USA Law and Practice Contributed by: Claudia Ray, Joseph Loy, Brandon R. Weber and Andrew (Keum Yong) Lee, Kirkland & Ellis LLP
defendant’s entire revenue from sales of prod - ucts or services based on the misappropriated trade secret constitutes the damages base, at which point the burden shifts to the defendant to demonstrate which costs should be deducted to arrive at the net profit. In addition, a plaintiff may need to consider pursuing 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 defend - ant’s entry into the market, disgorgement of the defendant’s profits or the value of the defend - ant’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 forecasting future lost profits or unjust enrichment. As an example, a technical expert may be able to offer an opinion concern - ing 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 witnesses to offer opinions rebutting the dam - ages calculations 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 oth - er measures. As in patent cases, courts have applied the “ Georgia-Pacific ” factors in order to reach a reasonable estimate of a royalty rate to which the parties would agree in a hypothetical negotiation.
Punitive damages may be available under the DTSA and for most state law claims if the defendant’s conduct was gross, wilful or mali - cious. There are certain exceptions involving whistle-blower immunity for which punitive dam - ages against a current or former employee may be unavailable. 7.3 Permanent Injunction Under the DTSA, a court may issue an injunction that places some limits on an employee’s subse - quent employment in order to protect the plain - tiff’s trade secrets, but the scope of the injunction may not be so broad as to prevent an employee from entering into any employment relationship or conflict, with applicable state laws prohibiting restraints on the lawful practice of a profession. Moreover, the trade secret owner must base its request for a permanent injunction on evidence of threatened misappropriation and not merely on the information that the employee knows. As a result, a trade secret owner may have limited recourse to injunctions in states such as California or Louisiana that disfavour non- competition agreements or that have rejected the inevitable disclosure doctrine. In practice, courts have issued injunctions restricting former employees in possession of sales and market - ing-related trade secrets from soliciting former clients or bidding on certain contracts. Where the misappropriated trade secret has been used to develop a competing product or service, the trade secret owner should consider seeking a permanent injunction requiring the misappropriator to cease offering or recall the product or service. To succeed, the trade secret owner will likely need to show irreparable injury by putting forward evidence that other remedies, such as monetary damages, would be inade - quate to compensate for the misappropriation. A
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