The Virginia Court of Appeals recently issued a consequential trade secrets ruling, reversing a jury’s multi-billion dollar damages award, and finding that the trial court committed several legal errors which improperly led to the largest damages verdict in Virginia’s history. The case, Pegasystems Inc. v. Appian Corp., No. 1399-22-4, involved two companies in the business process management (BPM) industry, each of whom offer platforms that enable third party business customers to build complex software applications using “low-code application development platforms.” …
Continue Reading Virginia Court of Appeals Reverses Record $2 Billion Verdict, Emphasizing Damages Resulting from Misappropriation Must Actually Be Proved Under Virginia Trade Secrets Law

In California, although the prevailing rule is that each party in litigation must cover their own fees and costs, a litigant can be awarded reasonable attorney’s fees and costs if expressly permitted in a contract. Proprietary information agreements often include an award of attorney’s fees and costs if a company prevails in seeking injunctive relief for misappropriation of its trade secrets by a current or former employee. However, there is an ambiguity in whether a plaintiff actually prevails on a claim for trade secret misappropriation, entitling it to injunctive relief and therefore attorney’s fees, even without a showing of damages. In…
Continue Reading Attorney’s Fees May Be Recoverable in Trade Secret Cases, Even Without Damages

AI tools such as Chat GPT and Otter are becoming common programs that employees use to help streamline business tasks. Otter, for example, is an AI Meeting Assistant that automatically transcribes and summarizes meetings in real time, records audio, captures slides, extracts action items, and generates content such as e-mails and status updates. While tools like Otter may provide quick answers or help synthesize a large volume of information, employers and employees alike should be mindful of the types of information fed to (and possibly stored in) AI programs. The use of an AI tool to, for example, record a…
Continue Reading Mind Your Audience: Disclosure of Confidential Information to AI Programs Can Give Rise to Trade Secret Misappropriation Claims

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

The tension between encouraging free and fair competition and protecting competitive advantages derived from hard work and ingenuity is at the very heart of trade secrets law. Among other things, this tension manifests itself in the gray areas endemic to any legal analysis of what information may constitute a “trade secret.” In comparison, assessing the behavior of those accused of misappropriating trade secrets can sometimes be a much more straightforward exercise. And it seems that the more egregious (and less “gray”) the behavior, the more likely a court is to exercise its limited discretion to restrain competition at the preliminary…
Continue Reading One Bad Apple Won’t Spoil the Rest of the Bunch’s Ability to Fairly Compete in Matthews International Corp. v. Lombardi

Should a defendant found liable for stealing trade secrets have to fork over all of the research and development costs it theoretically avoided by misappropriating the secrets? Yes, according to the “avoided costs” theory of unjust enrichment that is gaining traction and resulting in large verdicts in DTSA and UTSA cases around the country.[1] …
Continue Reading The Developing “Avoided Costs” Remedy in Trade Secret Litigation

While preliminary injunctions are not uncommon in trade secrets misappropriation cases, a recent Fifth Circuit decision highlighted the importance that the movant put forth colorable evidence of misappropriator “use” of the trade secrets in preliminary injunction cases. In CAE INTEGRATED, L.L.C.; Capital Asset Exchange and Trading, L.L.C. v. MOOV TECHNOLOGIES, INCORPORATED; Nicholas Meissner — F.5th — (2022) 2022 WL 3210358 , the Fifth Circuit affirmed denial of a preliminary injunction for the lack of evidence showing such use. In this case, CAE sued Meissner, a former employee, and MOOV, his subsequent employer, for trade secret misappropriation in the Western District…
Continue Reading Insufficient Evidence: Fifth Circuit Affirms Denial of Preliminary Injunction for Trade Secret Misappropriation

The Seventh Circuit recently affirmed summary judgment in favor of a former employee and his new employer on claims for misappropriation of trade secrets relating to a prototype of an actuator created eleven years prior, holding that the inference that the defendant used his knowledge of the prototype more than a decade later was “barely conceivable” and “exceptionally unreasonable.” REXA, Inc. v. Chester, — F.4th —, 2022 WL 2981167, at *6 (7th Cir. 2022) (internal quotation marks omitted).
Continue Reading Unfashionably Late: Seventh Circuit Rejects Misappropriation Claim Premised On Prototype Created Eleven Years Prior

Litigators know it is generally not easy to recover attorneys’ fees in defense of a trade secret misappropriation action. The Federal Defend Trade Secrets Act (“DTSA”) permits a court to “award reasonable attorneys’  fees” to the defendant when a claim of misappropriation  is “made in bad faith,” which “may be established by circumstantial evidence.”[1] But what exactly does bad faith mean and what is the threshold?
Continue Reading A High Mountain to Climb: Filing DTSA Claims Without any Evidence is Not Enough to Meet “Bad Faith” Standard for Awarding Attorneys’ Fees to Opponent

Trade secret litigation presents a variety of procedural and practical complexities at every stage of the proceeding. One of the most important—yet often overlooked—issues in these cases can be summarized by the following question:…
Continue Reading Signed, Sealed, Delivered? Fifth Circuit Finds Sealing of Sensitive Information Requires Far More Than a Protective Order

A recent decision from the Eastern District of California illustrates the sometimes fine line between the need for plaintiffs to allege a claim for trade secret misappropriation in sufficient detail, while avoiding disclosing the trade secret in so much detail as to destroy it.

In Dairy, LLC v. Milk Moovement, Inc., Dairy, LLC (“Dairy”) sued Milk Moovement, Inc. and Milk Moovement, LLC (collectively, “Defendants”), alleging trade secret misappropriation under both the Defend Trade Secrets Act and the California Uniform Trade Secrets Act and intentional interference with contractual relations.  No. 2:21-cv-02233, 2022 WL 1103822, at *1 (E.D. Cal. Apr. 13, 2022)…
Continue Reading Dairy, LLC v. Milk Moovement, Inc.: Identifying Software Trade Secrets With Particularity to State a Claim for Trade Secret Misappropriation