This is first in multi-part discussion of measuring the accounting period for trade secret damages. First up: untethering the liability requirement of secrecy from the damages goal of awarding as much as necessary (but no more than) to eliminate unfair competition.

Trade secrets qualify for protection only so long as they are not generally known or ascertainable through “proper means” such as independent invention, reverse-engineering, observing them in public use or obtaining them from public literature. See Uniform Trade Secrets Act (UTSA) § 1(4); id., cmt. Extending the protection of a trade secrets beyond this point contravenes the public interest in avoiding unnecessary restraints on exploitation of valuable information. Restatement 3d Unfair Competition, § 39 cmt. f.

One might conclude then that the cut-off for damages for trade secret misappropriation should be the end of the secrecy period (i.e., the period the trade secrets were not known or knowable through proper means). And there are some cases that taken this position, including the recent decision of the Delaware district court in Liqwd, Inc. and Olaplex v. L’Oreal USA, Inc., 1:17-cv-14, D.I. 1078 at 3 (D. Del. Aug. 20, 2019) (Memorandum and Judgement following entry of jury verdict). See also id. D.I. 1162 at 9, 2019 U.S. Dist. LEXIS 215668, at *12-13 (D. Del. Dec. 16, 2019) (Order denying plaintiffs’ motion to alter judgment); id. D.I. a1184 at 2 (D. Del. Mar. 24, 2020) (entry of final judgment).

However, the Liqwd decision to cut off damages as of the loss of secrecy may contravene the guiding principle that damages should last as long as necessary to deprive the defendant of a head start or other unfair commercial advantage that is attributable to misappropriation.
Continue Reading Extending Damages for Trade Secret Misappropriation beyond the Loss of Secrecy