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The federal Defend Trade Secrets Act, at 18 U.S.C. sections 1829(3) and (5), broadly defines trade secret misappropriation to include cases of improper use, disclosure, or acquisition of a trade secret.  Under the federal trade secret statute, at 18 U.S.C. section 1839(3)(B), states that trade secret information “derives [its] independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by improper means by, another person who can obtain economic value from [that information’s] disclosure or use[.]”  The United States Court of Appeals for the Third Circuit, in Oakwood Laboratories LLC v. Thanoo, 999 F.3d 892 (3d Cir. 2021), explained that “[t]he trade secret’s economic value depreciates or is eliminated altogether upon its loss of secrecy when a competitor obtains and uses that information without the owner’s consent.”  Similarly, in Storagecraft Tech. Corp v. Kirby, 744 F.3d 1183 (10th Cir. 2014), the federal appellate court discussed damage remedies in a trade secret misappropriation decision and stated in pertinent part: “When someone steals a trade secret an discloses it to a competitor he effectively assumes for himself an unrestricted license in the trade secret.  And that bears its cost.  After all, what value does a trade secret hold when it’s no longer a secret from the trade?”  Federal and state appellate decisions frequently rely on the legal principles that exclusive use of a trade secret confers economic value and misappropriation of the trade secret will destroy the competitive advantage of the trade secret owner.  In this regard, precedent from the United States Supreme Court, in Ruckelhaus v. Monsanto Co., 467 U.S. 986 ( 1984), explained that, “[t]he economic value of that property right lies in the competitive advantage over others that [the plaintiff] enjoys by virtue of its exclusive access to the data, and disclosure or use by others of the data would destroy that competitive edge.”  Peter Mavrick is a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

The Defend Trade Secrets Act provides a variety of remedies, at 18 U.S.C. section 1836(b)(3)(B), including damages for actual loss, unjust enrichment caused by the misappropriation, or damages measured by the imposition of liability for a reasonably royalty for the misappropriator’s unauthorized disclosure or use of the trade secret.  The Supreme Court’s Ruckelhaus precedent explained that, “[w]ith respect to a trade secret, the right to exclude others is central to the very definition of the property interest.  Once the data that constitute a trade secret are disclosed to others, or others are allowed to use those data, the holder of the trade secret has lost his property interest in the data.”

The Defend Trade Secrets Act provides legal and equitable remedies beyond only the plaintiff trade secret owner’s “loss of exclusivity” in the trade secret.  The federal statute and case law recognize that there can be other, if not fully realized, injuries.  For example, the Oakwood Laboratories LLC decision stated in pertinent part: “Aurobindo’s rapid market entry into a sector of the pharmaceutical industry with few competitors may well deprive Oakwood of market share.  Utilizing Oakwood’s trade secrets provides Aurobindo a jumpstart in an industry it would otherwise not have competitively joined for another decade.  Aurobindo will avoid substantial research and development costs that Oakwood has already invested in its own product development.  Those are competitive harms recognized in” the federal statute.   Because the federal statute followed many years after the state-law enacted Uniform Trade Secrets Act (which has been adopted my most states in the U.S.) federal courts often find persuasive state law on the issue of damages.  For example, in Rohm & Haas Co. v. Adco Chem. Co., 689 F.2d 424 (3d Cir. 1982), the federal appellate court explained that: “New Jersey law states that a company misappropriating a trade secret may lose the benefits of future independent experiments because of the difficulty of determining how much of the improvement is attributable to those independent efforts and how much to the information gained by the wrongdoing…In trying to segregate honest efforts and ill-acquired knowledge, [e]very doubt must be resolved against the parties to a fraudulent act.”  Similarly, the United States Court of Appeals for the Fifth Circuit in Bohnsack. v. Varco, L.P., 668 F.3d 262 (5th Cir. 2012), interpreted state trade secret law and explained that: “Damages in misappropriation cases can take several forms: the value that a reasonably prudent investor would have paid for the trade secret; the development costs the defendant avoided incurring through the misappropriation; and a reasonable royalty.  This variety of approaches demonstrates the ‘flexible’ approach used to calculate damages for claims of misappropriation of trade secrets.”

Peter Mavrick is a Miami business litigation lawyer, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.

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