Case 8:18-cv-02001-JVS-JDE Document 600 Filed 11/07/22 Page 1 of 75 Page ID
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`MASIMO 2068
`Apple v. Masimo
`IPR2022-01465
`
`

`

`Case 8:18-cv-02001-JVS-JDE Document 600 Filed 11/07/22 Page 2 of 75 Page ID
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`TABLE OF CONTENTS
`
`
`
`
`I. Bench Trial Background....................................................................................... 1
`II. Party Background................................................................................................ 2
`III. Findings of Fact and Conclusions of Law.......................................................... 4
`A. Jurisdiction and Venue.............................................................................. 4
`B. Witness Testimony.................................................................................... 5
`C. Breach of Contract..................................................................................... 5
`Defense: Void Contracts...................................................................... 9
`D. Breach of Fiduciary Duty.......................................................................... 9
`Defense: Statute of Limitations.......................................................... 15
`E. Trade Secrets……………........................................................................ 18
`Trade Secret 1.................................................................................... 19
`Trade Secret 5.................................................................................... 23
`Trade Secret 8.................................................................................... 25
`Trade Secret 9.................................................................................... 28
`Trade Secret 11.................................................................................. 32
`Trade Secret 12.................................................................................. 35
`Willfulness & Maliciousness............................................................. 39
`Defenses……..................................................................................... 40
`F. The ’848 Patent…………........................................................................ 42
`Infringement....................................................................................... 42
`Invalidity…........................................................................................ 51
`Level of Ordinary Skill in the Art............................................ 53
`
`
`Scope and Content of Prior Art............................................... 53
`
`Motivation to Combine…………............................................ 55
`
`Reasonable Expectation of Success......................................... 57
`
`Other Indicia of Nonobviousness............................................ 58
`G. Other Affirmative Defenses.................................................................... 59
`H. Equitable Remedies………..................................................................... 59
`
`Breach of Fiduciary Duty……………............................................... 59
`Trade Secrets - Injunctive Relief……............................................... 60
`Breach of Contract - Injunctive Relief……....................................... 62
`Patent Applications Containing Trade Secrets................................... 62
`Restraint on Employment……........................................................... 65
`Attorney’s Fees………………...……............................................... 66
`IV. Summary of Conclusions of Law..................................................................... 67
`V. Conclusion......................................................................................................... 72
`
`
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`i
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`MASIMO 2068
`Apple v. Masimo
`IPR2022-01465
`
`

`

`Case 8:18-cv-02001-JVS-JDE Document 600 Filed 11/07/22 Page 3 of 75 Page ID
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`After Plaintiffs waived their right to a jury trial (Dkt. 398), the Court
`presided over a bench trial. See Dkts.552, 553, 555, 556, 557. The Court received
`direct testimony via declaration before holding in-person proceedings for cross-
`examination, redirect, and recross. At the conclusion of trial, the parties submitted
`closing briefs (Dkts. 576-1, 579-1) and the Court held closing argument. See Dkt.
`583. Under Rule 52(a) of Federal Rules of Civil Procedure, the Court now enters
`its findings of fact and conclusions of law.
`
`I.
`
`Bench Trial Background
`
`Plaintiffs’ First Amended Complaint (Dkt. 42), Defendants’ Answer and
`Counterclaims (Dkt. 46), and Plaintiffs’ Answer to Counterclaims (Dkt. 49) are the
`operative pleadings. In sum, before trial the case was narrowed to encompass only
`the following claims and related defenses:
`Breach of contract: Whether Defendant, Dr. Marcelo Lamego, breached
`•
`contracts with Plaintiffs, Masimo Corporation and Cercacor Labs, based on
`his employee confidentiality agreements, and whether those agreements are
`void as a restraint on trade;
`Breach of fiduciary duty: Whether Dr. Lamego breached his fiduciary duty
`of undivided loyalty to Cercacor based on representations made to the board
`of directors, and whether this claim is barred by the statute of limitations;
`Trade secret misappropriation: Whether Defendants misappropriated any of
`Trade Secrets 1, 5, 8, 9, 11, and/or 12 under Cal. Civ. Code § 3246.1
`(CUTSA), and whether related defenses apply;
`Patent infringement: Whether Defendants infringe Claim 9 of the U.S. Patent
`No. 10,194,848, and whether Claim 9 is invalid for obviousness; and
`What, if any, equitable relief should be afforded to the parties?
`•
`See Dkt. 508 (Amended Joint Final Pretrial Conference Order).
`
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`•
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`Apple v. Masimo
`IPR2022-01465
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`II.
`
`Party Background
`
`Plaintiff Masimo Corporation is a leader in pulse oximetry, which involves
`measuring oxygen in the blood. Joe Kiani founded Masimo in 1989. Kiani believed
`he could solve the “motion problem” in pulse oximetry, which prevented accurate
`pulse oximetry measurements when the patient was moving, leading to false
`alarms. Mohamed Diab is a scientist who joined Masimo about six months after its
`founding. Diab designed circuits and wrote the software that Masimo used to
`develop pulse oximetry technology. A pulse oximeter works by attaching a sensor
`to a patient to detect a physiological signal. Light sources in the sensor transmit
`light through the patient’s tissue. The amount of light absorbed by the tissue and
`the corresponding detected signal can provide information about the patient’s
`blood flow and blood content such as oxygen saturation (“SpO2”). The detected
`signal is called a photoplethysmogram, photoplethysmograph, pleth, or “PPG” for
`short.
`
`Historically, motion at the measurement site could corrupt the PPG and
`result in “noisy” and unreliable data. By the early 1990s, Kiani and Diab had
`discovered their first solution to the motion problem in pulse oximetry and had
`developed multiple algorithms for measuring oxygen saturation. Masimo named its
`technology Masimo “SET” for Signal Extraction Technology. Masimo also began
`working on an improved pulse rate algorithm. Masimo patented some of its
`technology and kept other aspects secret.
`In 1998, Masimo Corp. spun off Cercacor (formerly known as Masimo
`Laboratories) to carry forward some portions of Masimo’s business that were still
`in research and development. Kiani became Cercacor CEO, and Diab became the
`first employee, where he continued to work closely with Masimo. Masimo and
`Cercacor have a cross-licensing agreement that allows them to work together
`confidentially on new technologies. For example, Cercacor has focused on glucose
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`Apple v. Masimo
`IPR2022-01465
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`Case 8:18-cv-02001-JVS-JDE Document 600 Filed 11/07/22 Page 5 of 75 Page ID
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`and other non-invasive parameters. Masimo and Cercacor refer to these parameters
`as “rainbow” parameters and named the technology “rainbow SET.” Under the
`relevant cross-licensing agreement, Masimo uses Cercacor’s technology and pays
`Cercacor a license fee and royalties.
`Defendant Dr. Marcelo Lamego holds a Ph.D. in Electrical and Electronics
`Engineering from Stanford University. Upon graduating from Stanford in 2000,
`Dr. Lamego obtained employment as an Algorithm Engineer at Masimo
`Corporation. Dr. Lamego signed his first confidentiality agreement at that time.
`See JTX-307. In 2000, Dr. Lamego worked at Masimo for approximately six
`months. From 2001 to 2003, he joined the Boston Consulting Group, in São Paulo,
`Brazil, where he also worked as a professor at the University of São Paulo,
`teaching in the MBA program for Management and Product Engineering.
`In January 2003, Masimo re-hired Dr. Lamego as a Research Scientist. At
`that time, Dr. Lamego signed a second Masimo confidentiality agreement. See
`JTX-308. In 2005, Dr. Lamego signed a third Masimo confidentiality agreement.
`See JTX-309.
`In February 2007, after Diab began having health problems, Kiani selected
`Dr. Lamego as Masimo Labs’ (now Cercacor) next Chief Technology Officer
`(CTO). To facilitate this transition, Masimo exposed Dr. Lamego to its technology,
`including providing access to Masimo’s confidential information, such as the
`rainbow SET source code. Dr. Lamego also shared an office with Diab. Dr.
`Lamego was one of twelve employees with access to all rainbow directories on
`Masimo’s network. See JTX-20; JTX-26. In his new role as CTO, Dr. Lamego
`signed another confidentiality agreement, agreeing that his work product would
`belong to Cercacor and that he would not use or disclose confidential information
`if he left Cercacor. See JTX-310.
`From February 2007 to January 2014, Dr. Lamego served as Cercacor’s
`CTO. In this role, he was responsible for the engineering team and Cercacor’s
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`MASIMO 2068
`Apple v. Masimo
`IPR2022-01465
`
`

`

`Case 8:18-cv-02001-JVS-JDE Document 600 Filed 11/07/22 Page 6 of 75 Page ID
`#:39538
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`research and product development. Dr. Lamego was charged with assembling a
`team of engineers and scientists with the goal of applying the rainbow technology
`to non-invasively measure glucose. Dr. Lamego also worked toward developing an
`accurate, wireless-wearable sensor to non-invasively monitor patient parameters
`such as blood oxygen. In 2013, Masimo introduced the iSpO2, the first pulse
`oximeter for both Apple (iOS) and Android mobile devices, which connected
`through a cable and was marketed for consumer use only. See JTX-40. In January
`2014, Dr. Lamego left Cercacor based on disagreements with Cercacor’s
`management. After he left, Dr. Lamego worked at Apple, Inc. from January 2014
`until July 2014.
`Upon leaving Apple, Dr. Lamego and his wife, Tatiana Lamego, founded
`Defendant True Wearables (“TW”). Dr. Lamego has been the CEO of True
`Wearables ever since. At True Wearables, Dr. Lamego wanted to create an
`inexpensive, disposable, noninvasive monitoring device. To that end, he created
`the Oxxiom device. Dr. Lamego intended to keep the cost of the device low by
`distributing processing tasks between the device and another device, such as an
`iPhone. To create the Oxxiom, Dr. Lamego used off-the-shelf components, such as
`processors, batteries, and LEDs, which he believed would be suitable components
`for a single-use, disposable device, and would be efficient and affordable while
`performing adequately. Dr. Lamego announced the Oxxiom in January 2016 and
`shipped the first device in August 2018.
`
`III. Findings of Fact and Conclusions of Law
`
`Jurisdiction and Venue
`A.
`The Court has subject matter jurisdiction over this action pursuant to
`1.
`28 U.S.C. § 1331 because these claims arise under the federal patent laws. 35
`U.S.C. §§ 271, 281; 28 U.S.C. § 1338(a).
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`Apple v. Masimo
`IPR2022-01465
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`

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`Case 8:18-cv-02001-JVS-JDE Document 600 Filed 11/07/22 Page 7 of 75 Page ID
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`This Court has supplemental jurisdiction over Masimo’s state law
`2.
`claims under 28 U.S.C. § 1367(a). Masimo’s state law claims are related to the
`patent infringement claim such that they form part of the same case or controversy
`under Article III of the United States Constitution.
`3.
`The Court has personal jurisdiction over the parties and venue is
`proper in this Court under 28 U.S.C. §§ 1391(b) and (c) and 1400(b) because Dr.
`Lamego resides in, and True Wearables has its regular and established place of
`business in, the County of Orange within the Central District of California.
`
`B. Witness Testimony
`4.
`Throughout the course of the bench trial, the Court had the
`opportunity to observe each witness as they testified in open court. The Court
`carefully listened to each witness’s testimony and observed their demeanor, which
`helped inform the Court’s overall assessment of each witness’s credibility. The
`Court’s credibility assessments underpin several of the findings of fact set forth in
`this Order. In turn, those findings of fact inform the Court’s conclusions of law.
`The Court’s credibility findings were especially important with respect to claims or
`defenses that turned on Dr. Lamego’s credibility, as he was a central witness in the
`case. Where the Court’s conclusions turned on a finding of credibility (or lack
`thereof), those findings are stated herein.
`
`Breach of Contract
`C.
`To prove breach of contract, Masimo must prove (1) the existence of a
`5.
`contract, (2) Masimo’s performance or excuse for nonperformance, (3) Dr.
`Lamego’s breach, and (4) that Masimo suffered harm as a result of the breach.
`Oasis W. Realty, LLC v. Goldman, 51 Cal. 4th 811, 821, 250 P.3d 1115, 1121
`(Cal. 2011).
`6.
`
`If a breach causes no actual harm, it may be redressable under
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`MASIMO 2068
`Apple v. Masimo
`IPR2022-01465
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`

`

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`California law because “failure to perform a contractual duty is, in itself, a legal
`wrong.” Elation Sys., Inc. v. Fenn Bridge LLC, 71 Cal. App. 5th 958, 965 (2021)
`(nominal damages and equitable relief for breach of non-disclosure agreement
`appropriate despite no actual harm).
`7.
`Masimo bears the burden of proving breach of contract by a
`preponderance of the evidence. Pugh v. See’s Candies, Inc., 203 Cal. App. 3d 743,
`760 (Ct. App. 1988).
`8.
`Masimo has satisfied all four elements of breach of contract.
`9.
`First, Dr. Lamego entered into three contracts with Masimo by signing
`confidentiality agreements in 2000, 2003, and 2005. See Dk. 447-1, AF 7–9; Miller
`Direct ¶¶ 15, 23, 24; JTX-307; JTX-308; JTX-309. Dr. Lamego also entered into a
`contract with Cercacor by signing a confidentiality agreement in 2008. See AF-10;
`JTX-310.
`Second, Dr. Lamego signed the agreements “in consideration of the
`10.
`compensation and benefits from my employment,” and he does not dispute that
`Masimo provided the agreed upon compensation and benefits. Thus, Masimo has
`shown performance.
`11.
`Third, Masimo has shown Dr. Lamego’s breach of the confidentiality
`agreements because those agreements prohibited Dr. Lamego from taking any
`Masimo confidential information or property. Specifically, Dr. Lamego agreed
`that, “After my employment with Masimo has terminated, I will not disclose or
`make use of any Confidential Information for any purpose, either on my own or on
`behalf of another business.” JTX-307, ¶ 2. “[T]he term Confidential Information
`means any information in any form that Masimo considers confidential, including
`business plans, customer files, sales and marketing reports, technical data, prices
`and costs, designs and formulas, software, databases, personnel and payroll
`records, mailing lists, accounting records, and other business information.” Id. Dr.
`Lamego also agreed that, “Upon termination of my employment for any reason, I
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`MASIMO 2068
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`will immediately assemble all property of Masimo in my possession or under my
`control and return it unconditionally to Masimo.” Id. ¶ 11.
`12. At trial, Dr. Lamego admitted that, upon leaving Cercacor in January
`2014, he kept certain documents, including:
`•
`A recommendation letter from Kiani on behalf of Dr. Lamego (JTX-311 at
`Ex. 2);
`One page of a 2013 email exchange in which Kiani praised Dr. Lamego as
`the “leading scientist in the world on noninvasive blood constituent
`monitoring” (JTX-311 at Ex. 3; JTX-312 at Ex. 4);
`A recommendation letter from Diab on behalf of Dr. Lamego (JTX-311 at
`Ex. 4);
`A 2014 email exchange between Kiani and Gerry Hammarth (CFO of
`Cercacor) regarding the whereabouts of Dr. Lamego’s employment
`agreements (JTX-311 at Ex. 9);
`An email exchange between Masimo’s counsel and Dr. Lamego confirming
`Plaintiffs had copies of Dr. Lamego’s employment agreements and Dr.
`Lamego did not have access to them at Cercacor (JTX-311 at Ex. 9; JTX-
`312 at Ex. 9);
`A presentation Dr. Lamego gave at Masimo during his first two weeks of
`employment in 2000 discussing the Beer-Lamber Model, third party
`published works, extrapolations, and generalizations made in the subject of
`light transport in biological tissues (JTX-312 at Ex. 2);
`A 2010 email exchange in which Kiani called Dr. Lamego “one of the
`smartest, if not the smartest, person I know” (JTX-312 at Ex. 5);
`A 2010 email exchange in which Kiani praised Dr. Lamego and his Cercacor
`team after a presentation (JTX-312 at Ex. 6);
`A series of emails, without their attachments, disseminating workshops that
`Dr. Lamego prepared to give to Cercacor engineers (JTX-313 at
`
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`•
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`TRUE016662–81);
`A 2012 email exchange between Kiani and Dr. Lamego discussing Dr.
`Lamego’s potential attendance at an FDA meeting (JTX-313 at
`TRUE016694–96);
`Several 2012 email exchanges between Kiani and Dr. Lamego discussing
`Cercacor’s hiring process and hiring an engineer over Dr. Lamego’s
`objections, which also contain sensitive and confidential information such
`as: (1) engineer salaries; (2) the amount Cercacor spent acquiring a
`company; (3) the amount Cercacor spent researching non-invasive glucose;
`and (4) Kiani’s confidential assessment of the business risks posed by one of
`Cercacor’s competitors. (JTX-313 at TRUE016697–715)
`See 3/18 Tr. 10:21–24, 11:16–19 (Dr. Lamego: “One hundred percent sure that I
`took it.”).
`13. Dr. Lamego acknowledged that each of the emails he took includes an
`express confidentiality notice. Id. at 12:22–25; JTX-313. Dr. Lamego did not have
`permission to take these confidential documents. See 3/15 Tr. 129:13–131:11. The
`information contained therein qualifies as “Confidential Information” under the
`agreements.
`14. Additionally, as explained below in the context of the trade secrets
`claim, Dr. Lamego took certain confidential trade secret information for his own
`use, and used that information at his new company, True Wearables.
`15.
`Fourth, Masimo has shown that it suffered harm as a result of the
`breach. Dr. Lamego’s breach of three confidentiality agreements harmed Masimo,
`because its confidential information is valuable, and because Dr. Lamego’s breach
`threatens Masimo’s competitive advantage and the exclusivity of its confidential
`information. Dr. Lamego’s breach of his confidentiality agreement harmed
`Cercacor, because Cercacor places significant value on its confidential information,
`and because Dr. Lamego’s breach causes Cercacor to lose the competitive
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`advantage from maintaining the exclusivity of its confidential information.
`Defense: Void Contracts
`16.
`In defense of the breach of contract claims, Dr. Lamego has not
`proven his counterclaim, that is, the confidentiality agreements are void because
`they restrained Dr. Lamego from engaging in a lawful profession, trade, or
`business under Cal. Bus. & Prof. Code § 16600.
`17.
`The provisions that Masimo seeks to enforce relate to removing
`confidential information and company property; those provisions do not restrain
`Dr. Lamego from engaging in a lawful profession, trade, or business.
`18.
`Even assuming other provisions in the agreements could impose such
`restrictions, those provisions would not void the entire agreement. See Cal. Bus. &
`Prof. Code § 16600 (improper restraint voids agreement “to that extent,” but the
`remainder of agreement remains enforceable); Lawrence Crane Enters., Inc. v.
`Abrams, No. CV 11-7797-DMG (AGRx), 2013 WL 12123997, at *5 (C.D. Cal.
`Jan. 28, 2013) (voiding some non-compete contract provisions as violating public
`policy under § 16600 did not void other provisions “prohibit[ing] the use of
`confidential and proprietary information, including trade secrets, except in the
`course of employment with Plaintiffs”); Cal. Civ. Code § 1599 (“Where a contract
`has several distinct objects, of which one at least is lawful, and one at least is
`unlawful, in whole or in part, the contract is void as to the latter and valid as to the
`rest.”).
`19. Defendants have failed to show that the agreements are unenforceable
`as to the breached provisions. Thus, Masimo’s narrow breach of contract claims
`are not barred by Cal. Bus. & Prof. Code § 16600.
`
`Breach of Fiduciary Duty
`D.
`To prove a breach of fiduciary duty, Cercacor must prove (1)
`20.
`existence of a fiduciary duty; (2) breach of the fiduciary duty; and (3) damage
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`proximately caused by the breach. Gutierrez v. Girardi, 194 Cal. App. 4th 925, 932
`(2011).
`21. Corporate officers owe fiduciary duties to the corporation. Oakland
`Raiders v. Nat’l Football League, 131 Cal. App. 4th 621, 632 (2005). “Inherent in
`each of these relationships is the duty of undivided loyalty.” Wolf v. Superior Ct.,
`107 Cal. App. 4th 25, 30 (2003).
`22. Cercacor bears the burden of proving breach of fiduciary duty by a
`preponderance of the evidence. Kanbar v. Kaufman, No. C 07-2123 VRW, 2008
`WL 11408996, at *14 (N.D. Cal. Oct. 22, 2008), aff’d, 372 F. App’x 694 (9th Cir.
`2010).
`23. Cercacor has satisfied all three elements of breach of fiduciary duty.
`24.
`First, it is undisputed that, as Cercacor’s Chief Technical Officer, Dr.
`Lamego owed Cercacor a fiduciary duty of undivided loyalty. Accord JTX-301 at
`1 (Dr. Lamego acknowledging “fiduciary responsibilities as the Chief Technical
`Officer of Cercacor”).
`25.
`Second, Cercacor has proven breach of that duty in connection with
`an October 24, 2013 presentation that Dr. Lamego, then-CTO of Cercacor, gave to
`the Board of Directors. Because the harm that flows from this breach relates to the
`parameters deemed the “Chem 5 panel,” the Court’s analysis of this claim focuses
`on the Chem 5 panel. See Lamego ¶ 30 (the Chem 5 panel included the following
`parameters:
`
`26. Dr. Lamego’s presentation discussed the feasibility of technology that
`Cercacor engineers had been developing for noninvasively measuring 20 blood
`parameters, including the Chem 5 panel. See Merritt Direct ¶ 22; JTX-83.
`27. As early as 2007, Dr. Lamego began working on solving noninvasive
`glucose, which was deemed the “Hummingbird Project.” See Kiani ¶ 87; JTX-718.
`In 2010, Dr. Lamego proposed a hybrid device/sensor to noninvasively measure
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`glucose. Kiani ¶ 177 (quoting JTX-746 (executive summary)).
`28.
`In 2011, before glucose was solved, Dr. Lamego told Kiani he was
`resigning from Cercacor. Kiani ¶¶ 145–46; JTX-1083. Kiani encouraged Dr.
`Lamego to stay, and Dr. Lamego agreed to stay “until feasibility is proved or
`disproved for Gu,” i.e., glucose. Kiani ¶ 147; JTX-1083.
`29. Dr. Lamego kept working on glucose and informed Kiani that he
`made great progress on noninvasively measuring glucose and several other
`parameters that normally require a blood draw. Kiani ¶ 167. Dr. Lamego told Kiani
`that a number of these new parameters were ready to start building into products
`and obtaining regulatory clearances. Id. ¶ 168.
`30. As a result, Kiani asked Dr. Lamego to present his progress on the
`new parameters to Cercacor’s Board of Directors, which resulted in the relevant
`October 24, 2013 presentation. See JTX-73; Kiani ¶ 169; Diab ¶ 241; Chen ¶¶
`91–92. Dr. Lamego delivered the presentation using PowerPoint slides. JTX-305;
`JTX-306; 3/17 Tr. 158:15–18, 159:24–160:4; 3/18 Tr. 86:3–8.
`31. Kiani and Diab attended the presentation. JTX-934; Diab ¶ 240;
`Kiani ¶ 169. Hammarth also attended the presentation as CFO and corporate
`secretary. JTX-953; Hammarth ¶¶ 31–33. Others on Dr. Lamego’s team who
`reviewed the slides before Dr. Lamego’s presentation, including Sean Merritt,
`Cristiano Dalvi, Ferdyan Lesmana, Jeroen Poeze, Hung Vo, Jesse Chen, Mathew
`Paul, Kevin Pauly, and Hoi Wong, did not attend the presentation and thus lack
`personal knowledge regarding what Dr. Lamego said during the presentation.
`32. During the presentation, Dr. Lamego told the board about his progress
`on the new parameters. JTX-73; 3/15 Tr. 92:20–93:3. Dr. Lamego said the
`parameters, including glucose, could be measured using Cercacor’s sensor,
`originally designed for glucose. JTX-73 at MASM0087868; JTX-306 at
`MASM0113841–42; Kiani ¶¶ 170–171, 173.
`33. Dr. Lamego explained that he successfully measured glucose using
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`MASIMO 2068
`Apple v. Masimo
`IPR2022-01465
`
`

`

`Case 8:18-cv-02001-JVS-JDE Document 600 Filed 11/07/22 Page 14 of 75 Page ID
`#:39546
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`“patient-dependent calibration,” whereas he measured the other parameters using
`global calibration. See JTX-73 at MASM0087868; JTX-306 at
`MASM0113841–42, MASMO0113900; JTX-746; Kiani ¶¶ 170, 174–75; Diab
`¶¶242, 244.
`34. Kiani was excited by Dr. Lamego’s reported results and
`corresponding proposal to deliver a commercial product measuring fifteen new
`parameters in one year, as shown below. JTX-73 at MASM0087894,
`MASM0087808, MASM0087868; Kiani ¶¶ 180–83, 187; Diab ¶ 243.
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`MASIMO 2068
`Apple v. Masimo
`IPR2022-01465
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`

`

`Case 8:18-cv-02001-JVS-JDE Document 600 Filed 11/07/22 Page 15 of 75 Page ID
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`35. Although Dr. Lamego conveyed enthusiasm about the feasability of
`the tested parameters during the presentation, at trial he explained that when he
`said the parameters were feasible, he meant only that his results merited further
`investigation and development. See Lamego ¶ 27; Merritt ¶ 25.
`36. Dr. Lamego’s presentation advises that, “[m]ore clinical studies are
`required to validate all the 20 noninvasive parameters measured by the glucose AP
`sensor;” and “[t]hese are preliminary results and a clinical data collection with a
`larger subject population is needed to confirm the results and assess overall
`performance.” See Merritt ¶ 26; JTX-306 at MASM0113900–14. Kiani explained
`that additional clinical studies are always required to support regulatory
`submissions for new products. Kiani ¶ 180.
`37. At trial, Dr. Lamego admitted that, although he did not believe
`Cercacor could meet the dates set forth in the timeline he presented to the board, he
`did not reveal this to the board. Compare JTX-306 at MASM0113926 (timeline),
`with 3/18 Tr. 87:6–91:14 (“THE COURT: Did you believe that would occur? . . .
`THE WITNESS: I don’t believe that we will be able to have that [done] . . . .”;
`“THE COURT: Did you believe that date? THE WITNESS: To tell you the truth,
`no.”; “THE COURT: Did you believe that was a realistic date? THE WITNESS: I
`did not believe that this was possible even with the tests we had . . . . THE
`COURT: At this meeting of the board, did you tell the board members that date is
`not realistic? THE WITNESS: Well, I did not say that . . . .”).
` 38. At trial, Dr. Lamego also criticized the data he had presented
`favorably to the board, stating that the data look like the product of a random
`number generator. 3/17 Tr. 173:1–5 (“[J]ust looking at the scatter plot you can see
`there’s no clinical accuracy. You don’t have to be an engineer to understand that
`those scatter plots are almost random number generators.”).
`39. By representing feasability of the parameters to the board, alongside
`specific manufacturing and regulatory timelines, even when Dr. Lamego believed
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`MASIMO 2068
`Apple v. Masimo
`IPR2022-01465
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`the data was not clinically accurate and the timelines were not realistic, Dr.
`Lamego breached his duty of loyalty to Cercacor.
`40.
`Fourth, Cercacor has proven damages proximately caused by Dr.
`Lamego’s breach.
`41. Before Masimo decided whether to license from Cercacor any of the
`parameters tested by Dr. Lamego, Masimo tasked its board member and practicing
`clinical anesthesiologist, Dr. Steven Barker, with reviewing Dr. Lamego’s findings.
`Kiani ¶¶ 186–87; Barker ¶ 9; 3/16 Tr. 89:13–24. Dr. Barker did so and
`recommended that Masimo license the Chem 5 panel from Cercacor, but not
`license the glucose parameter (SpGu). See Barker ¶¶ 21–22; Lamego ¶ 30; 3/16 Tr.
`87:5–15; JTX-1160.
`42.
`In evaluating Masimo’s market opportunity, Barker relied on and
`made recommendations based upon Dr. Lamego’s representation of accuracy of the
`parameters. 3/16 Tr. 90:6–10. Barker’s conclusions were based on his impression
`as a practicing clinician and anesthesiologist who would use the measurements on
`patients. 3/16 Tr. 82:9–25; see also id. 88:23–90:10.
`43. Kiani shared Dr. Barker’s recommendation with Dr. Lamego and sent
`him Barker’s report. Dr. Lamego responded: “Great!!! Thank you!” JTX-1159;
`JTX-1160; Kiani ¶ 193. Throughout this process, Dr. Lamego did not tell Barker,
`Kiani, or anyone else that his timeline was unrealistic or that the data lacked
`clinical significance. 3/18 Tr. 91:24– 93:15 (Dr. Lamego testified: “I didn’t believe
`based on the data we had that that dat[a] was clinically significant.”).
`44. Relying on Dr. Lamego’s presentation, the board authorized the
`additional resources requested by Dr. Lamego to meet his proposed timeline,
`including approving hiring new engineers. JTX-73 at MASM0087808; Kiani ¶¶
`184–85; 3/15 Tr. 96:1-13. These resources would not have been approved for a
`product where feasability remained in question. Kiani ¶ 182.
`45. Also relying on Dr. Lamego’s representations, Masimo approved
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`MASIMO 2068
`Apple v. Masimo
`IPR2022-01465
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`

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`Case 8:18-cv-02001-JVS-JDE Document 600 Filed 11/07/22 Page 17 of 75 Page ID
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`licensing the Chem 5 panel from Cercacor for licensing fees totaling $2.5 million,
`which eventually had to be returned due to lack of feasability. JTX-1368; JTX-936;
`Kiani ¶¶ 189–92, 210; Barker ¶¶ 18, 23; Hammarth ¶ 32.
`46. By causing Cercacor to expend additional resources in furtherance of
`Dr. Lamego’s claimed feasability and proposed timeline, in which he himself did
`not believe, and by causing Cercacor to later return the Chem 5 panel licensing fees
`to Masimo, Dr. Lamego’s breach of fiduciary duty proximately harmed Cercacor.
`See Kiani ¶¶ 206–07; Diab ¶ 248; Hammarth ¶ 37; JTX-826.
`Defense: Statute of Limitations
`47.
`In defense of Cercacor’s breach of fiduciary duty claim, Dr. Lamego
`has not proven that the statute of limitations bars this claim.
`48. California applies a four-year statute of limitations to claims for
`breach of fiduciary du