This is the third in a multi-part discussion [first part] [second part] about whether and when to cut-off damages for trade secret misappropriation. Similar posts on LinkedIn at [first], [second] and [third].

Guidance from the courts on these questions is not always consistent and depending upon the jurisdiction may not exist. This makes it hard to predict in a particular matter the length of time that will be allowed for recovery of trade secret damages.

A possible solution, one which is well-grounded in UTSA principles and related commentary, is extending the damages accounting period for as long as necessary to eliminate the unfair commercial advantage gained from actionable misappropriation. See Uniform Trade Secret Act (UTSA), § 3 cmt. (“Like injunctive relief, a monetary recovery for trade secret misappropriation is appropriate only for the period in which information is entitled to protection as a trade secret, plus the additional period, if any, in which a misappropriator retains an advantage over good faith competitors because of misappropriation.”).

Our first installment explained that the damages accounting period may extend beyond the time a trade secret is no longer protected because it has lost its secrecy.* Our second  installment acknowledged that there are circumstances where damages end 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 an unfair commercial advantage that is attributable to misappropriation – occurs before the trade secret loses its secrecy.

This installment addresses the use of the so-called “head start” rule as a temporal limitation on damages and flags different interpretations of the rule that may cause confusion or misunderstanding about the proper duration of a damages award. The many and varied head start concepts may compel a court to limit or expand damages in a manner that is inconsistent with the core principle of eliminating unfair commercial advantage.
Continue Reading Unfair Head Start and Trade Secret Damages

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