The recent decision by the U.S. Court of Appeals, Sixth Circuit, Caudill Seed & Warehouse Co. v. Jarrow Formulas, Inc., illustrates the flexible approach taken by courts when considering the calculation of compensatory damages in trade secrets cases. No. 21-5345, 2022 WL 16846585 (6th Cir. Nov. 10, 2022) There, the Sixth Circuit affirmed a jury’s compensatory damages verdict which awarded the plaintiff its research and development costs for its misappropriated trade secret even though the underlying trade secret was not destroyed through disclosure or other means. Id. at *15.
Continue Reading Reap What You Sow – Sixth Circuit Affirms Recovery of Research and Development Costs to Agricultural Company in Trade Secret Case

A recent California Court of Appeals decision found nominal damages could be awarded for an employee’s breach of a non-disclosure agreement (“NDA”), even if no actual harm was done to the employer.  An award of nominal damages for breach of an NDA may be important for companies seeking to protect confidential information and trade secrets for two reasons: (1) this may give rise to an award of litigation costs, and (2) may also support a permanent injunction ruling preventing the former employee from any further possession or use of the protected information.
Continue Reading NDA: An Effective Way to Protect Confidential Information

Whether a court order is appealable is often the first issue analyzed by appellate attorneys. An interlocutory order is an order issued by a court while a case is pending. These orders are not a final disposition of the case, but some interlocutory orders may be appealed even while the litigation continues. California law generally holds that “[t]o qualify as appealable, the interlocutory order must be a final determination of a matter that is collateral—i.e., distinct and severable—from the general subject of the litigation.”[1]
Continue Reading Trade Secret Misappropriation: Denial of Motion for Attorneys’ Fees under CUTSA is Not an Appealable Order

Whether under the federal Defend Trade Secrets Act (“DTSA”) or under state law uniform trade secrets acts (“UTSA”), assessing monetary damages in trade secret misappropriation cases is rarely easy.  By definition, trade secrets lose their value once they lose their secrecy, but the lost value is often difficult to monetize.  Calculating damages for misappropriation should account for the lost value of the trade secret “asset,” but courts often lose sight of this calculus in fixing damages.  Lost profits, unjust enrichment, and reasonable royalties are common measures of damages in trade secret misappropriation cases, but there is another rarely considered measure of damages:  the diminution in value of a plaintiff’s trade secret caused by the misappropriation.  Damages for the diminution in value of a trade secret are a form of compensatory damages, though some courts will grant injunctive relief due to the difficulty in valuing the diminution of trade secrets.  Aerodynamics Inc. v. Caesars Entm’t Operating Co., No. 2:15-cv-01344-JAD-PAL, 2015 U.S. Dist. LEXIS 129588, at *1 (D. Nev. Sep. 24, 2015).  DTSA (and most UTSA statutes), of course, recognize compensatory damages as a viable theory.  18 U.S.C. § 1836(b)(3)(B).  When courts have assessed trade-secret diminution theories, they have emphasized the critical importance of a quality expert and an almost asset-sale like economic valuation of the trade secrets.
Continue Reading Diminution in Value As A Measure of Damages for Trade Secret Misappropriation

On September 2, 2020, the Fifth Circuit declined to void a fee award of nearly $2.3 million in favor of an employer that had prevailed on its trade secret theft claim against its former employee, because the employee willfully failed to comply with the bankruptcy court’s “extremely explicit” order regarding his objections to the award.
Continue Reading Fifth Circuit Affirms Attorney’s Fee Award of $2.3 million in Misappropriation Case Against Former Employee who Failed to Comply with Court’s Objections Order

The United States Court of Appeals for the Third Circuit recently affirmed a District Court opinion awarding punitive damages against a former employee who stole confidential information from his former employer, even though the employer did not “own” the stolen information.  Advanced Fluid Sys., Inc. v. Huber, 958 F.3d 168 (3rd Cir. 2020).  This is a first of its kind decision in the federal circuit courts.  The Third Circuit held that the non-owner employer still had the right to bring trade secret claims because it had possessed and taken appropriate safeguards to keep that information secret from its competitors and the public prior to the theft.  The Court of Appeals further determined that the employer could recover damages, including punitive damages, against the former employee who stole that information for the benefit of a competitor.  The case is further detailed below.
Continue Reading Federal Court of Appeals Rules That Ownership of Trade Secret Not Necessary to Recover Punitive Damages for Its Theft

On April 23, 2020, the California Court of Appeals affirmed a trial court decision refusing to order payment of a “reasonable royalty” as damages for misappropriation of a trade secret.  For the first time in a published California appellate decision, the Ajaxo court applied a test used to determine royalties in patent cases to a trade secret misappropriation case. Ajaxo, Inc. v. E*Trade Financial Corporation, 261 Cal. Rptr. 3d 583 (Cal. Ct. App. 2020).
Continue Reading What’s the Value? California Court Applies Patent Royalties Test To Trade Secret Claim