting services versus licensing fees.

Using the available evidence, Lloyd addressed each of the Georgia-Pacific factors. He reviewed the available record of Ajaxo‘s transactions and negotiations for its products and services, including with Infocast and Fidelity, as well as with IWAPI, Sephora, and Charles Schwab, and concluded there was “little, if any, value to the trade secret.” Even considering the licensing negotiation between Ajaxo and E*Trade, Lloyd opined there was “no way to disaggregate” the value of any trade secret embedded in the package being negotiated. At most, the letters of intent that E*Trade transmitted to Ajaxo shortly before pulling out of any deal showed that “some minimal amount might have been paid, but only based on very high usage rates.”

Lloyd emphasized that the availability of wireless stock trading did not increase E*Trade‘s trading volume; rather, the volume of wireless trades during the relevant timeframe never exceeded one-half of one percent, or five trades in a thousand. Further, the wireless trading function was not profitable. Lloyd opined that the trade secret offered little economic advantage because, even if its front-end solution remained unknown, as Koo had testified, other companies came up with comparable back-end solutions quickly. Lloyd found no evidence of use of the trade secret by E*Trade, as required by California law for payment of a royalty. He concluded that “there was simply a lack of data or information to allow us to come to a reasonable conclusion with any degree of certainty about reasonable royalty.”

3. Closing Briefs and E*Trade‘s Motion to Strike

Each side submitted closing briefs that summarized and reiterated their arguments during both phases of the royalty trial.

Ajaxo argued that it was entitled to a reasonable royalty based on both E*Trade‘s direct use of the misappropriated trade secret, under either the enterprise direct use model or the end-user subscription model, as well as on E*Trade‘s disclosure to Everypath under the value-added developer distribution model. It maintained that application of the Georgia-Pacific factors supported the royalty award proposed by Koo, that apportionment was not appropriate because the royalty models were based only on licensing of the misappropriated trade secret, and that the head start rule was inapplicable. Ajaxo further maintained that the blueprints or “know-how” stolen by E*Trade was more valuable than the source code, that the nature of the trade secret was established during the first trial, and that the jury verdict in the second trial established E*Trade‘s use of the trade secret. Finally, Ajaxo criticized E*Trade for trying to revive issues related to the destruction of evidence and nonavailability of the source code, all of which Ajaxo contended had been litigated and resolved in Ajaxo‘s favor.

E*Trade argued that Ajaxo had failed to satisfy its burden of proof and had introduced incompetent evidence to support a reasonable royalty. It urged the trial courtto exclude or disregard each of Ajaxo‘s royalty models as dependent on erroneous assumptions and speculation and at odds with establish methodology for determining a reasonable royalty, like the head start rule and apportionment. E*Trade reiterated its phase I arguments that Ajaxo was not entitled to a reasonable royalty because it had already received compensation under the breach of nondisclosure agreement claim, because there was no evidence of E*Trade‘s use of the trade secret, and because of Ajaxo‘s purposeful destruction of evidence. E*Trade argued in the alternative that any royalty award must be less than $250,000—or half the license fee proposed by Ajaxo in September 1999—and offset by the prior judgment.

Consistent with the trial court‘s direction based on E*Trade‘s objections at trial, E*Trade also moved to strike those parts of Sing Koo‘s expert testimony relating to (1) the enterprise direct use model assessing a $41.5 million royalty for E*Trade‘s alleged ““direct use“” of Ajaxo‘s trade secret, (2) the ““subscription“” model assessing royalties of up to $3.33 billion, as an alternative to the direct use model, and (3) the opinion that Ajaxo‘s technology was unique because it provided a ““front-end“” as opposed to a ““back-end“” solution for wireless transactions.

E*Trade argued that contrary to the rules of expert discovery, Koo did not fully disclose these theories prior to trial. Instead, Koo‘s expert report described only the $23.4 million royalty under the value-added developer distribution model. Koo disclosed the “subscription” model during the second day of his deposition by obliquely referring to E*Trade‘s 10-K filings. In response to probing by E*Trade‘s counsel, Koo then described a model in which Ajaxo was entitled to a $15 monthly fee for every E*Trade brokerage customer, though he had not yet calculated the total amount owed, which he stated would “obviously” reach into the hundreds of millions of dollars. Then, three days before the start of the phase II trial, Ajaxo served its trial brief, disclosing for the first time Koo‘s $41.5 million “direct use” model. This new theory relied on a ““50 concurrent user“” limitation that E*Trade contended was being used to justify an80-license multiplier, a concept that was never before raised in the case. E*Trade similarly claimed that Koo‘s opinion at trial about the uniqueness of Ajaxo‘s “front-end” system for wireless trading was not disclosed in Koo‘s expert report or depositions.

Ajaxo opposed the motion to strike. It accused E*Trade of distracting from the merits in “this David versus Goliath” case by “feign[ing] prejudice” from the allegedly insufficient disclosures. Ajaxo argued that Koo had described each of the royalty models in his phase I trial testimony and had further elaborated on those opinions in his depositions. It argued that if E*Trade required additional details about Koo‘s opinions, it should have asked those questions during his depositions. Regarding E*Trade‘s motion to strike testimony about Ajaxo‘s unique, front-end solution for a wireless trading, Ajaxo argued that the nature of the solution was discussed throughout the first trial and was not new material susceptible to being stricken.

4. Trial Court‘s Statement of Decision

The trial court issued a tentative decision in August 2015 and final statement of decision in September 2015. The court granted E*Trade‘s motion to strike expert testimony, excluding evidence of the end-user subscription and enterprise direct use royalty models, and rejected Ajaxo‘s claim to a reasonable royalty.

The trial court made the following findings: (1) Ajaxo did not prove that it was entitled to a royalty award against E*Trade; (2) assuming Ajaxo was entitled to an award, it did not prove the amount of any reasonable royalty; (3) Ajaxo‘s value-added developer distribution royalty model relied on speculation and assumptions that were not proved or were contrary to the weight of the evidence; (4) Ajaxo‘s royalty theory was excessive in amount and not “reasonable” under the facts and circumstances; (5) Ajaxo failed to tether its royalty claim to E*Trade‘s trade secret misappropriation, as found by the jury in the underlying 2003 liability trial; (6) consideration of the Georgia-Pacific factors dictated that no royalty should be awarded; (7) Ajaxo lost or destroyed evidence relevant to theroyalty inquiry and to a fair evaluation of the trade secret at issue; (8) Ajaxo‘s witnesses gave contradictory testimony on facts material to numerous issues bearing on entitlement to a royalty, the amount if any, and the circumstances under which all remaining copies of the software source code and Javadoc were lost or destroyed; and (9) Ajaxo acted with unclean hands in destroying evidence during the pending litigation and committing other improper conduct related to the issues to be decided in this trial. We examine these findings in more detail in our discussion below.

The trial court entered judgment in favor of E*Trade and against Ajaxo regarding the claim for reasonable royalties. It awarded E*Trade its costs of suit.

D. Ajaxo‘s Motion for a New Trial

Ajaxo subsequently filed its intent to move for a new trial and to set aside the judgment. It also moved to strike costs.

Ajaxo‘s motion for a new trial rested on three grounds. First, Ajaxo claimed that irregularities in the proceedings deprived it of a fair trial (Code Civ. Proc., § 657, subd. 1). Ajaxo argued that it was error to exclude the two royalty models because each model was fully disclosed before trial and E*Trade was not prejudiced by any allegedly tardy disclosure. Ajaxo challenged the trial court‘s finding that Ajaxo had “lost or destroyed the necessary evidence” as inconsistent with the prior judgment against Everypath for $90 million, which Ajaxo contended had not required examination of source code but had relied on the same misappropriation evidence from the first trial. And Ajaxo contended that the trial court ignored testimony and evidence adduced in previous phases that established the nature of the trade secret.

Second, Ajaxo cited inadequate damages (Code Civ. Proc., § 657, subd. 5) as ground for a new trial, claiming the trial court ignored “substantial, reliable, and persuasive evidence” provided by the value-added developer distribution model. Ajaxo argued that the court misunderstood the model, which did not base the royalty calculation on Everypath‘s actions but on E*Trade‘s actions as the hypothetical owner of the tradesecret. Thus, E*Trade would have been entitled to a master-developer license fee of $700,000 from Everypath and to 50 percent of the $510,000 runtime license fee for each of Everypath‘s sublicenses, for a total of $24 million.

Third, Ajaxo claimed that errors of law deprived it of a fair trial (Code Civ. Proc., § 657, subd. 7), including the exclusion of the royalty models, the erroneous application of the Georgia-Pacific factors and head start doctrine, and the erroneous treatment of E*Trade‘s unclean hands argument as a defense. Ajaxo also sought, in the alternative, to vacate or amend the judgment (Code Civ. Proc., § 663), citing error in the award of costs to E*Trade.

E*Trade opposed the motion, supported by the declarations of counsel and submission of excerpts from the trial and case record.

The trial court denied the motion for a new trial in a written order. It found that Ajaxo had not demonstrated any irregularity in the proceedings, insufficiency of damages, or error of law warranting a new trial. It noted that it exercised its discretion to deny Ajaxo‘s request for reasonable royalties “for numerous separate and independently sufficient reasons” as set forth in its statement of decision. It concluded that Ajaxo‘s arguments in support of a new trial, even if meritorious, would not affect its ultimate conclusion to deny a royalty award. The trial court also confirmed its determination that E*Trade was entitled to its costs of suit as the prevailing party. It reasoned that the judgment had resolved Ajaxo‘s only remaining cause of action for misappropriation of trade secrets, and that Ajaxo had recovered no relief.

Ajaxo timely appealed from the judgment.

E. Ajaxo‘s Motion to Strike Costs

Ajaxo challenged the award of costs to E*Trade as contrary to the statutory framework for cost recovery, which defines “prevailing party” to include “the party with a net monetary recovery.” (Code Civ. Proc., § 1032, subd. (a)(4).) Ajaxo contended that it was the prevailing party based on the first jury verdict in 2003 and through both priorappeals. It argued that under the governing law, E*Trade‘s defeat of its claim for a reasonable royalty neither altered its prevailing party status nor brought E*Trade within any of the other statutory definitions of a prevailing party. In the alternative, Ajaxo argued that the trial court should tax portions of E*Trade‘s claimed costs as unreasonable.

E*Trade opposed the motion to strike or tax costs, arguing that Ajaxo was not the prevailing party and had not been since the entry of final judgment on the breach of contract cause of action. E*Trade recounted the unique procedural history of the case, beginning with the disposition of the first appeal, which effectively “split the case in two,” allowing entry of final judgment and payment of damages on the breach of contract cause of action while remanding for a new trial on the misappropriation cause of action. (See Ajaxo I, supra, 135 Cal.App.4th at p. 69.) After the California Supreme Court denied review of Ajaxo I in 2006, E*Trade satisfied the $1.29 million judgment, plus costs, interest, fees, and attorney fees on appeal, though the misappropriation cause of action was not yet resolved. E*Trade argued that it therefore became “inevitable” that there would be two final judgments between the parties.

According to E*Trade, Ajaxo was then able to litigate the trade secret claim “as if a new lawsuit had begun,” seeking $302 million in unjust enrichment damages from the jury in the second trial and leading to the 2008 verdict which awarded Ajaxo nothing. The trial court entered judgment for E*Trade in 2008, including costs; when E*Trade filed its memorandum of costs seeking $134,080.06, Ajaxo did not move to tax the costs award. Rather, Ajaxo appealed. This court in the second appeal reversed the judgment and remanded for the trial court to exercise its discretion regarding whether Ajaxo should be paid a reasonable royalty. (Ajaxo II, supra, 187 Cal.App.4th at pp. 1315-1316.) That decision did not address the costs award, which Ajaxo had not challenged on appeal.

E*Trade‘s October 2015 memorandum of costs following the judgment denying a reasonable royalty thus claimed $221,317.53, of which $134,080.06 was “merely arestatement of the costs claimed” under the 2008 judgment. E*Trade argued that the case history refuted Ajaxo‘s claim to be a prevailing party, since in “all proceedings subsequent to the 2006 remittitur, . . . neither party recovered any relief.”

Ajaxo disputed E*Trade‘s characterization of multiple judgments. It argued that even if that were true, the prevailing party determination under Code of Civil Procedure section 1032, subdivision (b) is for an “action,” which refers to the litigation viewed as a whole. Ajaxo reasoned that it “finds itself in procedurally the identical position it was in 2003” with a net monetary recovery of $1.29 million. Ajaxo maintained that it would be inequitable and contrary to the statute to strip Ajaxo of prevailing party status where it prevailed on liability on two causes of action and damages on one cause of action.

The trial court denied the motion to strike costs and granted-in-part the motion to tax costs, reducing the total cost award by about $8,300. Ajaxo separately appealed from the order granting E*Trade costs.

II. DISCUSSION

Ajaxo contends that the trial court erred in three main ways. First, by denying Ajaxo a reasonable royalty. Second, by denying Ajaxo‘s motion for a new trial. And third, by awarding costs to E*Trade. We examine the relevant analytical framework and Ajaxo‘s burden on appeal before turning to Ajaxo‘s specific contentions.

A. Framework to Assess a Reasonable Royalty Under the CUTSA

A reasonable royalty, as a monetary remedy under section 3426.3, subdivision (b), is simply “a court-determined fee imposed upon a defendant for his or her use of a misappropriated trade secret.” (Ajaxo II, supra, 187 Cal.App.4th at p. 1308.) As demonstrated by our discussion in Ajaxo II, a court ““may order“” a reasonable royalty for the past use of a misappropriated trade secret ““[i]f neither damages [for actual loss] nor unjust enrichment caused by misappropriation are provable.“” (Id.) The statute limits payment of a reasonable royalty to “no longer than the period of time the use could have been prohibited.” (Id.)The reasonable royalty ““is an attempt ““to measure a hypothetically agreed value of what the defendant wrongfully obtained from the plaintiff. By means of a “suppositious meeting” between the parties, the court calculates what the parties would have agreed to as a fair licensing price at the time that the misappropriation occurred.““” (Ajaxo II, supra, 187 Cal.App.4th at p. 1308, quoting Vermont Microsystems, Inc. v. Autodesk, Inc. (2nd Cir. 1998) 138 F.3d 449, 451.)⁹ The reasonable royalty thus approximates “the price that would be set by a willing buyer and a willing seller for the use of the trade secret made by the defendant.” (Rest.3d Unfair Competition (1995) § 45, com. g.) “Because the primary concern in most cases is to measure the value to the defendant of what he actually obtained from the plaintiff, the proper measure is to calculate what the parties would have agreed to as a fair price for licensing the defendant to put the trade secret to the use the defendant intended at the time the misappropriation took place.” (University Computing Co. v. Lykes-Youngstown Corp. (5th Cir. 1974) 504 F.2d 518, 539 (University Computing).) Where there is a “real-world “comparable” close on point,” the court may view that as the “starting point” for the hypothetical negotiation.

(Oracle Am., Inc. v. Google Inc. (N.D.Cal. 2011) 798 F.Supp.2d 1111, 1121.) The court may then adjust upward or downward for other comparable data points including, where appropriate, the Georgia-Pacific factors. (Id.)The Georgia-Pacific factors originated in “a patent-infringement case whose hypothetical agreement framework for determining infringement damages has since been widely adopted . . . .” (Microsoft Corp. v. Motorola, Inc. (9th Cir. 2015) 795 F.3d 1024, 1040.) The decision “set out fifteen factors for courts to consider in arriving at a royalty rate the parties might have agreed upon in a hypothetical negotiation” set at ““the time the infringement began.“” (Id. at p. 1041.) Though derived from a patent case, the Georgia-Pacific factors are commonly referenced in trade secret reasonable royalty discussions. (See, e.g., O2 Micro Intern. Ltd. v. Monolithic Power Systems (N.D.Cal. 2005) 399 F.Supp.2d 1064, 1078 [granting reasonable royalty under the CUTSA after applying Georgia-Pacific factors].) This reflects a general trend of patterning trade secret damages after patent damages. (Olson v. Nieman‘s, Ltd. (Iowa 1998) 579 N.W.2d 299, 310 (Olson) [“Given the difficulty of assessing damages in trade secret cases, courts have frequently analogized damages in a trade secret action to those measures of damages usually employed in patent infringement cases“]; see Milgrim on Trade Secrets (2019) Aspects of Relief Available in Trade Secret Litigation § 15.02.) Both the parties and the trial court in this case recognized application of the Georgia-Pacific factors to the royalty analysis here.¹⁰

As with any hypothetical inquiry informed by a range of evidentiary factors, the reasonable royalty offers no promise of mathematical precision. It is a purely theoretical measure, appropriate “[w]here no established royalty can be proved . . . .” (Faulkner v. Gibbs (9th Cir. 1952) 199 F.2d 635, 639.) Determination of a reasonable royalty is a question of fact. (Id.) It “rest[s] in the sound discretion of the [finder of fact] based upon a fair and impartial consideration of all the evidence.” (Olson, supra, 579 N.W.2d at p. 310.) Some flexibility in the analysis is required to ensure that the difficulty of

“4. The [trade secret owner]‘s . . . policy . . . to maintain his [trade secret] monopoly by . . . granting licenses under special conditions designed to preserve that monopoly. “5. The commercial relationship between the [trade secret owner] and licensee, such as, whether they are competitors in the same territory in the same line of business; or whether they are inventor and promoter. “6. The effect of selling the [trade secret] in promoting sales of other products of the licensee; the existing value of the invention to the [trade secret owner] as a generator of sales of . . . [non-trade secret items]; and the extent of such derivative or convoyed sales. “7. The duration of the [trade secret‘s value] and the term of the license. “8. The established profitability of the product made under the [trade secret]; its commercial success; and its current popularity. “9. The utility and advantages of the [trade secret] over the old modes or devices, if any, that had been used for working out similar results. “10. The nature of the [trade secret]; the character of the commercial embodiment of it as owned and produced by the licensor; and the benefits to those who have used [it]. “11. The extent to which the infringer has made use of the [trade secret]; and any evidence probative of the value of that use. “12. The portion of the profit or of the selling price that may be customary in the particular business or in comparable businesses to allow for the use of the [trade secret] or analogous inventions. “13. The portion of the realizable profit that should be credited to the [trade secret] as distinguished from non-[trade secret] elements, the manufacturing process, business risks, or significant features or improvements added by the infringer. “14. The opinion testimony of qualified experts. “15. The amount that a [trade secret owner] . . . and a licensee . . . would have agreed upon (at the time the [misappropriation] began) if both had been reasonably and voluntarily trying to reach an agreement . . . .” (Georgia-Pacific Corp., supra, 318 F.Supp. at p. 1120.)

assessing damages in a trade secret case does not prevent fair compensation to the trade secret owner for loss or injury caused by misappropriation. (Id. at p. 311.)

That flexibility is consistent with the policies underlying trade secret protection. (See Ajaxo II, supra, 187 Cal.App.4th at pp. 1311-1312 [authorization for a reasonable royalty protects innovation and standards of commercial ethics where a plaintiff fails to prove damages].) These guideposts are essential to bear in mind where, as here, there appears to be no set prescription for the trial court to follow in determining how to assess a reasonable royalty authorized by section 3426.3, subdivision (b).

B. The Appellate Burden in a Failure-of-Proof Case

The parties present differing approaches to this court‘s review of the trial court‘s decision to deny a royalty. Because our analysis of the issues raised on appeal requires the appropriate degree of deference to the trial court‘s rulings (San Francisco Fire Fighters Local 798 v. City and County of San Francisco (2006) 38 Cal.4th 653, 667), we examine the applicable standard of review. That standard “is determined by the nature of the challenged action of the trial court . . . .” (El Dorado Meat Co. v. Yosemite Meat & Locker Service, Inc. (2007) 150 Cal.App.4th 612, 617 (El Dorado Meat).)

Ajaxo‘s position seems to be that the trial court abused its discretion by failing to exercise its discretion as directed by this court in Ajaxo II and by overlooking the available evidence from which it “could have” reached a reasonable royalty. Ajaxo contends that the court‘s judgment was based on an “erroneous legal ruling,” and that the existence of substantial evidence to support the resolution of any factual dispute does not support affirmance where the trial court failed to “actually perform[]” its factfinding function. (See Kemp Bros. Construction, Inc. v. Titan Electric Corp. (2007) 146 Cal.App.4th 1474, 1477.)

E*Trade responds that Ajaxo has misstated the trial court‘s duty to exercise its discretion on remand from Ajaxo II and has misconstrued the standard of review.

We address the trial court‘s discretion to award—or deny—a royalty in the next section of the Discussion (part III.C.1.). As for the standard of review, we find that Ajaxo‘s references to substantial evidence and to the trial court‘s supposed failure to perform its factfinding functions are misguided. The “nature of the challenged action of the trial court” that dictates the applicable standard of review (El Dorado Meat, supra, 150 Cal.App.4th at p. 617) is the determination that Ajaxo failed to carry its burden to demonstrate entitlement to a reasonable royalty in any amount. This court does not revisit the sufficiency of the evidence that may have been available to fulfill Ajaxo‘s burden of proof at trial.

In a case where the trier of fact has determined that the party with the burden of proof did not carry its burden and that party appeals, “it is misleading to characterize the failure-of-proof issue as whether substantial evidence supports the judgment.” (In re I.W. (2009) 180 Cal.App.4th 1517, 1528; Sonic Manufacturing Technologies, Inc. v. AAE Systems, Inc. (2011) 196 Cal.App.4th 456, 466 (Sonic Manufacturing).) Instead, “where the issue on appeal turns on a failure of proof at trial, the question for a reviewing court becomes whether the evidence compels a finding in favor of the appellant as a matter of law.” (In re I.W., supra, at p. 1528.) Specifically, we ask “whether the appellant‘s evidence was (1) “uncontradicted and unimpeached” and (2) “of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding.“” (Ibid., quoting Roesch v. De Mota (1944) 24 Cal.2d 563, 571.)

It is an onerous standard. To succeed, Ajaxo must show that the evidence it relies upon compelled a finding in its favor. In claiming, as it does, that “substantial evidence was entered at trial to support an award of reasonable royalties,” Ajaxo fails to recognize its burden on appeal. We moreover are guided by the general principle that the trial court‘s judgment is presumed to be correct on appeal, with “all intendments and presumptions in favor of its correctness.” (Almanor Lakeside Villas Owners Assn. v. Carson (2016) 246 Cal.App.4th 761, 769.)

C. It Was Within the Trial Court‘s Discretion To Deny Ajaxo a Royalty

Ajaxo contends that the trial court applied an erroneous legal standard at several points in its reasonable royalty analysis. It challenges the trial court‘s consideration of E*Trade‘s spoliation and unclean hands argument, the application of apportionment principles from patent law, and the exclusion of two of Ajaxo‘s three royalty models. Ajaxo contends that even excluding Ajaxo‘s royalty models, there was ample evidence available for the trial court to devise a reasonable royalty. We find no reversible error and no abuse of discretion.

1. The Award of a Reasonable Royalty Pursuant to Section 3426.3, Subdivision (b) Is Discretionary

Notes

Unspecified statutory references are to the Civil Code.

During the relevant time period, Koo was Ajaxo‘s founder, chief executive officer (CEO), and sole owner; he gave the company to his sons before the royalty trial in 2012. His wife, Connie Chun, was Ajaxo‘s cofounder and remains an officer of the company.

The disposition of the first appeal, which reversed the judgment as to “the trial court‘s grant of nonsuit on damages for misappropriation” () but affirmed the judgment “[i]n all other respects” (ibid.), is (continued)

Everypath went out of business and the trial court bifurcated the case. (.) Issues related to E*Trade‘s involvement in financing Everypath were addressed in pretrial rulings and were put to rest in .

As noted earlier and discussed in detail below, section 3426.3, subdivision (b) of the CUTSA provides that “[i]f neither damages nor unjust enrichment caused by misappropriation are provable, the court may order payment of a reasonable royalty for no longer than the period of time the use could have been prohibited.”

The terms used for Ajaxo‘s three royalty models are not always consistent. To avoid confusion, we follow the trial court‘s statement of decision which refers to (1) the $23 million ” ‘enterprise direct use’ ” model based on E*Trade‘s direct use of the trade secret (sometimes referred to in the record as an “enterprise licensing provisioning method“), (2) the $41 million “value-added developer distribution” model based on hypothetical runtime licenses to 92 Everypath customers (sometimes referred to as ” ‘developer‘s license with sublicenses’ ” or “master-developer license coupled with run-time licenses” model), and (3) the ” ‘end-user subscription’ ” or ” ‘subscription’ model.”

Section 3426.3, subdivision (c) states that “[i]f willful and malicious misappropriation exists, the court may award exemplary damages in an amount not exceeding twice any award made under” section 3426.3, subdivision (a) authorizing recovery of damages for actual loss or unjust enrichment caused by misappropriation, or section 3426.3, subdivision (b) authorizing a reasonable royalty if neither damages nor unjust enrichment are provable. The trial court bifurcated consideration of exemplary damages pending the outcome of the royalty trial.

The trial court never reached the issue of exemplary damages because it declined to award any royalty. As noted ante (fn. 7), the statute authorizes exemplary damages for willful and malicious misappropriation “in an amount not exceeding twice any award made under subdivision (a) or (b).” (§ 3426.3, subd. (c).) Although the jury found willful and malicious misappropriation in the first trial and awarded $1.29 million in damages for breach of the nondisclosure agreement, the breach of contract damages do not satisfy the statutory predicate for exemplary damages, based on an award for “actual loss caused by misappropriation” or “unjust enrichment caused by misappropriation” (§ 3426.3, subd. (a)) or alternatively on an award of a reasonable royalty (id., subd. (b)).

Because the CUTSA is derived from the Uniform Trade Secrets Act (Uniform Act) (Stats. 1984, ch. 1724, § 1, pp. 6252-6253), California courts consider case law from other jurisdictions applying similar sections of the Uniform Act. (See ; .) The Uniform Act ““was approved by the National Conference of Commissioners on Uniform State Laws in 1979 and adopted without significant change by California in 1984.“” (.) Unlike other provisions of the CUTSA derived almost verbatim from the Uniform Act, the authorization for the reasonable royalty under section 3426.3, subdivision (b) departs from the Uniform Act by requiring that actual damages and unjust enrichment be “unprovable” before a royalty may be imposed. (; .) This difference pertains only to the circumstances in which a party may be eligible to receive a reasonable royalty, however, and does not limit our examination of case law from other jurisdictions related to the calculation of a reasonable royalty.

The following are the 15 Georgia-Pacific factors considered by the trial court in this case, adjusted to apply to trade secret misappropriation: “1. The royalties received by the [trade secret owner] for the licensing of the [trade secret] in suit, proving or tending to prove an established royalty. “2. The rates paid by the licensee for the use of other [trade secrets] comparable to the [trade secret] in suit. “3. The nature and scope of the license, as exclusive or non-exclusive; or as restricted or non-restricted in terms of territory or with respect to whom the manufactured product may be sold. (continued)

Ajaxo has failed to challenge the trial court‘s ruling regarding offset under the theory of precluding double recovery, raising it for the first time in its reply brief. We discuss the issue in more detail in our review of the trial court‘s denial of Ajaxo‘s motion for a new trial, post. (See Discussion, part II.D.b.)

The trial court identified the sources of information that no longer existed at the time of the royalty trial as follows: Ajaxo‘s Wirelessproxy XO software that implemented the trade secret; the “later” Smart Agent software; the “earlier” Wirelessproxy software belonging to KC Multimedia on which Wirelessproxy XO was based; all source code for all versions of the software; the “Javadoc” documentation of Java source code that explained its components and how they worked to the author and other programmers; all printed and electronic copies of the source code and Javadoc; and the prototype application that Ajaxo developed for E*Trade in 1999.

The opinion in Ajaxo I does not discuss E*Trade‘s unclean hands defense, which was not an issue on appeal. Ajaxo‘s destruction of evidence is nonetheless (continued) discussed in the context of a separate evidentiary issue involving Koo‘s communications with the FBI after he discovered unauthorized access to Ajaxo‘s server in September 1999 (shortly after Ajaxo demonstrated its technology for E*Trade). (.) Two years later, after the filing of this lawsuit, Koo apparently informed the FBI that Ajaxo‘s server may have been infected with a virus. () Consequently, “[a]ccording to Koo, the FBI advised him that he should ‘reformat’ the server‘s hard drive.” (.) This resulted in the destruction of “all the electronic files and data that resided on the server pertaining to the E*Trade application of Ajaxo‘s technology as it existed in the fall of 1999.” ()

Ajaxo‘s brief on appeal appears to conflate different motions and rulings by the trial court prior to the 2008 trial on damages. Ajaxo points to an April 2008 ruling by the discovery judge (Hon. Socrates P. Manoukian) rejecting a motion by E*Trade to augment its expert witness list and to take additional depositions, stating (incorrectly) that the ruling was on E*Trade‘s motion to terminate the litigation based on Ajaxo‘s destruction of a hard drive. However, this court‘s review of the record confirms that E*Trade did file a motion in April 2008 to terminate litigation, or in the alternative, for issue, evidentiary, and monetary sanctions based on that destruction of evidence. According to the arguments of counsel at the royalty trial, the trial court denied that attempt and excluded evidence of the destruction of Ajaxo‘s hard drive from the trial on misappropriation damages.

The relevant excerpts of deposition transcript were designated by E*Trade in the phase II royalty trial and were admitted as evidence. Those portions quoted above are from depositions taken in 2001 and 2002.

Ajaxo does not challenge the trial court‘s conclusions that key assumptions of the model pertaining to Everypath‘s use of the trade secret were not supported by the evidence. Among these, the court found the assumption that Everypath deployed the trade secret technology in 92 customer contracts to be “unproven.” Several of these purported “customer” relationships were included in the model despite the fact that “[e]ven a cursory review” of the agreements with Everypath would have proven them incompatible, such as one contract that was for services provided to Everypath in which Everypath was the customer, another which extended services for only a three-month trial period, and others which included services other than software licensing and charged amounts that did not approximate the model‘s $510,000 figure. According to testimony during the first trial from Everypath‘s then-CEO, the majority of Everypath‘s customer contracts received software unrelated to wireless trading or online financial services. The court also found, based on testimony establishing significant overhauls to Everypath‘s core technology in the years immediately following the misappropriation of Ajaxo‘s trade secret, that Ajaxo failed to show that the software deployed to Everypath‘s alleged, 92 customers used or embodied the trade secret at all.

As discussed in our summary of the royalty models (see ante part I.C.2.a.), Koo presented the value-added developer distribution model as the non-overlapping complement of the enterprise direct use model. That model, which the trial court ultimately excluded, assessed a royalty based on E*Trade‘s direct use of the trade secret with its brokerage customers.

The parties’ positions limited any attempt by Ajaxo to ascribe joint liability between E*Trade and Everypath for Baca‘s role in appropriating the trade secret while employed at E*Trade and later at Everypath and resulted in the trial court granting an in limine motion on the subject. Ajaxo‘s counsel expressed no objection “[s]o long as Mr. Baca is on the clock with E*Trade, then it‘s E*Trade‘s responsibility. If he‘s on the clock for Everypath, then it‘s Everypath‘s responsibility. And that‘s the way the case can be tried.”

E*Trade‘s counsel addressed the subject of Koo‘s expert opinion multiple times during the deposition on November 17, 2014. For example, counsel asked Koo, “[A]re there any subject matters you expect to testify about other than what‘s in your expert report, Exhibit 1?” Koo answered that except as to what he might raise to respond to E*Trade‘s experts, “I don‘t have any other opinion to add to.” E*Trade‘s counsel later asked, “So what if E*Trade says nothing at all? Do you have any opinions on this subject that you intend to offer?” Koo answered, “Then I already offer my opinion in the four corner [sic] of my report.” In another colloquy, E*Trade‘s counsel emphasized that it was asking “to know a hundred percent of everything that you‘re going to tell the Court is the basis for your opinion” and verified what Koo had previously stated he was relying on. Counsel continued, “Are there any pieces of—particular pieces of either testimony or documentary evidence in this case that are critical to your opinions, as you sit here today, as you intend to offer them to the trial court beyond what you‘ve listed out in Exhibit 1?” Koo responded, “No.” Shortly after, E*Trade‘s counsel asked if there were “any parts of the record that you looked at and relied upon in connection with preparing your opinions that you did not write down in your report, Exhibit 1?” Koo answered, “I said . . ., my opinion and the citings are all in this four corners of my report this morning. And that is still true.” When asked if he had other “worksheets or spreadsheets that show your calculations” for the report, Koo answered “No. It is all being consolidated into this report, and that‘s it.”

For example, Ajaxo points to special interrogatory No. 11, which asked Ajaxo to “[s]pecify with particularity the terms of the suppositious license that Ajaxo contends the Court should consider as the basis for a reasonable royalty award to Ajaxo.” Its response stated that “[v]arious reasonable royalty models may be relevant in determining the reasonable royalties due Ajaxo,” then listed among the possibilities “a license based on a subscription model; a developer‘s license, both with and without, the ability to sublicense; runtime licenses; a license based on per user ability to access; a license based on per user use . . . .” Ajaxo also points to Koo‘s deposition testimony in February 2012, in which he provided general responses about documents and testimony he had relied on in forming the opinion he would offer at the phase I trial. Koo in response referenced the jury verdicts and appellate opinion, the “license[s] that Ajaxo issued to Infocast, to IWAPI, and to Fidelity, and also the corresponding brokerages,” prior testimony about Ajaxo‘s “conduct in licensing,” and the software distribution model used by Everypath which demonstrated that its conduct triggered “a minimum of 30 license[s].”

Although an order denying a new trial is not directly appealable, we may review it after the final judgment as an order substantially affecting the rights of the parties. (Code Civ. Proc., § 906; .)

Terry Lloyd opined that Ajaxo‘s trade secret had a “short economic life” based on the time required for others to develop their own front-end wireless solutions. Bruce McFarlane identified the failure to limit damages to the head-start period as among the critical flaws in Ajaxo‘s proposed royalty models. He explained the relevance of a trade secret‘s economic lifespan to the royalty analysis, noting “the additional cost that a licensee would incur to acquire essentially the same functionality, . . . to do it itself or buy from someone else represents an economic cap on what that licensee would be willing to pay for a license to that technology.” William Beardsley, who testified as E*Trade‘s expert in software development projects in the 2008 trial on misappropriation damages, opined that based on E*Trade‘s technology and engineering capabilities at the time, it could have developed its own wireless trading capability in six months using four engineers.

The only mention we have found of offset in Ajaxo‘s memorandum of points and authorities in support of its motion for a new trial is a fragmented statement suggesting that the judgment against Everypath is an unsatisfied default judgment that has no relevance in offsetting any damages against E*Trade. The unsatisfied default judgment against Everypath, of course, is not the basis for the trial court‘s ruling on offset.

The record shows the amount of Ajaxo‘s default judgment against Everypath comprised $60 million in compensatory damages—attributed at the prove-up to a combination of venture capital funding received by Everypath during the relevant period, (continued) (continued) and the increase in Everypath‘s business valuation after the taking of the trade secret, and $30 million in exemplary damages.

Counsel for E*Trade explained these costs in his declaration in support of E*Trade‘s opposition to the motion to strike costs. According to that declaration, the 2003 judgment after the first jury trial and bench trial on injunctive relief became final in 2006, upon the Supreme Court‘s denial of review of the Ajaxo I decision and remittitur of the case. E*Trade paid the judgment in full, including the damages awarded by the jury for breach of contract, as well as the costs awarded to Ajaxo, interest, attorney fees, interest on fees and costs, and the further award of attorney fees on appeal in Ajaxo I. After the jury awarded Ajaxo nothing on its misappropriation claim in the 2008 jury trial (second trial), the trial court entered judgment in September 2008 for E*Trade, including costs. Ajaxo never sought to tax the items in E*Trade‘s 2008 memorandum of costs, though it argued in an unsuccessful motion to vacate the 2008 judgment that the court should not have awarded costs to E*Trade. E*Trade points out that Ajaxo did not challenge that ruling or the costs award in its appeal from the 2008 judgment in favor of (continued) E*Trade. Its memorandum of costs filed in relation to the 2015 judgment included costs filed after the 2008 jury trial on damages for misappropriation.

Such a “severing” function could also create endless problems for the appellate process as a contradiction of the ” ‘one final judgment’ ” rule, the “fundamental principle of appellate practice that prohibits review of intermediate rulings by appeal until final resolution of the case.” (; see Code Civ. Proc., § 904.1; .) The rule was designed to prevent ” ‘piecemeal disposition and multiple appeals in a single action would be oppressive and costly, and that a review of intermediate rulings should await the final disposition of the case.’ ” (.)

It does not escape our attention that the dilemma in assigning costs to the prevailing party here arises at least in part from the disposition of Ajaxo I, which reversed the judgment “[w]ith respect to the trial court‘s grant of nonsuit on damages for misappropriation of Ajaxo‘s trade secret” but affirmed the judgment “[i]n all other respects . . . .” (Ajaxo I, supra, 135 Cal.App.4th at p. 69.)

E*Trade argues that to the extent we might find that Code of Civil Procedure section 1032 does not anticipate multiple final judgments between the same parties in the same civil case, and that both applications of “prevailing party” are true—each as to a separate judgment, then the prevailing party determination is “other than as specified” by the statute (Code Civ. Proc., § 1032, subd. (a)(4)), which in any event authorizes the trial court to determine the prevailing party and award costs. We believe that while the court could properly find E*Trade to be the prevailing party under the statutory definition supplied, as described above, this argument has merit as a possible alternative ground.

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