F I L E D

United States Court of Appeals

Tenth Circuit

PUBLISH

APR 8 1999

UNITED STATES COURT OF APPEALS

PATRICK FISHER

TENTH CIRCUIT

Clerk

HUSSEIN NAIMIE,
Plaintiff-Counter-Defendant - Appellee and
Cross-Appellant,
v.

Nos. 97-4129 & 97-4147

CYTOZYME LABORATORIES, INC., a Utah

corporation; CYTOZYME RESEARCH
COMPANY,
Defendants-Counter-Claimants - Appellants
and Cross-Appellees.
Appeal from the United States District Court
for the District of Utah
(D.C. No. 95-CV-23)
Gary A. Weston (Scott M. Ellsworth with him on the briefs) of Nielsen & Senior,
Salt Lake City, Utah, for Plaintiff-Counter-Defendant - Appellee and CrossAppellant.
Richard B. Ferrari (Beatrice M. Peck, Salt Lake City, Utah, with him on the
briefs), San Diego, California, for Defendants-Counter-Claimants - Appellants
and Cross-Appellees.

Before BRORBY, McWILLIAMS, and BRISCOE, Circuit Judges.

BRORBY, Circuit Judge.

Defendants-Appellants Cytozyme Laboratories, Inc. and Cytozyme

Research Company (collectively Cytozyme) appeal from the district courts
judgment awarding Dr. Naimie damages pursuant to two contracts existing
between the parties. Dr. Naimie cross-appeals the district courts calculation of
damages. We have jurisdiction pursuant to 28 U.S.C. 1291 and we affirm.

I. Background
Cytozyme manufactures and markets nutritional plant and animal growth
enhancement products. In late 1980, Cytozymes president and chief financial
officer, Mr. Steve Baughman, asked Dr. Naimie, a chemical engineer, if he would
be interested in developing new formulations for Cytozyme products, and offered
to pay Dr. Naimie royalties on products using the new formulations. After initial
discussions, Mr. Baughman sent a letter to Dr. Naimie in January 1981 confirming
Cytozymes offer to pay royalties in exchange for the transfer of a new
technology base to be developed by Dr. Naimie. Dr. Naimie then began
developing formulations. On September 28, 1981, Mr. Baughman sent another to
letter Dr. Naimie which confirmed [t]his is our agreement to pay you an override
... on completed products that we produce using the technology you have
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developed for Cyto-Zyme. Dr. Naimie delivered his first formulation to

Cytozyme that September. Approximately one month later, both parties signed a
written agreement (the October 1981 Agreement) which stated: In order to
protect [Dr. Naimies] interest in the products developed in the past or which may
be developed by [Dr. Naimie] in the future, [Cytozyme] agrees to pay to [Dr.
Naimie] a royalty pursuant to the attached schedule. Cytozyme also agreed to
pay Dr. Naimie an annual $6,000 consulting fee and travel expenses. Dr. Naimie
continued to develop formulations for Cytozyme products. 1 Cytozyme began
paying royalties to Dr. Naimie in November, 1981.

On May 28, 1985, the parties signed another written agreement (May 1985
Agreement). In this agreement, Cytozyme agreed to hire Dr. Naimie as a full
time consultant for an annual fee of $60,000 plus travel expenses. The agreement
defined Dr. Naimies consulting duties and further stated [i]n addition to the
base fee, [Dr. Naimie] will, as in the past, be entitled to royalties on products [he
has] developed or will develop. The term of the agreement was seven years.
However, five years later, in October 1990, Cytozyme terminated the May 1985
Agreement after Dr. Naimie refused to make a presentation. Cytozyme stopped
The district court determined Dr. Naimie developed formulations for
sixteen Cytozyme products.
1

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making royalty payments to Dr. Naimie after July 1990. By letter dated May 6,
1991, Dr. Naimie terminated Cytozymes license to use the formulations he
developed. When Cytozyme continued to manufacture products that allegedly
used his formulations, Dr. Naimie filed this diversity action in district court for
breach of contract and declaratory judgment.

After a bench trial, the district court concluded two agreements existed
between the parties: a verbal licensing agreement, and a written consulting
agreement. First, the court determined a verbal licensing agreement arose
between the parties in or about September 1981 and remained in effect until Dr.
Naimies termination in 1990. Pursuant to this verbal licensing agreement, Dr.
Naimie licensed to Cytozyme the exclusive right to use his formulations in
exchange for royalties on products using those formulations. The license was
terminable by either party at will.

Second, the court determined the October 1981 Agreement amounted to a

written contract for part-time consulting services and a memorialization of the
parties earlier verbal licensing agreement. When Cytozyme decided to hire Dr.
Naimie as a full-time consultant, the parties replaced that portion of the October
1981 Agreement dealing with consulting services with the May 1985 Agreement.
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Importantly, the court concluded the May 1985 Agreement was not an integrated
contract because it incorporated and referenced the verbal licensing agreement.
As such, the May 1985 Agreement did not modify or replace the verbal licensing
agreement and, at the time of Dr. Naimies termination, both the verbal licensing
agreement and the May 1985 Agreement were in full force and effect.

Pursuant to the May 1985 Agreement, the court awarded Dr. Naimie unpaid
fees for consulting services Dr. Naimie performed in September 1990. Further,
the court concluded Cytozyme had breached the verbal licensing agreement by
unjustifiably refusing to pay royalties, and awarded Dr. Naimie unpaid royalties
from June 1990 through August 1996. On appeal, Cytozyme argues: (1) the
district court failed to apply relevant patent law in determining whether Dr.
Naimie owned the formulations and whether Dr. Naimie suffered any damage; (2)
the district court erred in determining that the May 28, 1985 agreement was not an
integrated contract; (3) insufficient evidence exists to support the district courts
finding of a verbal licensing agreement; and (4) Dr. Naimie rescinded any license
agreement and therefore cannot make a claim under that agreement.

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II. Inapplicability of Federal Patent Law

The district court determined Dr. Naimie owned the formulations he
developed and Cytozymes payment of royalties was evidence of that ownership.
The court also found Cytozyme had no ownership interest in the formulations and
had no right to use the formulations after Dr. Naimie terminated Cytozymes
license. The court specified, however, that its findings addressed the respective
ownership rights of the parties and not the rights of third parties not before the
court. In other words, the district court applied contract principles to determine
the parties respective rights under the licensing agreement and declined to assess
the parties ownership rights as against the rest of the world pursuant to federal
patent principles.

Cytozyme argues inventions may be owned only through a federal patent,

and because Dr. Naimie did not have a patent, he could not own the formulations
at issue in this case and could not receive damages on that basis. Further,
Cytozyme alleges the district courts findings regarding ownership create state
patent rights a result the Supreme Court prohibited in Bonito Boats, Inc. v.
Thunder Craft Boats, Inc., 489 U.S. 141 (1989). We review the district courts
findings of fact for clear error and the courts conclusions of law de novo. Equal
Employment Opportunity Commn v. Wiltel, Inc., 81 F.3d 1508, 1513 (10th Cir.
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1996).

The Supreme Court has taken a pragmatic approach to dealing with the
relationship between federal patent law and state laws relating to intellectual
property. Bonito Boats, 489 U.S. at 156. In Bonito Boats, the Court made clear
state regulation of intellectual property must yield to federal patent law to the
extent the state regulation clashes with the balance struck by Congress in our
patent laws. Id. at 152; see also Aronson v. Quick Point Pencil Co., 440 U.S.
257, 262-63 (1979) (considering whether state law interfered with the three
primary purposes of the federal patent system such that federal law preempted
state law). Specifically, a state law may not substantially impede public use of an
otherwise unpatentable, publicly known intellectual creation. Bonito Boats, 489
U.S. at 156-57. However, the Court emphasized states retain the power to adopt
rules for the promotion of intellectual creation within their own jurisdictions so
long as those rules do not impermissibly interfere with the federal patent scheme.
Id. at 165; see also Aronson, 440 U.S. at 262 ([T]he states are free to regulate
the use of such intellectual property in any manner not inconsistent with federal
law.).

In this case, the district court applied state contract law to determine the
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parties rights to the formulations. The Supreme Court addressed a very similar
situation in Aronson. In Aronson, the parties entered into a contract whereby
defendant agreed to pay plaintiff a royalty in return for the exclusive right to
make and sell a keyholder plaintiff had designed. 440 U.S. at 259. Plaintiff was
unable to obtain a patent on her design; however, defendant continued to pay her
royalties as provided for in the contract. Id. at 259-60. When copies of
plaintiffs design began to saturate the market, defendant filed suit, arguing the
contract was unenforceable because federal patent law preempted state contract
law. Id. at 260.

The Supreme Court concluded federal patent law was not a barrier to
enforcement of the parties licensing agreement because enforcement was not
inconsistent with purposes of the federal patent system. 2 Id. at 262-64
Specifically, the Court noted: (1) the licensing agreement provided royalties to

The Supreme Court listed the purposes of the federal patent system as:
First, patent law seeks to foster and reward invention; second, it
promotes disclosure of inventions, to stimulate further
innovation and to permit the public to practice the invention
once the patent expires; third, the stringent requirements for
patent protection seek to assure that ideas in the public domain
remain there for the free use of the public.

Aronson, 440 U.S. at 262.

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the inventor and therefore acted as an incentive to invention; (2) the licensing
agreement promoted disclosure because it encouraged the inventor to manufacture
her inventions and thereby display the novel idea which they embody wherever
they are seen; and (3) the licensing agreement did not withdraw ideas from the
public domain because the design was not in the public domain before defendant
obtained a license. Id. at 262-63. The Court concluded:
Enforcement of these contractual obligations, freely undertaken in
arm's- length negotiation and with no fixed reliance on a patent or a
probable patent grant, will encourage invention in areas where patent
law does not reach, and will prompt the independent innovator to
proceed with the discovery and exploitation of his invention.
Id. at 266 (internal quotation marks and citation omitted).

Applying these principles to the present case, we conclude enforcement of

the licensing agreement pursuant to state law does not undermine the purposes of
the federal patent scheme. First, enforcement encourages invention because the
royalties provide an additional incentive to invention, or in this case, an
incentive to develop formulations. See Aronson, 440 U.S. at 262. Second,
enforcement does not conflict with the federal policy of disclosure. In Aronson,
the Court concluded enforcement promoted disclosure because manufacture of
plaintiffs simple keyholder device inescapably disclosed its design to the
public. Id. at 263-69. Here, manufacture of Cytozyme products does not
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automatically lead to full disclosure of Dr. Naimies formulations. Nonetheless,

enforcement encourages the exploitation of an invention that might otherwise
remain undeveloped and therefore inaccessible to the public. Moreover, others
remain free to discover and exploit the formulations through reverse engineering
or independent creation. See Bonito Boats, 489 U.S. at 155. Lastly, enforcement
does not withdraw ideas from the public domain as the formulations were not in
the public domain before Cytozyme obtained its license. See Aronson, 440 U.S.
at 263; see also Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 484 (1974)
(holding that state trade secret law did not withdraw ideas from the public domain
because trade secrets, by definition, are not placed in the public domain).

Accordingly, we find no conflict with the Courts decision in Bonito Boats.

Unlike the state law at issue in Bonito Boats, enforcement of the licensing
agreement in this case does not substantially impede public use of an unpatentable
intellectual creation. See Bonito Boats, 489 U.S. at 156-57. More important,
application of state contract law does not impermissibly interfere with the federal
patent scheme, see Bonito Boats, 489 U.S. at 165, but rather benefits society by
encouraging invention in areas where patent law does not reach, see Aronson, 440
U.S. at 266. We therefore conclude the district court correctly applied state

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contract law to determine the parties respective ownership rights. 3

III. Breach of Contract

Cytozyme contends the district court made several errors in resolving Dr.
Naimies breach of contract claim. First, Cytozyme argues there is no evidence of
a verbal licensing agreement. Second, Cytozyme contends the May 1985
Agreement was the only contract in effect at the time of Dr. Naimies termination
and that it was a fully integrated contract which contained all terms between the
parties, including payment of royalties. As such, termination of the contract in
1990 extinguished all of Dr. Naimies rights to royalties. Third, Cytozyme argues
even if the alleged licensing agreement existed, Dr. Naimie rescinded that
agreement by his May 6, 1991 letter and therefore extinguished his rights under
the agreement. We address each of these arguments in turn.

Because the district court correctly determined the parties respective

ownership rights without reference to federal patent law, the court was not
required to make findings regarding the novelty or nonobviousness of Dr.
Naimies formulations, nor calculate a reasonable royalty pursuant to federal
patent law. To the extent Cytozyme challenges the district courts findings
regarding the parties ownership rights under the contract, we conclude those
findings are not clearly erroneous based on the parties correspondence,
Cytozymes payment of royalties, and the technical evidence presented.
3

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1. Existence of a Verbal Licensing Agreement

The district court determined a verbal licensing agreement arose between
the parties in or about September 1981. As evidence of this agreement, the
district court cited to three letters written by Mr. Baughman to Dr. Naimie dated
September 28, 1981, January 3, 1981, and March 1, 1983; the October 1981
Agreement; and the May 1985 Agreement. The issue of whether a contract exists
is a mixed question of law and fact. ProMax Dev. Corp. v. Mattson, 943 P.2d
247, 257 (Utah Ct. App. 1997). We review mixed questions under either the
clearly erroneous standard or de novo standard depending on whether the mixed
question involves primarily a factual inquiry or the consideration of legal
principles. Armstrong v. Commissioner, 15 F.3d 970, 973 (10th Cir. 1994). In
this case, Cytozyme does not dispute the existence of the evidence cited by the
district court, but rather argues the district court erred in concluding those
documents evidenced a binding contract. Because that conclusion primarily
involves application of legal principles to the facts, we review the district courts
conclusion de novo.

Cytozyme contends there is no evidence of any oral licensing agreement

and, at most, the pre-October 1981 correspondence between the parties amounts
to the parties kick[ing] proposals around for a year. Under Utah law, a contract
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is not formed unless there is a meeting of the minds. Sackler v. Savin, 897 P.2d
1217, 1220 (Utah 1995). A meeting of the minds requires assent by all parties to
the same thing in the same sense so that their minds meet as to all the terms.
Cessna Fin. Corp. v. Meyer, 575 P.2d 1048, 1050 (Utah 1978). Hence, no
contract exists if the parties merely engage in preliminary negotiations and do not
agree to all essential terms. Crimson v. Western Co., 742 P.2d 1219, 1221-22
(Utah Ct. App. 1987). On the other hand, a response to an offer amounts to
acceptance if an objective, reasonable person is justified in understanding that a
fully enforceable contract has been made. Cal Wadsworth Constr. v. City of St.
George, 898 P.2d 1372, 1376 (Utah 1995). The offeree must manifest
unconditional agreement to all of the terms of the offer ... without material
reservations or conditions. Cal Wadsworth Constr. v. City of St. George, 865
P.2d 1373, 1376 (Utah Ct. App. 1993), affd, 898 P.2d 1372 (Utah 1995) (quoting
R.J. Daum Constr. Co. v. Child, 247 P.2d 817, 819 (Utah 1952)). Moreover, an
offeree may accept an offer by conduct if that conduct manifests his or her intent
to be bound. Commercial Union Assoc. v. Clayton, 863 P.2d 29, 34-37 (Utah Ct.
App. 1993).

Here, Cytozyme clearly made an offer to Dr. Naimie, at first orally and then

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in a letter dated January 3, 1981, 4 to pay royalties in exchange for the use of new
formulations Dr. Naimie might develop. The written offer specified the terms of
the proposed agreement including amount and timing of the royalty payments. In
a letter dated September 28, 1981, Cytozyme confirmed their agreement to pay
Dr. Naimie royalties on products they produced using Dr. Naimies formulations.
Dr. Naimie responded to these offers by performing research, testing and
developing new formulations, and eventually delivering his first formulation in
September 1981. An objective, reasonable person would conclude Dr. Naimie
acted in a manner manifesting his intent to be bound by the licensing agreement.
We find nothing in the record to indicate Dr. Naimie disagreed with the terms
Cytozyme offered nor conditioned his acceptance in any manner. Accordingly,
we conclude the parties entered into a valid verbal licensing agreement in
September 1981.

The fact that the parties may have intended to subsequently prepare a
written instrument does not prevent the verbal agreement from binding the
parties. See Lawrence Constr. Co. v. Holmquist, 642 P.2d 382, 384 (Utah 1982);
Consarc Corp. v. Marine Midland Bank, N.A., 996 F.2d 568, 574 (2d Cir. 1993);

Cytozyme inadvertently misdated this letter to read January 3, 1980. The

parties agree the correct date was January 3, 1981.
4

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Restatement (Second) of Contracts 27 (1979). While it is true that parties who

do not intend to enter a binding contract without a writing will not be bound until
a written agreement is prepared, see Sackler, 897 P.2d at 1221-22, we do not
believe the parties expressed such an intent in this instance. Cytozyme and Dr.
Naimie agreed to all essential terms of the licensing agreement before they signed
the October 1981 Agreement. Moreover, Dr. Naimie delivered his first
formulation a month prior to the signing of the October 1981 Agreement. This
evidence leads us to conclude the parties manifested an intent to be bound prior to
the October 1981 Agreement. 5 See Restatement (Second) of Contracts 27 cmt. c
(1979) (listing factors to be considered in determining whether parties formed a
contract prior to preparing a written memorial).

2. Integration
The district court concluded the May 1985 Agreement was not integrated,
but rather incorporated and referenced prior agreements, including ... the verbal

Cytozyme quotes various segments of Dr. Naimies trial testimony as

evidence that Dr. Naimie did not believe a contract formed until October 1981.
While we agree Dr. Naimies testimony at times seems inconsistent, we believe
this is more a reflection of Dr. Naimies unfamiliarity with legal terms and his
difficulty with the English language than a true indication of intent. Based on Dr.
Naimies actions and his testimony as a whole, we conclude he manifested an
intent to be bound by the verbal licensing agreement.
5

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agreement regarding payment of royalties. Contract integration is a question of

fact. Bailey-Allen Co. v. Kurzet, 945 P.2d 180, 190 (Utah Ct. App. 1997). We
review the district courts fact findings for clear error. Wiltel, 81 F.3d at1513. A
finding is clearly erroneous when although there is evidence to support it, the
reviewing court on the entire evidence is left with the definite and firm conviction
that a mistake has been committed. Anderson v. City of Bessemer City, 470 U.S.
564, 565 (1985). On appeal, we view the evidence in the light most favorable to
the district court's ruling, and must uphold any district court finding that is
permissible in light of the evidence. Exxon Corp. v. Gann, 21 F.3d 1002, 1005
(10th Cir. 1994) (internal citation omitted).

An integrated contract is one where the parties thereto adopt a writing or

writings as the final and complete expression of the agreement. Bailey-Allen
Co., 945 P.2d at 190 (internal quotation marks and citation omitted). The issue of
whether a contract is integrated and thus supersedes prior agreements depends on
the parties intent. Ringwood v. Foreign Auto Works, Inc., 671 P.2d 182, 183
(Utah 1983). In determining intent, a court may consider extrinsic evidence as
to the circumstances of the transaction, including the purpose for which the
contested agreement was made. Id. In this case, the majority of the May 1985
Agreement relates to Dr. Naimies full-time consulting duties. The Agreement
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mentions royalties only in passing: In addition to the base fee you will, as in the
past, be entitled to royalties on products you have developed or will develop.
Both parties testified the primary purpose of the May 1985 Agreement was to
make Dr. Naimie a full-time consultant. Based on this evidence, it was not
clearly erroneous for the district court to conclude the May 1985 Agreement was
not integrated.

3. Recission
Cytozyme summarily argues Dr. Naimie rescinded the licensing
agreement in a letter dated May 6, 1991 6 and thereby canceled his right to
damages beyond that date. We find this argument without merit. The May 6
letter does not resemble a recission as that term is commonly defined a mutual
agreement between the parties to discharge and terminate their duties under the
contract. See Restatement (Second) of Contracts 283(1) (1979); 5A Arthur

Dr. Naimies letter stated:

As you are aware, the royalties ... due [Dr. Naimie], for the exclusive
license to make, use and sell products utilizing the technology
developed by Dr. Naimie have not been paid since June, 1990,
despite oral and written requests for payment. Accordingly, please
be advised that the right of [Cytozyme] to make, use or sell products
based on or otherwise making use of the technology developed by Dr.
Naimie is hereby terminated effective the date of this letter.
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Linton Corbin, Corbin on Contracts 1236, p. 533 (1964). Rather, the letter
recognizes Cytozymes breach of the licensing agreement and revokes permission
to use the formulas. 7 The letter contains no indication of an agreement to
discharge contractual duties. Because we find no evidence or legal authority to
support Cytozymes argument, we conclude the district court correctly declined to
utilize such an analysis.

IV. Damage Calculation

The district court awarded Dr. Naimie unpaid royalties, accruing between
June 1990 and August 1996, on sixteen Cytozyme products which used Dr.
Naimies formulations. In his cross-appeal, 8 Dr. Naimie alleges the district court
Dr. Naimies letter is more analogous to those cases in which a party
asserts his or her right to suspend performance because of the other partys
breach. See Sprague v. Boyles Bros. Drilling Co., 294 P.2d 689, 693 (Utah 1956)
(But where the contract has merely been breached ... the contract may still
remain in force, and even though it does, the wronged party may be excused from
further performance and recover for loss occasioned to him.); see also 5A Arthur
Linton Corbin, Corbin on Contracts 1237, p. 547 (1964) (A mere expression by
the injured party of recognition of the fact that a vital breach has occurred and an
assertion of his own discharge thereby is no part of an agreement to rescind; it
is not an offer to rescind, nor is it the acceptance of such an offer.).
7

Cytozyme asks us to strike portions of Dr. Naimies Reply Brief that were
not limited to the issues Dr. Naimie raised in his cross-appeal. See Fed. R. App.
Proc. 28(c) (1995); 10th Cir. R. 31.2 (1996). We grant Cytozymes motion and
strike those portions of the Reply Brief that relate to issues Dr. Naimie did not
cross-appeal. We have not considered those portions of the Reply Brief in
reaching our decision on the merits of this case.
8

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made two errors in calculating damages: (1) the district court erred in not
awarding royalties through December 1996 as calculated by Dr. Naimies expert
witness, and (2) the district court erred in not awarding royalties on new, post1990 Cytozyme products. We will not disturb the district courts method of
calculating damages on appeal if it has a reasonable basis in the evidence. Lone
Mountain Prod. Co. v. Natural Gas Pipeline Co., 984 F.2d 1551, 1558 (10th Cir
1992). We review the district courts determination of the amount of damages
resulting from a breach of contract for clear error. Chaparral Resources, Inc. v.
Monsanto Co., 849 F.2d 1286, 1289 (10th Cir. 1988).

1. Time Period
Dr. Naimie challenges the district courts award of unpaid royalties through
August 1996 and argues he presented sufficient evidence to extend the award
through December 1996. Dr. Naimie bears the burden of proving damages
resulting from breach of contract. See Sawyers v. FMA Leasing Co., 722 P.2d
773, 774 (Utah 1986); Bunnell v. Bills, 368 P.2d 597, 601 (Utah 1962). If the
appellant intends to urge on appeal that a finding or conclusion is unsupported by
the evidence or is contrary to the evidence, the appellant shall include in the
record a transcript of all evidence relevant to such finding or conclusion, and, if

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the appellant fails to do so, the court is under no obligation to remedy any failure
of counsel to fulfill that responsibility. Deines v. Vermeer Mfg. Co., 969 F.2d
977, 979 (10th Cir. 1992). Moreover, where appellant fails to submit sufficient
portions of the record, an appellate court cannot review the district court's
factual findings and must accept them as correct. Trujillo v. Grand Junction
Regl Ctr., 928 F.2d 973, 976 (10th Cir. 1991); see also Green v. Johnson, 977
F.2d 1383, 1387 (10th Cir. 1992) (concluding record submitted by appellant was
insufficient for meaningful review).

To support his argument, Dr. Naimie included in his appendix two trial
exhibits prepared by his expert witness. One calculates royalties from June 1990
through August 1996, and the other from September 1996 through December
1996. 9 Dr. Naimie asserts this evidence was uncontradicted. Dr. Naimie also
included a very brief portion of trial transcript showing both exhibits were
admitted.

This record is insufficient to enable meaningful review of the district

Dr. Naimie claims he amended his damage calculation to include

September through December 1996 based on data Cytozyme provided after trial
began.
9

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courts findings. We cannot ascertain from the record provided whether Dr.
Naimie presented the district court with a choice between the August and
December calculations or rather presented them as a whole. We are also unable
to determine what, if any, findings the court made with regard to Cytozymes
claim that Dr. Naimie was precluded from claiming additional damages not set
forth in the Pretrial Order. We must, therefore, accept as correct the district
courts calculation of damages through August 1996 and deny Dr. Naimies crossappeal on this issue.

2. Products
The district court based its damage calculation on the sale of sixteen
Cytozyme products that the court determined used or currently uses formulations
developed by Dr. Naimie. The district court did not award damages on new
post-September 1990 product trade names because it determined insufficient
evidence existed showing Dr. Naimie developed or had an ownership interest in
those products. We believe the district courts method of calculating damages
was based on a reasonable analysis of the evidence. Lone Mountain Prod. Co.,
984 F.2d at 1558. The technical evidence and testimony presented at trial relates
almost exclusively to the sixteen Cytozyme products listed in the district courts
findings. Moreover, Dr. Naimie can point to no direct evidence that he developed
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the formulations for products introduced after September 1990. 10 Rather, Dr.
Naimie argues the court must infer as much based on Cytozyme employee
testimony and alleged discrepancies between Cytozyme sales invoices and
production reports. However, it is within the district courts discretion to weigh
the evidence and draw reasonable inferences from the facts. Federal Deposit Ins.
Corp. v. Hamilton, 122 F.3d 854, 860 (10th Cir. 1997). The courts choice
between two permissible views of the evidence cannot be clearly erroneous.
Manning,146 F.3d at 813. Based on the evidence presented (or lack thereof), it
was plausible for the district court to conclude Dr. Naimie had no interest in the
post-1990 products. Accordingly, we conclude the district courts calculation of
damages based on the sixteen listed products was not clearly erroneous.

The judgment of the district court is AFFIRMED.

Dr. Naimie had the burden to produce a sufficient evidentiary basis to

establish the fact of damages and the extent and amount thereof. See Sawyers,
722 P.2d at 774; Bunnell, 368 P.2d at 601.
10

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Nos. 97-4129 & 97-4147, Naimie v. Cytozyme Laboratories, Inc.

BRISCOE, Circuit Judge, concurring and dissenting:
I concur in the opinion except for the rejection of Dr. Naimies contention
in his cross-appeal that he presented sufficient evidence to receive damages for
unpaid royalties from September through December 1996. I would reverse and
remand to the district court for its determination of an additional damage award
for the September through December 1996 period and affirm the district court on
all other issues.
Cytozyme argues, for the first time on appeal, 1 that Dr. Naimie did not seek
damages for the additional period in the pretrial order. This argument is without
merit. One of the listed contested issues of fact was [t]he amount of royalties, if
any, owing to [plaintiff] as a consequence of the use of the formula[s] since
January 1, 1990. Appellants App. at 75. Nowhere did Dr. Naimie limit himself
to damages accruing prior to September 1996.
At trial, Dr. Naimie presented the testimony of Derek Rasmussen, an
accountant, who testified on the issue of damages. Rasmussen prepared Exhibit
59, which included four schedules of damages. Schedule 3 set forth the unpaid

The majority erroneously assumes Cytozyme asserted this same argument

in district court. The record, however, does not bear this out. In its post-trial
brief, Cytozyme made only two arguments regarding damages: (1) that Naimie
was limited to damages accruing prior to commencement of his lawsuit; and (2)
Naimies entitlement to royalties ended at some point between 1991 and 1994.
Appellees App. at 1347-48. The district court rejected both arguments.
1

royalties from June 1990 through August 1996. Appellees App. at 1662-63. The
total amount of damages listed in Schedule 3 ($482,753) coincided with the
amount claimed in the pretrial order. Id. at 1663. Exhibit 59 also included
Schedule 3a, which Rasmussen prepared based upon documents allegedly received
from Cytozyme after the trial began (and after the pretrial conference was
conducted). Schedule 3a sets forth the royalties that accrued between September
and December 1996. Id. at 1664.
Based upon the evidence presented to the district court and its rulings that
the parties had an enforceable agreement concerning royalty payments and that
Cytozyme breached that agreement, there is no conceivable reason for not
awarding Dr. Naimie damages for the September through December 1996 period.
Although the district courts findings of fact are not crystal clear, it appears the
court began with the figure of $482,753 (the original total of unpaid royalties
through August 1996 set forth in Schedule 3), made two deductions in accordance
with arguments by Cytozyme in its post-trial motion, and arrived at the final
damage figure of $377,526.45. Unfortunately, there is no indication in the courts
order whether it considered the issue of damages for the period of September
through December 1996 or, if it did, why it concluded Dr. Naimie was not entitled
to damages for that period. Dr. Naimie may not be entitled to the full $15,085
amount he claims on appeal because part of this claim encompasses royalties for
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new products that are not based on his formulas. However, he is entitled to some
measure of damages for unpaid royalties for the September through December
1996 period.

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