USA Law and Practice Contributed by: Claudia Ray, Joseph Loy, Josh Berlowitz and Andrew (Keum Yong) Lee, Kirkland & Ellis LLP
To show irreparable harm, a plaintiff will need to demonstrate that monetary damages would be inad - equate, which is more likely where the trade secret owner previously had market exclusivity and therefore the misappropriation results in reduced market share, lost customers, lost business opportunities and/or price erosion. Whereas lost sales alone may be insufficient to estab - lish irreparable harm if such losses can readily be cal - culated, damage to the trade secret owner’s good will, reputation or other intangible factors, and any other harms that result in a decrease in revenue available for employee attraction and retention, or for R&D activi - ties on which the business relies for continued profit - ability, may be relevant to establishing the inadequacy of monetary damages. In some jurisdictions, a party moving for a prelimi - nary injunction must also show that there is a risk of further dissemination of its trade secrets beyond the misappropriation already complained of – eg, Faiveley Transp. Malmo AB v Wabtec Corp , 559 F.3d 110, 118 (2d Cir. 2009). In addition, an unreasonable delay in bringing a trade secret misappropriation claim or the motion for a preliminary injunction will weigh against granting the injunction. Courts are increasingly moving towards requiring sufficient precision in the identifica - tion of the trade secret such that defendants receive fair and precise notice of what the injunction actu - ally prohibits. See Carl Zeiss Meditec, Inc v Topcon Medical Sys., Inc , 2022 WL 1530491 (Fed. Cir. May 16, 2022). 7.2 Measures of Damages Damages available to a trade secret plaintiff will vary depending on the federal and state claims asserted and the theories of recovery. Under the DTSA, damag - es for trade secret misappropriation can be calculated in at least three ways (18 USC Section 1836 (b)(3)(B)): • actual loss caused by the misappropriation; • unjust enrichment caused by the misappropriation, which may be sought in addition to actual loss to the extent that damages calculations do not over - lap, or in lieu of either actual loss or unjust enrich - ment; and • a reasonable royalty.
Damages under the UTSA similarly include actual loss in addition to unjust enrichment not included in calculating actual loss, or a reasonable royalty in lieu of actual damages (UTSA Section 3 (a)). Additionally, some state trade secret laws do not require putting a trade secret to commercial use before royalty dam - ages may be obtained. See AirFacts, Inc v Amezaga , 30 F.4th 359, 369 (4th Cir. 2022). In some situations, lost profits may be shown by directly establishing that certain sales expected by the plaintiff were lost to the defendant as a result of trade secret misappropriation. More commonly, however, a plaintiff will argue that the defendant’s entire revenue from sales of products or services based on the mis - appropriated trade secret constitutes the damages base, at which point the burden shifts to the defend - ant to demonstrate which costs should be deducted to arrive at the net profit. In addition, a plaintiff may need to consider pursu - ing other damages theories, such as the expenses the plaintiff incurred in developing its trade secrets, the reduction in market share and/or erosion in price attributable to the defendant’s entry into the market, disgorgement of the defendant’s profits or the value of the defendant’s avoided R&D costs. In cases where the defendant has not yet released (or has only recently begun selling) a product or service based on the misappropriated trade secret, expert analysis and testimony may be invaluable in fore- casting future lost profits or unjust enrichment. As an example, a technical expert may be able to offer an opinion concerning the length of the “head start” a trade secret misappropriator obtained as a result of using the plaintiff’s trade secret, which a damages expert can take into account when forecasting dam - ages. Defendants should prepare their expert witness - es to offer opinions rebutting the damages calcula - tions offered by the plaintiff. If other measures of damages are inadequate, the plaintiff may seek a reasonable royalty. This measure is generally seen as a theory of last resort and can result in lower recovery than other measures. As in patent cases, courts have applied the “Georgia-Pacif - ic” factors in order to reach a reasonable estimate of
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