This error can occur if SQL Server attempts to create a new database with existing file names. By default, when SQL Server creates a new InterchangeBTM database, it creates the data and the InterchangeBTM.mdf and InterchangeBTM_log.ldf log files in the \Program Files\Microsoft SQL Server\MSSQL\Data folder.
If these files already exist in this folder, SQL Server cannot create the InterchangeBTM database, which in turn causes the database setup portion of the BizTalk Server Setup program to fail.
NOTE: The BizTalk Server database data and log files may exist in the SQL Server Data files directory if:
BizTalk Server has been previously installed, and then subsequently uninstalled. The BizTalk uninstall routine does not remove the BizTalk databases.
-or-
BizTalk Server has been previously installed, subsequently uninstalled, and the SQL Server installation that housed the BizTalk databases was uninstalled. The SQL Server uninstall routine does not remove any of the physical files used to create its databases.