USA Trends and Developments Contributed by: Dawn Mertineit, Seyfarth Shaw LLP
Despite the challenges (and price tag) associ - ated with trade secrets litigation, parties that successfully prove trade secret misappropria - tion may recover eye-popping verdicts. In one recent case, an insulin pump manufacturer obtained a jury verdict of over USD450 million against a competitor and certain of its former executives after proving that the defendants had misappropriated trade secrets associated with the insulin pump to develop a competing prod - uct. In that case, the trade secret owner also convinced the jury that the defendants’ misap - propriation of several of the trade secrets at issue was “willful and malicious” , justifying puni - tive damages that dwarfed the compensatory damages the plaintiffs were entitled to (namely, the unjust enrichment that the defendants had improperly obtained through their unlawful mis - appropriation). See Insulet Corp v EO Flow Co, United States District Court, District of Massa - chusetts, C.A. No 23-11780-FDS. Similar trends of “nuclear” verdicts in trade secrets cases are anticipated where trade secret owners have properly documented the existence and value of such assets. However, damages awards are also subject to reversal on appeal – as seen in the Virginia Court of Appeals’ July 2024 decision reversing the largest jury award in state history when it determined that the trial court had made sig - nificant errors leading to a USD2 billion award in Pegasystems Inc v Appian Corp. That trend, combined with varying standards for recover - able damages in different jurisdictions, weighs in favour of employers engaging damages experts early on if they learn of trade secret misappro - priation, to best set up a potential recovery that will compensate the harm done by bad actors.
Conversely, the significant trade secrets ver - dicts that have been seen in recent years make it clear that businesses hiring employees from competitors must implement strict protocols to guard against misappropriation of the former employer’s critical trade secret assets, which can lead to damages awards that may even have the potential to bankrupt the company. Even if the defendant company defeats a trade secret claim, it can spend millions of dollars defend - ing against such suits, further underscoring the need to avoid threatened lawsuits entirely. Conclusion Businesses should regularly review their restric - tive covenants agreements to ensure compli - ance with various state laws, federal rules and/or judicial trends. They should also take measures to prevent information loss and mitigate harm that may occur notwithstanding best efforts to prevent trade secret misappropriation.
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