From The Recorder:

SAN FRANCISCO — Chip designer Donald Stern thought he’d found the holy grail of memory technology. But after he disclosed his designs for an inductive storage capacitor to Mitsubishi, they started showing up in “SuperSRAM” chips produced by a Mitsubishi-Hitachi joint venture.

On Tuesday the Sixth District Court of Appeal upheld a verdict against Mitsubishi Electric Inc. for breaching a non-disclosure agreement, but agreed with Superior Court Judge Kenneth Barnum that the $123 million awarded by jurors was excessive.

“The correct measure of damages for breach of an NDA was the value of the benefit conferred on the defendant,” Justice Franklin Elia wrote. That’s the value of a license Mitsubishi would have paid for—not the total value of Stern’s technology, as the jury appeared to have found.

Grail Semiconductor v. Mitsubishi Electric came as welcome news to Davis Wright Tremaine partner Martin Fineman, who argued the appeal for Stern and his company, Grail Semiconductor.

“The finding of liability is intact,” he said. “We’re going to go back for a new trial where liability is already established and what we’re talking about is the amount of damages.”

Fineman tried the case with Raymond Niro Sr. of Niro, Haller & Niro in Santa Clara County Superior Court in 2012. They argued that Mitsubishi representative Ryuichi Matsuo signed a non-disclosure agreement before Stern pitched him on his technology in 2001. By 2004 a Mitsubishi-Hitachi joint venture called Renesas that employed Matsuo was producing a “SuperSRAM” memory chip that used Stern’s concept of inductive force.

Renesas’ designer testified that the chip had “nothing to do with inductance,” but Niro and Fineman produced Renesas marketing materials that used the word “inductor.” Mitsubishi argued that was a mistranslation from the Japanese version.

Plaintiff expert Joseph Gemini testified that Mitsubishi would have had to pay $123,898,889 to buy Stern’s technology, and the jury awarded precisely that amount. Barnum ordered a new trial, and on Tuesday the Sixth District agreed.

“The jury should have determined damages according to the amount Mitsubishi would have paid on April 19, 2001 for a lump-sum, fully paid license to use the confidential information,” Elia wrote. That figure should take into account that Stern retained possession of the secret and could have licensed the technology to others as well, Elia wrote. Presiding Justice Conrad Rushing and Justice Eugene Premo concurred.

Mitsubishi was represented on appeal by attorneys at Sidley Austin. They argued that Stern had presented no sufficient evidence to support damages in any amount, but the Sixth District disagreed.

“It is beyond question here that Grail established every element of breach of contract, including resulting harm,” Elia wrote. “The court did not find insufficient proof of the existence of damages; it ruled only that the amount of those damages was calculated incorrectly and therefore warranted a new trial using the correct measure of value.”

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