Guilford v. In-Patient Consultants Mgt., Inc.

Filed 8/27/07 Guilford v. In-Patient Consultants Mgt., Inc. CA2/3

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION THREE

Appeal from a judgment of the Superior Court of Los Angeles County, David Minning, Judge. Judgment is affirmed.

Hillel Chodos and Diane Lynn Fella; Lascher & Lascher and Wendy C. Lascher for Defendants and Appellants.

Weston, Benshoof, Rochefort, Rubalcava & MacCuish, Andrew W. Gilford, Scott J. Leipzig and Stephanie A. Jones for Plaintiffs and Respondents.

_______________________________________

Plaintiff Steven Guilford is a software architect. In October 1999, he brought suit against Adam Singer, M.D. (Dr. Singer)^[1]and Dr. Singers companies, In-Patient Consultants, Inc. (IPC) and In-Patient Consultants Management, Inc.^[2](IPCM) (collectively defendants) for breach of an oral contract. Guilford had developed a software program for defendants and contended they had failed to fully pay him for his work.

The case proceeded to trial, with several special interrogatories being submitted to the jury. The jury specifically concluded that there had been a contract under which defendants were to market the software developed by Guilford, and Guilford was to receive 10% of the proceeds from the sale of the program.^[3] The jury further concluded that defendants had breached their contract with Guilford, and awarded damages in the amount of $5,500. On appeal, we affirmed the jurys finding of liability, but reversed for a new trial on the sole issue of damages.^[4] We concluded that the trial court had erred in rejecting Guilfords proposed jury instruction that when the fact of damages is certain, the amount of damages need not be calculated with absolute certainty and may be computed on a reasonable basis.

Upon retrial, the jury awarded Guilford $2,972,394. Defendants appeal, arguing that, on retrial, Guilford impermissibly claimed to have created a much larger computer program for defendants than he claimed at the first trial. Defendants also argue there was no reasonable basis in the record for the sizeable award of damages. We disagree and affirm.

FACTUAL AND PROCEDURAL BACKGROUND

1. Background Facts

Dr. Singer is a hospitalist, a physician specializing in caring for patients, generally cared for by other physicians, when the patients are hospitalized. There are two problems unique to the work of hospitalists which were addressed by software at issue in this case. First, there are issues of continuity of care. That is, when a patient is admitted into the hospital, treated in the hospital, or subsequently discharged from the hospital, the patients primary care physician should be made aware of the admission, progress, and discharge respectively. Second, there are issues relating to the patients needs post-discharge. Patients are often discharged from the hospital with directions to follow upon release filling prescriptions, obtaining durable medical equipment, beginning physical therapy, and so forth. Dr. Singer believed that costly hospital readmissions arising out of post-discharge problems could be reduced by post-discharge telephone calls to patients, addressing any difficulties they may have encountered.

By 1994, Dr. Singer was addressing post-discharge issues by using an employee to conduct post-discharge telephone interviews. Dr. Singer had purchased a simple software program, called Q & A, which enabled him to type in interview questions, creating a script that his employee could follow when conducting the telephone interviews. Finding this program too simplistic, Dr. Singer eventually contracted with Guilford, his second cousin, to create a better software program for his hospitalist practice.

The precise features of the program created by Guilford are subject to dispute. What is undisputed is that, long after Guilford ceased working on the program, Dr. Singers employees continued improving and revising the program, and a program evolved from Guilfords original program was still being used by defendants at the time of trial. In order to better understand the dispute in this case, we will define certain features of the hospitalist software ultimately used by defendants. The central feature of the program is a massive database; the database was created using software sold by Oracle. The hospitalist program creates various tables into which users can input patient data, primary care physician data, hospital data, diagnosis data, medication data, durable medical equipment data, and so forth. We refer to this as the database. In order to address continuity of care issues, the program is designed to allow hospitalists to input data into the database from the hospital itself. Hospitalists are given personal digital assistants (PDAs) into which they can input patient data, admission notes, progress notes, and discharge notes. The PDAs can then be connected to the database by modem,^[5]and the data from the hospitalists is uploaded into the database. Alternatively, data can be input directly into the database from a terminal, without using a PDA. When an admission note, progress note, or discharge note is entered into the database, the database then formats this information for facsimile (fax) transmission, and automatically directs a fax machine to fax the note to the patients primary care physician. The use of the PDAs requires two different program elements. First, the PDA interface is the software that runs on the PDA itself, enabling the hospitalist to input data. Second, the PDA connectivity is the software that takes the raw data from the PDA, formats the data for insertion into the database, and inserts it into the database. The use of the fax machine similarly requires two program elements. The FAX connectivity is the software that formats the data for faxing; the FAX driver is the software that actually directs the fax machine to send the fax without human intervention. We use the phrase continuity of care software to refer to the database, PDA, and FAX elements of the program collectively. The next element of the software is the post-discharge survey. After a discharge note has been entered into the database, the file is flagged as being ready for a post-discharge survey. Defendants employ several non-medically trained individuals to conduct post-discharge telephone surveys. The post-discharge survey software guides these individuals through the necessary questions, based on the information in the database related to the patients unique discharge note. For example, if the discharge note indicated that the patient has been prescribed a particular medication, the post-discharge survey software would prompt the survey-taker to ask the patient whether that prescription has been filled. The post-discharge survey software is also designed to dynamically insert or delete questions or action items based on the answers to previous questions. For example, if the patient responds that the prescription has been filled, the survey would then insert a question as to whether the patient has experienced side effects. If the patient responds that the prescription has not been filled, the survey would prompt the survey-taker to assist the patient in obtaining the medication.^[6] Finally, the software has composite report elements. One of the advantages to an Oracle database is that it has a tool which enables Oracle programmers to query the database to display particular data from the database. By 2000, defendants had employed an Oracle programmer to create numerous composite reports from the vast stores of patient and outcome data in the database. These are the main features of the program that are at issue in this appeal. The program in use by defendants at the time of trial contained several additional features, such as those allowing for automated billing or creating a database to assist defendants in identifying hospitalists who might be recruited to join their practice. These features, which we will term subsequent features, were concededly not part of the software as developed by Guilford.

Guilford developed the software, and was paid approximately $100,000 by Dr. Singer for doing so. The precise terms of the agreement under which Guilford was paid were not at issue in the trial. Apparently, Guilford was first paid under an hourly agreement, and the agreement was subsequently modified to limit his hourly compensation in exchange for 10% of the proceeds from the anticipated sales of the software. At issue is the software Guilford created as of January 1997, the date the contract was terminated by defendants.^[7] Guilfords software encompassed the database, PDA connectivity, and FAX connectivity. In other words, Guilford programmed the entire continuity of care software, except for the PDA interface and the FAX driver at the opposite ends of the process. The PDA interface was written by Robert Singer, an employee of defendants. Robert Singer wrote the PDA interface to Guilfords specifications. That is, he wrote the interface to parallel the input screens Guilford had created for direct database input. As to the FAX driver, Guilford used a commercially-available FAX driver created by a third party.^[8] Guilfords program also included the post-discharge survey. It included few, if any, composite reports, although it was capable of being programmed to generate more.^[9] The subsequent features were not a part of the software. In January 1997, when Guilford was terminated by defendants, the program was functional and was in use in defendants practice.

Initially, Dr. Singer believed the program could be sold^[10]to third parties, including other practices, health plans, medical groups, hospitals, institutionalized health care providers, and socialized health care systems abroad. Dr. Singer and Robert Singer discussed prices for the software, and two models were created. Under the first model, the software would be licensed outright to a licensee who would run the system on its own computers. This would cost $300,000. Dr. Singer agreed that $300,000 was a fair and reasonable price for the sale of the software. Under the second system, defendants would sell a service instead. For a fee of $1250 per month, a doctor would be given an PDA that connected to defendants servers. Defendants would provide the continuity of care services (via the software) and post-discharge survey functions for the doctor. Dr. Andrew Fishmann, a hospitalist in a competing practice, testified that he had no reason to believe the software could not be licensed for $300,000 or that the monthly service could not be sold for $1250 per month.

As early as 1996, when the software was not yet fully functional, Huntington Provider Group was interested in using the system to manage its cases.^[11] After a demonstration, Huntington was interested in the software, but requested certain changes be made to it. Guilford and Robert Singer made the changes, for which Huntington paid $30,000 or $40,000. Huntington then used the software on a trial basis, and negotiations were then opened as to whether Huntington would license the software or possibly invest in IPCM. The individual at Huntington who was handling the negotiations was unexpectedly transferred to Europe. His successor was not interested, and the deal fell through. The price discussed had been $300,000 for the system; Huntington would have used it for four or five case managers. In 1996, there were negotiations with other entities, but the sales were never consummated.

In May of 1998, IPC issued a confidential business plan (1998 business plan) in the hopes of raising venture capital. At this point in time, the software running at IPC was largely unchanged from Guilfords software.^[12] The 1998 business plan states, IPC has developed a proprietary hospitalist information system: IPC-Link. The system allows the hospitalist physician to rapidly enter relevant demographic and clinical information on hospitalized patients into a central database via hand-held computers. Case management and home health personnel enter data using the same device. IPCs central data center and call center facilitate communication with primary care physicians and patient follow-up. IPC uses the database for practice management, operations improvement, outcomes management, and adjudication of capitated[^[13]] contracts.^[14] The business plan indicated that IPC-Link has proven to be the most important innovation in the industry. To the Companys knowledge, and according to the numerous hospitals and inpatient medical groups who have sought to purchase or contract for the system from IPC, it is still the only available information system for hospitalists. It both differentiates IPC in the marketplace and provides the technical infrastructure required for a hospitalist company to grow rapidly on a national scale.

Moreover, the 1998 business plan considered licensing IPC-Link to be an additional source of revenue. It stated, Despite virtually no marketing to date, the Company has received numerous requests for purchase and use of IPCs information system. The Company recently signed a contract to extend IPC-Link to hospital case managers. The report states that IPC believes that it has the opportunity to generate additional revenue from selling IPC-Links case management module and extending the product to the home health and durable medical equipment markets. In order to capitalize on this market opportunity, IPC will need to make additional investment[s] in technology and infrastructure. IPC conservatively estimates the hospital case management market alone to be over $150 million. IPC indicated that it intended to allocate approximately $50,000 of the proposed financing to develop a comprehensive development, business, and strategic plan for IPC-Link.

Ultimately, however, defendants chose not to license the software. While in negotiations to license the software to another hospitalist company for $300,000, defendants pulled the plug because that was just about the time we were going to take venture capital, and it didnt look very good for us to be selling our primary asset to our competitor. By this time, defendants perceived Guilfords software to be the key element that distinguished them from other hospitalist companies. As Robert Singer explained, We felt it was our competitive edge. We didnt want to lose control of the data, and we didnt want people competing with us with our own technology.

By mid-1999, Catholic Health Care West was almost begging defendants to sell them the software. Defendants refused to even discuss it. At this point, the software used by defendants was still substantially the same as the software Guilford had created in January 1997. Indeed, with the exception of additional composite reports, it was nearly identical to Guilfords software.

In mid-2000, IPC revised the post-discharge survey. The revised survey was not recreated from scratch, but incorporated and adapted elements of Guilfords original work. The post-discharge survey still performed the same functions as Guilfords original, but the screens seen by the user were different, and, arguably, more user‑friendly. IPC did not revise the continuity of care software at this time. By 2001, however, all original pieces of Guilfords software had been replaced, and additional functionality added. It is apparent, however, that the continuity of care and post-discharge survey elements of the software, while not the software that Guilford had developed, remained similar to his software.

Over time, IPC expanded its practice. IPC both hired individual hospitalists and incorporated existing practices through a practice franchise model. IPC advertised itself to existing physicians and practices as being in a position to handle all of the support issues surrounding a hospitalists practice, leaving the physicians free to practice medicine. IPCs software was frequently identified in its advertising to potential recruits as a reason why they should join IPC. When Guilfords contract was terminated in 1997, IPC consisted of only Dr. Singer and a few other physicians. By October 2001, the practice had expanded to 150.

In October 2001, a confidential information memorandum was prepared by IPC and its financial advisor, Cain Brothers (Cain Brothers memo). In a change from its behavior of the past three years, IPC stated that it was now ready to expand its focus from build[ing] new hospitalist practices to fully exploit[ing] the market by providing all hospitalists a full suite of services and products. IPC claimed in the Cain Brothers memo that its IPC-Link software has been developed to be sold to non-IPC practices.

Even though the software had been revised, the description of IPC-Link in the Cain Brothers memo reveals a substantial similarity to Guilfords software, although it also indicates that the subsequent features, including billing and recruitment, had been added by this time.^[15]In the Cain Brothers memo, IPC calculated projected IPC-Link revenue on the basis of selling a monthly service, rather than licensing the software outright. IPC assumed each group using the service would consist of five physicians, and would pay $8550 per month for its complete service, including post‑discharge surveys.^[16] An attached income statement projects $326,900 in revenue attributed to IPC-Link in 2002, and $2,032,350 in IPC-Link revenue in 2003.

The projected IPC-Link revenue was not actually generated. With the exception of two small contracts, IPC did not sell a monthly service as anticipated in the Cain Brothers memo. Instead, IPC continued to expand its ranks. At the time of trial, in late 2005, IPC had over 350 physicians, and had recently acquired a practice of another 50 physicians. It was the largest hospitalist practice in the nation; the next largest had only 90. IPCs growth was expected to continue.

2. The First Trial

In 1999, Guilford brought suit against defendants for breach of contract, and the case proceeded to trial. Special interrogatories were presented to the jury. The jury was asked whether Guilford had established a contract the essential terms of which were that: plaintiff, as an independent contractor, would write a software program at one‑half his customary rate and give defendants a limited non-exclusive license to enable defendants to sell to third-party end users[] non-exclusive licenses to use the software; and defendants agreed to market the software to third-party end users by non-exclusive licenses, and to pay plaintiff ten percent of the proceeds of the sale of such third party end user licenses? The jury did not answer the question yes or no. Instead, the jury indicated that it found the existence of a different agreement, the terms of which were: (1) [Plaintiff] would develop [a] software program; (2) [Defendant] would sell the software program; [and] (3) [Defendant] would pay plaintiff 10% of the proceeds of the sales of the software program. When asked to identify the consideration for the agreement, the jury responded, [Dr. Singer] would pay [an] additional 10 percent of sales revenue in exchange for [Guilford] working exclusively on this project, working faster and not billing more than 20 hours per week.^[17] The first jury concluded defendants breached their agreement, and awarded $5,500 in damages. The jury also found the following facts to be true: (1) after January of 1995, Guilford wrote the software which he agreed with Dr. Singer to write; (2) the software was a  work made for hire, that is, . . . it was designed by defendants, written by [Guilford] to defendants specifications for use by defendants, and fully paid for by defendants, on the understanding that it would be owned by defendants and would belong to them and not to Guilford;^[18]and (3) the software Guilford wrote functioned properly, and was of such a nature and quality[] that non-exclusive licenses would be marketable to third party end-users.

3. The First Appeal

On appeal, we reversed and remanded for a new trial on the issue of damages, concluding the jury had not been properly instructed. (Guilford v. In-Patients Consultants Management (April 14, 2003, B152110 [nonpub. opn.].) The trial court had rejected the following jury instruction: Where the fact of damages is certain, the amount of damages need not be calculated with absolute certainty. The law requires only that some reasonable basis of computation of damages be used, and the damages may be computed even if the result reached is an approximation. This is especially true if you find that it is the wrongful acts of the defendant that have created the difficulty in proving the amount of loss of profits or if you find that it is the wrongful conduct of the defendant that ha[s] caused plaintiff[] to not realize a profit to which plaintiff [is] entitled. We concluded the instruction was a correct statement of the law, supported by the evidence, and one which plaintiff was entitled to have given.

In concluding that the error in failing to give the instruction was prejudicial, we stated the following: [P]laintiff presented a strong case, indeed a case that the jury believed, that he had an agreement with defendants that he would share in the on-going profits, if any, produced by the software, specifically, that he would receive a percentage of the money from selling the software, and that defendants had promised to sell the software. The evidence also showed that despite this promise, defendants instead changed their business model, and rather than selling the software to other health care providers, decided to sell IPCMs hospitalist management services. In fact, this new business model created a disincentive to actually sell the software only. [] Thus, plaintiffs ability to calculate his damages with certainty had been impaired by defendants own conduct of co-opting the software for their expanded business purposes, because the actual, versus potential, number of software sales reflected the fact that defendants had concentrated on selling services into which the software had been bundled instead of selling software alone. To that statement, we further add that defendants did not even sell services into which the software had been bundled, but instead chose to absorb existing hospitalist practices into IPC under a franchise model whereby those practices would generate revenue for defendants by using the software, without a single dollar of that money ever being earmarked as revenue generated by the software. Our opinion further stated that a properly instructed jury could have approximated damages by treating each user of the software as someone who would have been a purchaser of it if the software alone, and not IPCMs management services based on the software, had been available.

4. The Pretrial Hearing

On remand, the parties disputed the scope of permissible discovery and the evidence to be admissible at trial. Specifically, the parties disputed whether any evidence of IPCs then-current software, and the salability of that software, was discoverable and admissible. The court set the matter for a hearing regarding the similarity of Guilfords software with the software then in use by defendants. The hearing was held over four days in February 2005.

At the hearing, Guilford demonstrated the software he had created. He testified that he had developed: the database, the PDA connectivity, the FAX connectivity, and the post-discharge survey features of the software. He testified that Robert Singer had programmed the PDA interface, with his guidance. He testified that the FAX driver was separately licensed software. He admitted that he did not program any functional composite reports, although he did note that he had originally programmed a few that were no longer functioning. Guilford did not make any claim to having developed the subsequent features, although he believed that some of them were built upon the infrastructure he had created. Guilford reviewed defendants then-current program, as well as parts of the source code for that program. He identified similarities in functions, tables, data structures, and source code.

Defense counsel cross-examined Guilford on the subject of two floppy disks Guilford had produced during discovery in 2000.^[19] The disks had some 105 files of source code on them. Guilford explained that the software he had demonstrated at the hearing was a functioning version of the software as it had existed when he was terminated by IPC in January 1997, and was not merely the source code that was on the floppy disks. Guilford explained that the source code alone cannot be run on a computer; it must first be compiled, and have an existing Oracle structure over which it can run to create the database. Defendants introduced evidence suggesting that the disk from which Guilford had demonstrated his program at the hearing contained more, and larger, files than the source code disks he had turned over in discovery. While this may have been the case, an IPC employee^[20]admitted that the program Guilford demonstrated in court was extremely similar to the software IPC had in January 1997, with only minor differences.

During the hearing, Guilfords counsel disclaimed any intention to suggest Guilford had created the entire current IPC-Link program. Counsel explained, Our intention is to use the software that originates from the PDA into the database, allows for faxing, and allows for surveys to be conducted. And weve been referring to that with a global terminology of . . . Case Management. [] Software involves recording patient demographic information, and storing that in the database, sending out faxes and conducting surveys.^[21]

After a witness had demonstrated the current version of IPC-Link, and the court heard expert testimony regarding the similarity between the programs, the court concluded that sufficient similarity existed between the current program and Guilfords software to allow valuation of the current program to be used. Defendants counsel inquired, Which software? Are you talking about the billing program and all the other programs or just the case management part? The court responded, Just the case management part of it.

5. The Second Trial

Before testimony in the second trial had even begun, defendants counsel began characterizing Guilfords program as encompassing only the post-discharge survey.^[22]When plaintiffs counsel questioned this characterization, defense counsel explained that the two floppy disks he had received in discovery represent the case management survey and only the case management survey. And that was the subject that is what we have understood for the last three years is the subject of [Guilfords] damage claim.^[23]

It was at this point that Guilford first learned that the some of the source code relating to the continuity of care software had been accidentally omitted from the floppy disks he had provided in discovery in 2000. At trial, Guilford testified that, when the source code was requested, he had simply cobbled together whatever source code he still had on his computer at home, and delivered it to defense counsel.^[24]When Robert Singer was subsequently cross-examined with the floppy disks, he expressed surprise that the floppy disks did not appear to contain the scripts to configure the database or the PDA connectivity feature, both of which he knew Guilford had created for IPC.

Defendants motion to exclude any attempt by Guilford to claim the program included anything beyond the post-discharge survey was denied. The court concluded that the scope of the program claimed to have been written by Guilford was an issue for the jury to determine, and allowed defendant to impeach Guilford with any prior characterizations of the scope of his program that he may have made (including the floppy disks). Guilford was cross-examined at length on his prior deposition and trial testimony, specifically focusing on his admissions that the source code on the disks could not be placed in a computer and immediately run by someone who might have purchased it.

Guilford submitted expert testimony as to the amount of money he would have received had defendants sold his software. Guilford relied on evidence that defendants believed they could have sold the software outright to practice groups of five doctors each for $300,000. Guilfords expert divided IPCs current physicians into practice groups of five, and assumed a $300,000 sale to each group of five at the time they had joined IPC.^[25] The expert then calculated the 10% to which Guilford would have been entitled. The expert allowed for interest from the time of the assumed software sale. The expert also calculated expected sales through 2011, based on estimated growth of IPCs practice, and reduced that amount to present value. All together, the calculations resulted an amount due Guilford of $5,456,148.

Defendants did not offer an alternative calculation of damages. Instead, they took the position that Guilfords software was largely useless and not marketable.^[26] Dr. Singer testified that the statements of prospective buyers interest appearing in the 1998 business plan, the projected sales in the Cain Brothers memo, and other written materials celebrating IPC-Link were mere puffery -- characterizing individual statements as a stretch, wishful thinking, or simply a mistake. When confronted with defendants written statements indicating IPCs software constituted a barrier for others attempting to enter the hospitalist business and an important factor to IPC in closing deals, Dr. Singer stated, I was wrong.

The case was given to the jury for a general verdict; special verdict requests of both parties were denied. The jury returned a verdict in favor of plaintiff for $2,972,394.^[27] The verdict was unanimous.

Defendants motions for judgment notwithstanding the verdict and for new trial were denied. Defendants filed a timely notice of appeal.

CONTENTIONS OF THE PARTIES

On appeal, defendants assert the trial court erred in denying their motion to limit Guilfords claim to only the source code on the floppy disks produced in discovery. In a related claim, defendants argue the trial court abused its discretion in denying defendants request for special interrogatories to be sent to the jury requiring them to identify the precise elements of the program which they believed Guilford had written. Finally, defendants argue that the evidence was insufficient to support the award of damages. We disagree with each contention and affirm.

DISCUSSION

1. Scope of Guilfords Claim

Defendants argue that the trial court erred in not limiting the program for which Guilford could obtain damages to the source code on the two floppy disks. Defendants argue that, without this limitation, Guilford was able to claim to have written a much larger program than that on which he had sought recovery at the first trial and the pretrial hearing.

We disagree with defendants factual premise. We have discussed the testimony at the pretrial hearing, and it is clear that the software which was: (1) demonstrated by Guilford; (2) claimed by Guilford to have been written by him; (3) argued as Guilfords software by counsel; and (4) found to be Guilfords software by the court^[28]was the very same software for which Guilford sought damages at the second trial the database, the PDA connectivity, the FAX connectivity, and the post-discharge survey. While Guilford may have also agreed that he produced the floppy disks in discovery under the representation that those disks contained all of the source code that he had written, he clearly took the position that the software at issue was the software he had demonstrated in court.

We have reviewed the testimony at the first trial and find it to be similar. Guilford introduced evidence that he had created the database, the PDA connectivity and the FAX connectivity elements of the software.^[29] While Guilford did agree that he had produced the floppy disks and believed them to contain all of the source code he had written, at no time did Guilford assert that the only software he had written was the post-discharge survey.

While there may have been minor discrepancies in Guilfords testimony regarding whether the software he had created included a handful of composite reports, or whether he believed his involvement in Robert Singers creation of the PDA interface should entitle him to damages based on the use of that interface,^[30]there was never any wholesale attempt of Guilford to change the scope of the program he claimed to have written. As such, there was no basis for the trial court to limit the scope of Guilfords claim. To the extent Guilfords testimony at both trials and the pretrial hearing differed from testimony he gave at his deposition relating to the contents of the floppy disks, defendants were properly permitted to impeach Guilford with that testimony. (Code Civ. Proc.,  2025.620, subd. (a).) That is all that is required.^[31]

Similarly, defendants contend the trial court erred in denying their request for special interrogatories. Defendants proposed a series of nine special interrogatories, most of which asked the jury whether certain elements were included in the software developed by Guilford.^[32] [T]he giving of special interrogatories to the jury is addressed to the sound discretion of the trial judge and his determination is not subject to review in the absence of a clear abuse of discretion. (Masonite Corp. v. Pacific Gas & Electric Co. (1976) 65 Cal.App.3d 1, 11‑12.) [T]he purpose of a special finding of fact is to test the validity of a general verdict by determining whether all facts essential to its support were established to the satisfaction of the jury. (Id. at p. 11.) Under this standard, there was no abuse of discretion. The findings of the jury in the first trial established that an oral contract had existed, the terms of the contract, and the fact that the contract had been breached. All that remained for this jury to resolve was the amount of damages Guilford suffered as a result of that breach. Whether Guilfords software had included, for example, faxing software, is simply not a fact essential to the support of the jurys award of damages. Defendants proposed special interrogatories sought to question the jury about facts which, if resolved in defendants favor, would have resulted in a lower award of damages than if they had been resolved in Guilfords favor.^[33] The defendants do not have the right to special interrogatories on every factual argument they made, and the trial court did not abuse its discretion in rejecting the interrogatories proposed by defendants.

2. Sufficient Evidence of Damages

As to the calculation of damages, the jury was instructed as follows: Steven Guilford must prove the amount of his damages according to the following instructions. He does not have to prove the exact amount of damages and you do not have to calculate the amount of his damages, if any, with mathematical precision, but there must be a reasonable basis for computing damages. You must not speculate or guess in awarding damages. [] In these instructions the term software program means the software program developed by Steven Guilford for defendants up to and including January of 1997. Steven Guilford must prove the amount of gross proceeds defendants would have received if they had used the efforts required by their agreement to sell or license the software program and thus the amount Steven Guilford would have received as his 10 percent of those gross proceeds. [] In order to prove this amount Steven Guilford must establish to whom the software program could have been sold or licensed [through] a reasonable effort[] by defendants or how much it could have been sold or licensed through reasonable efforts by the defendants and for how long it could have been sold or licensed through the reasonable efforts by defendants. [] However, when the fact of damages is certain, the amount of damages need not be calculated with absolute certainty. The law requires only that some reasonable basis of computation of damages be used and the damages may be computed even if the result[ ] reached is an approximation. This is especially true when it is the wrongful actions of the defendants that have created difficulty in proving the amount of damages, if any, to which plaintiff is entitled.

Defendants do not challenge the language of the instructions given; instead, they argue the evidence was not sufficient to support the amount of damages awarded. We therefore consider the evidence in the light most favorable to the jurys verdict. (Scottv. Pacific Gas & Electric Co. (1995) 11 Cal.4th 454, 465.) The jury could have found the following facts, based on the evidence introduced at trial: (1) Guilfords program was salable at the time it was delivered in January 1997; (2) The software used by defendants from 1997 until the changes were made in 2001 was the same software that Guilford had developed, with insignificant changes; (3) The software used from 2001 through the time of trial was, while capable of greater function than Guilfords software, sufficiently similar to Guilfords program that the potential revenue gained by its sale could be considered in determining the revenue that could have been gained by the sale of Guilfords program; (4) From January 1997 onward, a reasonable price for the sale of Guilfords software was $300,000 for a practice group of 5 physicians;^[34](5) Defendants could have made many sales of Guilfords software, as defendants admitted in their 1998 business plan, and as evidenced by the sale that was aborted when defendants decided not to license their software to their competition; (6) Defendants decided to use the software to expand their own practice, rather than license their software to other physicians; (7) Defendants business model included acquiring already existing practice groups; (8) Had defendants not decided to keep their software exclusive, it is reasonable to assume defendants would have made sales to at least as many practice groups as it acquired; (9) Defendants had acquired 76 practice groups by the time of trial; (10) Had defendants made 76 sales of its software, they would have generated $22,800,000 in revenue, entitling Guilford to $2,280,000; and (11) Simple interest on the unpaid sum amounted to $761,846. Under this calculation, Guilford would have been entitled to $3,041,846 in payments. The jury instead awarded the lesser amount of $2,972,394. While we cannot determine exactly how the jury reached the lesser figure, it is certainly supported by the evidence. The jury might have concluded that a slight reduction was necessary in light of the fact that the PDA interface and FAX driver were not part of the software program Guilford created. Alternatively, the jury might have concluded that a greater reduction was called for, but offset it with anticipated future sales for a short period, or even the two identifiable past sales which would have gone ahead were it not for defendants decision to keep Guilfords software for themselves.

Relying on authority relating to the difficulty of proving lost profits for an unestablished business, defendants argue that the evidence that the software would have been sold is too speculative. The authority is inapposite; we are not concerned here with the uncertainty of whether a new business would be able to operate at a profit. Instead, we are concerned with whether defendants could have sold an identifiable product, at a price which defendants themselves believed to have been a fair and reasonable price, to customers defendants had anticipated would purchase it. This is not too speculative to permit recovery. Indeed, even in lost profit cases for unestablished businesses,   prelitigation projections, particularly when prepared by the defendant   can establish prospective profits with sufficient certainty to permit recovery.^[35] (Parlour Enterprises, Inc. v. Kirin Group, Inc. (2007) 152 Cal.App.4th 281, 288.) In this case, defendants anticipated substantial profits from selling Guilfords software, but ultimately decided not to sell the software, preferring to keep it for themselves and instead use it to help expand their practice. Given defendants business decision to neither license the software nor sell it as part of a service package, and instead use it as an incentive for other hospitalists to join their practice, it was reasonable for the jury to calculate damages on the basis that the defendants would have made at least the number of sales equivalent to the number of practice groups that joined its practice.

DISPOSITION

The judgment is affirmed. Guilford shall recover his costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

CROSKEY, Acting P. J.

We Concur:

KITCHING, J.

ALDRICH, J.

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^[1] We shall refer to Adam Singer as Dr. Singer, to differentiate between Dr. Singer and his cousin, Robert Singer.

^[2] While IPC and IPCM are different legal entities, they have no distinction for the purposes of this case, and, indeed, were sometimes confused at trial.

^[3] We use the terms program and software interchangeably.

^[4] The trial court had granted a motion for judgment notwithstanding the verdict on the basis of the statute of limitations. We concluded the statute was not a bar.

^[5] Subsequent iterations of the program have incorporated web-based data entry and, presumably, wireless internet connections.

^[6] The system was originally designed for nurses to conduct the survey. When defendant hired non-medically trained personnel, the software was revised to allow the survey-taker to flag certain responses for nurse follow-up. A nurse would then be alerted by the system to contact the patient, and the reasons for the contact.

^[7] Subsequently, Guilford was hired on an hourly basis to do further work on the software, such as migrate it to Windows NT when that operating system became available, but this work is not considered part of the software at issue in this case. Indeed, Guilford wrote the program independent of any particular operating system, and IPCs vice president of technology conceded that the software did not need to be modified to run in the new operating system; it simply required a compatible version of Oracles database software.

^[8] For some time, defendants used a FAX driver that had been independently created by Guilford. Guilford was paid an additional amount for the license of his fax driver.

^[9] At one point, Guilford testified that his program could do basic composite reports. Robert Singer agreed, testifying that Oracle reports were not Guilfords forte, but that Guilford had created a few crude composite reports. Ultimately, Guilford testified that he had created a few composite reports for the program in 1996. Dr. Singer had then requested an architectural change to the system, which Guilford implemented. The change invalidated the composite reports, and Guilford did not have the opportunity to update them before his business relationship with defendants terminated.

^[10] Technically, the software was to be licensed, not sold. We follow the parties convention and use the terms interchangeably.

^[11] Indeed, the reason Robert Singer wrote the PDA interface rather than allowing Guilford to write it was because Guilford had been pressed for time. Huntingtons interest in the system had prompted the parties to speed work on the software so that it would be ready for a demonstration.

^[12] It had been migrated to Windows NT, was using a different third-party FAX driver, and had several more composite reports. Only minor changes to the database had been made, and the post-discharge survey had been relatively unchanged. The subsequent features had not yet been added.

^[13] A capitated contract is one by which a doctor or group is paid a certain amount per enrolled patient to provide services to all enrolled patients, regardless of how many require services.

^[14] Much of the difficulty in this case arises from the fact that defendants used the term IPC-Link to refer to their software from this point onward. While later versions of IPC-Link included the subsequent features and were therefore different from the software Guilford had developed, it is apparent that, at the time of the 1998 business plan, IPC-Link referred to software virtually unchanged from Guilfords software.

^[15] It states, IPC has developed a market leading information systems platform (IPC-LINK), that enables rapid and low cost collection of clinical and billing information. The hospitalists upload information collected from patient encounters each day via modem to a central server. Once data is uploaded, IPCs central data center and call center facilitate communication with primary care physicians. Referring doctors receive notification when a hospitalist admits a patient to the hospital. At discharge, the primary care physician receives documentation detailing the diagnoses, procedures, discharge medications, follow-up instructions, and other pertinent information. [] IPCs call center, which is staffed by trained medical personnel, contacts all patients after discharge to ensure they are receiving proper continuing care (home visits, etc.). Following proprietary, computer-driven algorithms, the IPC case managers determine if problems exist and provide patients with instructions for resolution of their issues. The case managers provide an appropriate referral for those patients whose problems cannot be addressed over the telephone. This system improves the quality of care, improves patient satisfaction, and lowers the cost of care through reduced readmission rates and emergency department visits. IPC management believes that their call center approach differentiates the Company from the competition and enhances the IPC brand name.

^[16] There would be a one-time $2,500 set-up fee per physician. There would be a monthly fee of $750 per physician for the use of the PDA. A monthly basic reporting fee of $500 per physician would be added, which would not include post-discharge surveys. An additional monthly fee of $500 per practice group would be charged for use of the call center to conduct post-discharge surveys, as well as a $25 fee for each completed survey. Assuming 72 post-discharge surveys per practice group, the total monthly revenue generated by IPC-Link would be $8550 per practice group or $1710 per physician.

^[17] In their reply brief on appeal, defendants argue that the first jury found only that Guilford was entitled to 10% of the proceeds, and that the term is ambiguous as to whether the jury intended for Guilford to receive 10% of the gross proceeds or only 10% of the net proceeds. The jurys clarification that the agreement required Dr. Singer to pay 10 percent of sales revenue revolves any ambiguity in favor of gross proceeds.

^[18] We note an apparent inconsistency in the verdict. In the context of answering the work made for hire question in the affirmative, the jury stated that defendants fully paid for the program. But if the jury found the defendants fully paid for the program, that appears inconsistent with the jurys finding that defendants were actually in breach of their agreement to pay Guilford. We believe the discrepancy can be explained by the jurys finding regarding the consideration for the promise to pay the 10% of sales revenue. The jury concluded Guilford agreed to write the program in exchange for payment; Guilford wrote the program and was paid. The jury also concluded that Guilford subsequently agreed to work faster and to limit his billing in exchange for further payment of 10% of sales revenue. It was this modification of the agreement that was breached.

^[19] At one point, the contents of those disks had been copied into a file called Fatman, leading counsel to refer to them by this name.

^[20] Pat Holmes testified that he was a consultant from January 1997 and was subsequently hired by IPC in March 1998. He was hired to be the new Oracle guy.

^[21] Plaintiffs counsel added that, for example, the value of the current programs recruiting function should be eliminated in determining the value of Guilfords software.

^[22] Defense counsel first made this representation in voir dire.

^[23] Whether defense counsel understood the subject of Guilfords claim to be only the post-discharge survey is not before us. However, it is apparent from our discussion of Guilfords demonstration and testimony at the pretrial hearing, as well as our quotation of Guilfords counsels discussion of the scope of Guilfords claim, that Guilford had then claimed to have written the database, PDA connectivity, and FAX connectivity programs, as well as the post-discharge survey.

^[24] At one point, defense counsel questioned Guilford stating, Actually, to be perfectly precise, we didnt ask you for source code. We asked you for the software program that you wrote that you say was the subject of this lawsuit. And you gave us these two disks. Defense counsel then quoted from Guilfords deposition, where he had asked Guilford, Your lawyers sent me two floppy disks which he said contained software that is the subject of this lawsuit. Are you familiar with those two floppy disks, pink floppy disks that Im taking about? Guilfords affirmative answer to this question is not an admission that the disks contained software rather than source code. In any event, defense counsel subsequently cross-examined Guilford on some of Guilfords testimony from the first trial. Defense counsel read one of his questions from the first trial as, You will recall during the course of depositions in this case, we asked you to produce the source code[,] the software that you claim you had written. It is apparent from the context that this question related to the floppy disks, and that defense counsel had asked for, and received, source code on them.

^[25] While IPC has practice groups of larger than