eliminating unfair competition

This is the next in a multi-part discussion of measuring the accounting period for trade secret damages. The common theme across these discussions is the need to untether the liability requirement of secrecy from the damages goal of awarding as much as necessary (but no more than) to eliminate unfair competition. Similar versions of the first and second parts of this series can also be found on the LinkedIn.

Our previous article posed the question as to when it was appropriate to cut-off money damages for trade secret misappropriation. Answer: damages for trade secret misappropriation should last as long as (and no longer than) necessary to eliminate commercial advantage due to misappropriation. This answer justifies extending the damages accounting period beyond the time a trade secret is no longer protected because it has lost its secrecy.

As explained in this article, the opposite is also true. There are circumstances where damages accounting period runs before the loss of secrecy. Why? Because the end of the commercial advantage period — the end of the time necessary to deprive the defendant of a head start or other unfair commercial advantage that is attributable to misappropriation – occurs before the trade secret loses its secrecy.

Practically speaking, the primary consideration in determining the cut-off date for damages is the end date for eliminating the unfair commercial advantage attributable to the misappropriation. This cut-off date may pre-date or post-date the loss of secrecy depending upon the facts in a particular case.
Continue Reading Ending Damages for Trade Secret Misappropriation before the Loss of Secrecy

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