Trade Secrets Verdict Derailed Over Improper Expert Testimony

Addressing the admissibility of expert testimony in trade secrets cases, the U.S. Court of Appeals for the Sixth Circuit ordered a new trial after finding that the district court had "abandoned" its gate-keeping function under F.R.E. Rule 702. Mike’s Train House, Inc. v. Lionel, L.L.C., Case No. 05-1095, 2006 U.S. App. LEXIS 30628 (6th Cir., Dec. 14, 2006) (Coole, C.J.).

Mike’s Train House (MTH) claimed that model trains manufactured in Korea for Lionel were based upon trade-secret designs for MTH trains that had been misappropriated by employees of a Korean firm both parties had used. The employees received criminal convictions in Korean court. MTH then sued Lionel and the Korean parties in the United States for misappropriation of trade secrets and unjust enrichment. A jury found for MTH and awarded damages of nearly $26 million for past and future lost profits. The district court refused Lionel’s motions for a new trial and for judgment as a matter of law. Lionel appealed.