Under the Defend Trade Secrets Act, the measures of monetary relief available to plaintiffs in trade secret misappropriation matters may include (1) actual losses caused by the misappropriation; (2) unjust enrichment caused by the misappropriation, e.g., disgorgement of at least some portion of the profits earned by the defendant; or (3) a reasonable royalty for the alleged misappropriator’s unauthorized use of the trade secret. See 18 U.S.C. § 1836(b)(3)(B). Calculating damages based on any of these measures can be a fact-intensive exercise aimed at assessing the economic footprint of an asserted trade secret. This Practice Point explores one discovery avenue that may assist practitioners and the trier of fact in assessing whether alleged misappropriated trade secrets added value to their commercial embodiments, thereby potentially indicating whether actual losses claimed by a plaintiff might (or might not) be attributable to the alleged misappropriation.
In some cases, plaintiffs seek actual damages under the premise that they would have generated incremental sales and profits but for a defendant’s alleged misappropriation. Particularly in cases where the parties-in-suit are head-to-head competitors, plaintiffs could argue that the alleged misappropriation was the driving force behind sales of the defendant’s accused product and, accordingly, caused the plaintiff’s claimed lost sales and profits. Conversely, defendants could argue that demand for products that embody the alleged misappropriated trade secret is driven by many unrelated factors and there is no causal nexus between the alleged misappropriation and the plaintiff’s claimed lost sales and profits. Information and documents that reveal the dates on which a plaintiff’s and/or defendant’s products began incorporating trade secret-based features, as well as the sales and profits generated by such products before and after incorporation, could be relevant to this inquiry.
A recent order from the United States District Court for the Central District of California addressed the potential relevance of such information to a plaintiff’s actual damages claims and a defendant’s rebuttals thereof. Specifically, on March 21, 2022, the court in Masimo Corp., et al. v. Apple Inc. issued an order requiring the Plaintiffs to produce discovery responses sufficient to understand “the date on which each [of Plaintiffs’ products] purportedly incorporating the alleged trade secrets was first sold.” Order, ECF No. 638, Masimo Corp., et al. v. Apple Inc., No. 8:20-cv-00048-JVS-JDE (C.D. Cal. March 21, 2022).