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Remedies Under the Defend Trade Secrets Act

Association of Corporate Counsel www.acc.com

Julia Rowe Katharine Burke

Sean Trainor Elana Matt

What is the Defend Trade Secrets Act?

•  Federal protection of trade secrets

•  Does not displace protection currently available under state laws

Defend Trade Secrets Act of 2016

What is a Trade Secret?

DTSA, 18 U.S.C. §1831.

All forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if–

'(A) the owner thereof has taken reasonable measures to keep such information secret; and '(B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the public…

Almeling, et al., “A Statistical Analysis of Trade Secret Litigation in State Courts,” Gonzaga Law Review, 2010 (accessed: http://www.tradesecretslaw.com/uploads/file/Statistical%20Analysis%20of%20Trade%20Secret%20Litigation%20in%20State%20Courts.pdf).

Trade Secret Litigation in State Courts

Almeling, et al., “A Statistical Analysis of Trade Secret Litigation in Federal Courts,” Gonzaga Law Review, 2010/2011 (accessed: http://www.tradesecretsnoncompetelaw.com/files/2014/05/Statistical-Analysis-of-Trade-Secret-Litigation-in.pdf).

Trade Secret Litigation in Federal Courts

DTSA: Available Remedies (A) Injunction (B) Award (C) Exemplary damages (2x) (D) Attorney’s fees

DTSA: Available Remedies (A) Injunction (B) Award (C) Exemplary damages (2x)

UTSA (a) Actual or threatened misappropriation may be enjoined. Upon application to the court an injunction shall be terminated when the trade secret has ceased to exist, but the injunction may be continued for an additional reasonable period of time in order to eliminate commercial advantage that otherwise would be derived from the misappropriation.

(b) In exceptional circumstances, an injunction may condition future use upon payment of a reasonable royalty for no longer than the period of time for which use could have been prohibited. Exceptional circumstances include, but are not limited to, a material and prejudicial change of position prior to acquiring knowledge or reason to know of misappropriation that renders a prohibitive injunction inequitable. (c) In appropriate circumstances, affirmative acts to protect a trade secret may be compelled by court order.

DTSA "(A) grant an injunction— "(i) to prevent any actual or threatened misappropriation described in paragraph (1) on such terms as the court deems reasonable, provided the order does not—

"(I) prevent a person from entering into an employment relationship, and that conditions placed on such employment shall be based on evidence of threatened misappropriation and not merely on the information the person knows; or "(II) otherwise conflict with an applicable State law prohibiting restraints on the practice of a lawful profession, trade, or business;

"(ii) if determined appropriate by the court, requiring affirmative actions to be taken to protect the trade secret; and "(iii) in exceptional circumstances that render an injunction inequitable, that conditions future use of the trade secret upon payment of a reasonable royalty for no longer than the period of time for which such use could have been prohibited;

Injunctive Relief

UTSA (a) Actual or threatened misappropriation may be enjoined. Upon application to the court an injunction shall be terminated when the trade secret has ceased to exist, but the injunction may be continued for an additional reasonable period of time in order to eliminate commercial advantage that otherwise would be derived from the misappropriation.

(b) In exceptional circumstances, an injunction may condition future use upon payment of a reasonable royalty for no longer than the period of time for which use could have been prohibited. Exceptional circumstances include, but are not limited to, a material and prejudicial change of position prior to acquiring knowledge or reason to know of misappropriation that renders a prohibitive injunction inequitable. (c) In appropriate circumstances, affirmative acts to protect a trade secret may be compelled by court order.

DTSA "(A) grant an injunction— "(i) to prevent any actual or threatened misappropriation described in paragraph (1) on such terms as the court deems reasonable, provided the order does not—

"(I) prevent a person from entering into an employment relationship, and that conditions placed on such employment shall be based on evidence of threatened misappropriation and not merely on the information the person knows; or "(II) otherwise conflict with an applicable State law prohibiting restraints on the practice of a lawful profession, trade, or business;

"(ii) if determined appropriate by the court, requiring affirmative actions to be taken to protect the trade secret; and "(iii) in exceptional circumstances that render an injunction inequitable, that conditions future use of the trade secret upon payment of a reasonable royalty for no longer than the period of time for which such use could have been prohibited;

Injunctive Relief

Injunctive Relief: Inevitable Disclosure •  Under UTSA

–  Even without evidence of misappropriation, injunction can be granted if former employee “cannot help but rely” on trade secrets.

•  See PepsiCo. Inc. v. Redmond, 54 F.3d 1262 (7th Cir. 1995).

–  Some states have rejected: CA, CO, MO, MD, LA, VA

•  Under DTSA –  Injunction must be “based on threatened misappropriation and

not merely information the person knows” –  Senate and House committee report: “[T]hese limitations on

injunctive relief were included to safeguard employee mobility”

Injunctive Relief: Standards

Judge Payne thus found that the factors under Virginia law favor granting an injunction. When granted, an injunction must be tailored to address properly the wrong that has been proved and to effectuate proper relief. Type and Scope of Injunction Judge Payne then addressed the type of injunction to issue – a “production” injunction or a “use” injunction. DuPont requested an injunction prohibiting Kolon from making a para-aramid product altogether, not just prohibiting Kolon from using the stolen secrets in making the product. Judge Payne determined that Kolon had not created a significant and comparable design for the product prior to stealing DuPont’s trade secrets. He further determined that the misappropriated trade secrets are inextricably intertwined in Kolon’s production line and operating processes, and further that it would not be possible for Kolon’s employees to “unlearn” the secrets that were misappropriated. He also determined that given Kolon’s flagrant misconduct, Kolon could not be trusted to police itself on an injunction that would prohibit only use of the stolen trade secrets. The scope of the injunction deals with both its geographic scope and its duration. DuPont requested a worldwide scope. Judge Payne looked to the Restatement (Third) of Unfair Competition, authority from the Eleventh Circuit[10] and the Ninth Circuit,[11] and general principles of equity to conclude that an extraterritorial injunction is warranted. Judge Payne considered the “independent development” standard in determining the duration of the injunction, but also cited with approval a treatise[12] which states that while the general principle and judicial preference is to limit injunctive relief to independent development time, courts seek to do equity and will enter an injunction for an arbitrary term if needed to accomplish an equitable result. In this case, Kolon had not perfected the technology after almost 20 years of trying and the evidence was that it took DuPont 30 years to develop Kevlar.® As a result, Judge Payne issued an injunction against Kolon prohibiting the production of any para-aramid fiber for 20 years, as well as a permanent injunction against the use of the trade secrets, and a permanent injunction against disclosure of the trade secrets not only to others outside Kolon but also against further disclosure to other employees of Kolon. Footnote On September 21, 2012, in a split decision a three-judge panel of the Fourth Circuit stayed the injunction pending Kolon’s appeal. For his part, in 2010 DuPont’s former employee Mitchell was convicted of stealing numerous trade secrets concerning the making of Kevlar® and passing them to Kolon. And now, on October 18, 2012, Kolon and five of its employees were indicted for their actions. That may take some of the fight out of them. Those employees could soon find themselves with a free one-way airplane ride to the United States, handcuffed to U.S. Marshalls. What It All Means For lawyers, the case is instructive because of its exhaustive analysis, first on the issue of a permanent injunction under the Uniform Trade Secrets Act. It will be persuasive authority in all states, except the four which have not adopted the UTSA. Perhaps more importantly, though, the case clearly sets cases brought under the UTSA, state law, outside the limitations of eBay on issuance of a permanent injunction when a statutory violation has been established. For business men and women, the lesson is clear. If you steal property of a competitor there is a significant downside if you get caught. There is also a significant downside if you get caught later destroying evidence during the course of the trial. No judge would take kindly to that. It goes to the heart of being able to have a fair trial. Kolon’s egregious misconduct permeates every aspect of this case and the court’s opinion. Instead to taking their company to new heights and building an empire for themselves, the key executives of Kolon may instead be known for the company’s collapse. They not only rolled the dice on the future of their company, they did so with no small amount of personal risk as well – time away from their families in a foreign country, living in the spartan accommodations of a U.S. prison. Copyright 2012 David G. Harrison. All Rights Reserved. [1] 547 U.S. 388, 26 S.Ct. 1843,164 L.Ed.2d 625 (2006) [2] See Audi AG v. D’Amato, 469 F.3d 534 (6th Cir. 2006); North American Medical Corp. v. Axiom Worldwide, Inc., 522 F.3d 1211 (11th Cir. 2008); Voices of the Arab World, Inc. v. MDTV Medical News Now, Inc., 645 F.3d 26 (1st Cir. 2011) [3] See PBM Products, et al. v Mead Johnson (4th Cir. 2011) [4] See Reno Air Racing Association v. McCord, 452 F.3d 1126 (9th Cir. 2006); Abercrombie & Fitch Co. v Moose Creek, Inc., 486 F.3d 629 (9th Cir. 2007); Marlyn Nutraceuticals, Inc. v. Muchos Pharma GmBH & Co., 571 F.3d 873 (9th Cir. 2009) [5] 304 U.S. 64 (1938) [6] Capital Tool & Mgf. Co., Inc. v. Maschinenfabrik Herkules, Hans Thoma Gmbh, 837 F.2d 171, 172 (4th Cir. 1988) [7] Like Kolon, Capital Tool involved the alleged violation of the Virginia Uniform Trade Secrets Act; but unlike Kolon, Capital Tool involved a request for a preliminary injunction, not a permanent injunction after a trial on the merits. The trial court in Capital Tool denied the preliminary injunction which the Fourth Circuit affirmed. The Virginia Uniform Trade Secrets Act provides that “(a)ctual or threatened misappropriation may be enjoined” (emphasis added). Code of Virginia §59.1-337 A [8] Code of Virginia §59.1-336 et seq. [9] 559 F.3d 110 (2d Cir 2009) [10] Nordson Corp. v. Plasschaert, 674 F.2d 1371 (11th Cir 1982) [11] Lamb-Weston, Inc. v McCain Foods, Ltd., 941 F.2d 970 (9th Cir. 1991) [12] Milgrim on Trade Secrets §15.02[1][e] • Archives

•  October 2014 •  April 2014 •  October 2013 •  September 2013 •  July 2013 •  May 2013 •  March 2013 •  February 2013 •  January 2013 •  November 2012 •  October 2012 •  July 2012 •  June 2012 •  May 2012 •  January 2012 •  December 2011 •  October 2011 •  August 2011 •  July 2011 •  June 2011 •  July 2010 •  September 2005 •  July 2005 •  October 2004

•  Under UTSA –  Some states do not require evidence of irreparable harm or lack

of adequate remedy at law because injunction express in statute •  Levisa Coal v. Consolidation Coal, 662 S.E.2d 44, 53 (2008). •  Boeing Co. v. Sierracin Corp., 738 P.2d 665, 681 (1987).

–  Other states apply standard, 4-factor equitable test •  Proctor & Gamble v. Stoneham, 747 N.E.2d 268, 274 (Ohio Ct. App. 2000).

–  Fed. courts may defer to state test, citing Erie doctrine •  E.I. DuPont v. Kolon Indus., 894 F. Supp. 2d 691, 706 (E.D. Va. 2012).

–  Fed. courts may apply standard 4-factor equitable test •  Saban v. Caremark RX, LLC, 780 F. Supp. 2d 700, 705 (N.D. Ill. 2011).

Injunctive Relief: Standards

Judge Payne thus found that the factors under Virginia law favor granting an injunction. When granted, an injunction must be tailored to address properly the wrong that has been proved and to effectuate proper relief. Type and Scope of Injunction Judge Payne then addressed the type of injunction to issue – a “production” injunction or a “use” injunction. DuPont requested an injunction prohibiting Kolon from making a para-aramid product altogether, not just prohibiting Kolon from using the stolen secrets in making the product. Judge Payne determined that Kolon had not created a significant and comparable design for the product prior to stealing DuPont’s trade secrets. He further determined that the misappropriated trade secrets are inextricably intertwined in Kolon’s production line and operating processes, and further that it would not be possible for Kolon’s employees to “unlearn” the secrets that were misappropriated. He also determined that given Kolon’s flagrant misconduct, Kolon could not be trusted to police itself on an injunction that would prohibit only use of the stolen trade secrets. The scope of the injunction deals with both its geographic scope and its duration. DuPont requested a worldwide scope. Judge Payne looked to the Restatement (Third) of Unfair Competition, authority from the Eleventh Circuit[10] and the Ninth Circuit,[11] and general principles of equity to conclude that an extraterritorial injunction is warranted. Judge Payne considered the “independent development” standard in determining the duration of the injunction, but also cited with approval a treatise[12] which states that while the general principle and judicial preference is to limit injunctive relief to independent development time, courts seek to do equity and will enter an injunction for an arbitrary term if needed to accomplish an equitable result. In this case, Kolon had not perfected the technology after almost 20 years of trying and the evidence was that it took DuPont 30 years to develop Kevlar.® As a result, Judge Payne issued an injunction against Kolon prohibiting the production of any para-aramid fiber for 20 years, as well as a permanent injunction against the use of the trade secrets, and a permanent injunction against disclosure of the trade secrets not only to others outside Kolon but also against further disclosure to other employees of Kolon. Footnote On September 21, 2012, in a split decision a three-judge panel of the Fourth Circuit stayed the injunction pending Kolon’s appeal. For his part, in 2010 DuPont’s former employee Mitchell was convicted of stealing numerous trade secrets concerning the making of Kevlar® and passing them to Kolon. And now, on October 18, 2012, Kolon and five of its employees were indicted for their actions. That may take some of the fight out of them. Those employees could soon find themselves with a free one-way airplane ride to the United States, handcuffed to U.S. Marshalls. What It All Means For lawyers, the case is instructive because of its exhaustive analysis, first on the issue of a permanent injunction under the Uniform Trade Secrets Act. It will be persuasive authority in all states, except the four which have not adopted the UTSA. Perhaps more importantly, though, the case clearly sets cases brought under the UTSA, state law, outside the limitations of eBay on issuance of a permanent injunction when a statutory violation has been established. For business men and women, the lesson is clear. If you steal property of a competitor there is a significant downside if you get caught. There is also a significant downside if you get caught later destroying evidence during the course of the trial. No judge would take kindly to that. It goes to the heart of being able to have a fair trial. Kolon’s egregious misconduct permeates every aspect of this case and the court’s opinion. Instead to taking their company to new heights and building an empire for themselves, the key executives of Kolon may instead be known for the company’s collapse. They not only rolled the dice on the future of their company, they did so with no small amount of personal risk as well – time away from their families in a foreign country, living in the spartan accommodations of a U.S. prison. Copyright 2012 David G. Harrison. All Rights Reserved. [1] 547 U.S. 388, 26 S.Ct. 1843,164 L.Ed.2d 625 (2006) [2] See Audi AG v. D’Amato, 469 F.3d 534 (6th Cir. 2006); North American Medical Corp. v. Axiom Worldwide, Inc., 522 F.3d 1211 (11th Cir. 2008); Voices of the Arab World, Inc. v. MDTV Medical News Now, Inc., 645 F.3d 26 (1st Cir. 2011) [3] See PBM Products, et al. v Mead Johnson (4th Cir. 2011) [4] See Reno Air Racing Association v. McCord, 452 F.3d 1126 (9th Cir. 2006); Abercrombie & Fitch Co. v Moose Creek, Inc., 486 F.3d 629 (9th Cir. 2007); Marlyn Nutraceuticals, Inc. v. Muchos Pharma GmBH & Co., 571 F.3d 873 (9th Cir. 2009) [5] 304 U.S. 64 (1938) [6] Capital Tool & Mgf. Co., Inc. v. Maschinenfabrik Herkules, Hans Thoma Gmbh, 837 F.2d 171, 172 (4th Cir. 1988) [7] Like Kolon, Capital Tool involved the alleged violation of the Virginia Uniform Trade Secrets Act; but unlike Kolon, Capital Tool involved a request for a preliminary injunction, not a permanent injunction after a trial on the merits. The trial court in Capital Tool denied the preliminary injunction which the Fourth Circuit affirmed. The Virginia Uniform Trade Secrets Act provides that “(a)ctual or threatened misappropriation may be enjoined” (emphasis added). Code of Virginia §59.1-337 A [8] Code of Virginia §59.1-336 et seq. [9] 559 F.3d 110 (2d Cir 2009) [10] Nordson Corp. v. Plasschaert, 674 F.2d 1371 (11th Cir 1982) [11] Lamb-Weston, Inc. v McCain Foods, Ltd., 941 F.2d 970 (9th Cir. 1991) [12] Milgrim on Trade Secrets §15.02[1][e] • Archives

•  October 2014 •  April 2014 •  October 2013 •  September 2013 •  July 2013 •  May 2013 •  March 2013 •  February 2013 •  January 2013 •  November 2012 •  October 2012 •  July 2012 •  June 2012 •  May 2012 •  January 2012 •  December 2011 •  October 2011 •  August 2011 •  July 2011 •  June 2011 •  July 2010 •  September 2005 •  July 2005 •  October 2004

•  Under DTSA

–  4-factor equitable test will likely control

–  A court’s equitable “discretion must be exercised consistent with traditional principles of equity, in patent disputes no less than in other cases governed by such standards.”

•  eBay v. MercExchange, 547 U.S. 388, 394 (2006).

Injunctive Relief: Civil Seizure Order •  Application:

–  Based on a verified application or affidavit –  Other equitable relief inadequate because subject of order would not comply and

would destroy, hide, or move items sought to be seized if given notice –  Harm to the trade secret owner outweighs potential risk to third parties –  Likelihood of success on merits –  Must describe with reasonable particularity what to be seized and, if possible, where

located

•  Order: –  Served by law enforcement and contains hours of execution and whether force is

authorized to access secured areas –  Requires applicant to post security –  Sets hearing no later than 7 days after issuance; if burden isn’t met, order dissolved

or modified


UTSA §3. Damages (a) Except to the extent that a material and prejudicial change of position prior to acquiring knowledge or reason to know of misappropriation renders a monetary recovery inequitable, a complainant is entitled to recover damages for misappropriation. Damages can include both the actual loss caused by misappropriation and the unjust enrichment caused by misappropriation that is not taken into account in computing actual loss. In lieu of damages measured by any other methods, the damages caused by misappropriation may be measured by imposition of liability for a reasonable royalty for a misappropriator's unauthorized disclosure or use of a trade secret.

DTSA "(B) award— "(i) (I) damages for actual loss caused by the misappropriation of the trade secret; and "(II) damages for any unjust enrichment caused by the misappropriation of the trade secret that is not addressed in computing damages for actual loss; or "(ii) in lieu of damages measured by any other methods, the damages caused by the misappropriation measured by imposition of liability for a reasonable royalty for the misappropriator's unauthorized disclosure or use of the trade secret;

Award



Award

Award: Actual Losses •  Examples of actual losses could include:

–  Lost profits caused by lost sales –  Price erosion –  Increased costs (e.g., increased marketing/advertising costs) –  Future lost profits –  Lost value of the trade secret

Influence from Patent Cases •  It seems generally accepted that “the proper measure of

damages in the case of a trade secret appropriation is to be determined by reference to the analogous line of cases involving patent infringement, just as patent infringement cases are used by analogy to determine the damages for copy-right infringement.”

•  Univ. Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 518, 535 (5th Cir. 1974) (citing Int’l Indus., Inc. v. Warren Petroleum Corp., 248 F.2d 696, 699 (3d Cir. 1957)).

Lost Profits in Patent Cases: Panduit

Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152, 1156 (6th Cir. 1978).

Use of Panduit in Trade Secrets Cases

•  “Compensatory damages in actions for trade secret misappropriation, and in analogous patent infringement cases, are generally determined by the difference between the plaintiff's position before and after the misappropriation of his secret.”

–  Agilent Techs. v. Kirkland, 2010 WL 610725, at *27 (Del. Ch. Feb. 18, 2010).

•  Eighth Circuit upheld district court’s analysis that “considered

each of the factual concerns discussed in Panduit.” –  Pioneer Hi-Bred Int'l v. Holden Found. Seeds, Inc., 35 F.3d 1226, 1245, n.56 (8th Cir.

1994).



Award

Award: Unjust Enrichment •  Unjust enrichment is a measure of the benefit received by

defendant as a result of the misappropriation

•  Examples of unjust enrichment could include: –  Higher profits –  Decreased costs (e.g., R&D costs)

Award: Unjust Enrichment •  Under UTSA

–  No double recovery permitted –  Plaintiffs may not recover both lost profits and unjust

enrichment, if such an award would be duplicative

•  Under DTSA –  Likely no double recovery –  Copyright law analogy: no double recovery of federal

copyright law remedies and unjust enrichment

Telex Corp. v. IBM Corp., 510 F.2d 894, 930 (10th Cir. 1975).

Award: Unjust Enrichment •  Methodology:

–  3rd Circuit has applied a “standard of comparison” method, comparing the defendant’s cost of doing business with and without the misappropriated IP.

•  Int’l Indus. v. Warren Petroleum Corp., 248 F.2d 696, 699 (3d Cir. 1957).

–  Other courts have considered comparisons between the defendant’s hypothetical profits with and without the IP at issue



Award

Award: Reasonable Royalty •  Reasonable royalty is available in patent infringement cases

Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court.

35 U.S.C§ 284.

Georgia-Pacific Factors 1.  Royalties received by the patentee

2.  Rates paid by the licensee for the use of other comparable patents

3.  Nature and scope of the license

4.  Licensor’s established policy and marketing program

5.  Commercial relationship between the licensor and licensee

6.  Effect as a generator of sales on non-patented items

7.  Duration of the patent and term of the license

8.  Profitability, commercial success and popularity of products made under patent

9.  Utility and advantages of the patent over old modes or devices

10. Nature, character and benefits of the patented invention to users

11.  Extent of use and evidence probative of the value of that use

12. Portion of profit customary to allow for use of the patented invention

13. Portion of profit that should be credited to the patented invention

14. Expert opinions

15. The hypothetical negotiation between licensor and licensee

UTSA: Federal Cases •  Atlantic Inertial Sys., No. 2:08-cv-02947,

2015 WL 3825318, at *10-15 (C.D. Cal. June 18, 2015) (analyzing several pertinent Georgia-Pacific factors to determine appropriate reasonable royalty rate).

•  LinkCo., Inc. v. Fujitsu Ltd., 232 F. Supp. 2d 182, 187 n.7 (S.D.N.Y. 2002) (adapting all fifteen Georgia-Pacific factors to trade secret cases under non-UTSA New York law).

•  Sunoco Prods. Co. v. Guven, No. 4:12-cv-00790, 2015 WL 127990, at *8-10 (D.S.C. Jan. 8, 2015) (endorsing use of the Georgia-Pacific factors in trade secret cases).

UTSA: State Cases •  Ajaxo, Inc. v. E*Trade Grp., Inc., No.

1-00-CV-793529, 2015 Cal. Super. LEXIS 190, at *48-56 (Cal. Super. Ct. Sept. 14, 2015) (indicating that courts commonly use the Georgia-Pacific factors to guide reasonable royalty determinations in trade secret misappropriate cases under the California UTSA, and applying all fifteen factors).

Award: Reasonable Royalty































University Computing Factors

1.  The resulting and foreseeable changes in the parties’ competitive posture

2.  The prices past purchasers or licensees may have paid

3.  The total value of the secret to the plaintiff, including development costs and the importance of the secret to the plaintiff’s business

4.  The nature and extent of the defendant’s intended use for the secret

5.  Any other unique factors in the particular case which might have affected the parties’ agreement

Widely Cited

• Storagecraft Tech. Corp. v. Kirby, 744 F.3d 1183, 1187-89 (10th Cir. 2014). • Carbo Ceramics, Inc. v. Keefe, 166 F. App’x 714, 723 (5th Cir. 2006). • Vermont Microsystems, Inc. v. Autodesk, Inc., 88 F.3d 142, 151-52 (2d Cir. 1996). • Atlantic Inertial Sys. Inc. v. Condor Pacific Indus. of Cal., Inc., No. 2:08-cv-02947, 2015 WL 3825318, at *10-15 (C.D. Cal. June 18, 2015). • Bianco v. Globus Med., Inc., 53 F. Supp. 3d 929, 937 (E.D. Tex. 2014) (Bryson, J.). • Ultraflo Corp. v. Pelican Tank Parts, Inc., 926 F. Supp. 2d 935, 962 (S.D. Tex. 2013).

University Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 518, 535 (5th Cir. 1974).


UTSA §3. Damages (b) If willful and malicious misappropriation exists, the court may award exemplary damages in an amount not exceeding twice any award made under subsection (a).

DTSA §1836(b)(3). Remedies. (C) if the trade secret is willfully and maliciously misappropriated, award exemplary damages in an amount not more than 2 times the amount of the damages awarded under subparagraph (B)

Exemplary Damages

UTSA: Exemplary Damages

Under ITSA, in order for there to be misappropriation, there must be knowing disclosure of a trade secret. By its very terms, therefore, trade secret misappropriation under ITSA requires a "bad act": the disclosure of someone else's trade secret. For an award of exemplary damages, that misappropriation must in addition be willful and malicious. Illinois courts have distinguished between motivation by malice and motivation by competition and have awarded punitive damages in the former situation, but not in the latter.

Roton Barrier v. Stanley Works, 79 F.3d 1112, 1120 (Fed. Cir. 1996).

Read Factors in Trade Secrets Cases 1.  Whether the infringer deliberately copied the ideas or design of

another; 2.  Whether the infringer, when he knew of the other's patent protection,

investigated the scope of the patent and formed a good-faith belief that the patent was invalid or not infringed;

3.  The infringer's behavior as a party to the litigation 4.  Defendant's size and financial condition; 5.  Closeness of the case 6.  Duration of defendant's misconduct; 7.  Remedial action by the defendant; 8.  Defendant's motivation for harm; and 9.  Whether defendant attempted to conceal its misconduct.

Read Corp. v. Portec, Inc., 970 F.2d 816, 827 (Fed. Cir. 1992).

Impact of Halo Elecs. v. Pulse Elecs.

Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923, 1926 (2016).

Here, 180 years of enhanced damage awards under the Patent Act establish that they are not to be meted out in a typical infringement case, but are instead designed as a sanction for egregious infringement behavior.

Remedies Under the Defend Trade Secrets Act

Association of Corporate Counsel www.acc.com

Julia Rowe Katharine Burke

Sean Trainor Elana Matt

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