2024 was a busy year for U.S. trade secret law. Many cases have had or are expected to have significant effects on present and future actions and parties in the United States. Below we present our top ten most interesting and impactful trade secret cases from across the country.
Avoiding Avoided Costs
Syntel Sterling Best Shores Mauritius Ltd. v. TriZetto Grp., Inc., No. 15 Civ. 211, 2024 WL 1116090 (S.D.N.Y. Mar. 13, 2024).
On remand from an appeal in which the Second Circuit vacated a jury award of $284,855,192 in compensatory damages to TriZetto for Syntel's misappropriation under the Defend Trade Secrets Act ("DTSA"), Syntel Sterling Best Shores Mauritius Ltd. v. TriZetto Group, Inc., 68 F.4th 792 (2d Cir. 2023), the district court further vacated jury awards of $142,427,596 and $59,100,0001 for Syntel's misappropriation under New York trade secret law and copyright infringement, respectively.
In the appeal, the Second Circuit had affirmed the jury's findings that Syntel was liable for trade secret misappropriation under both the DTSA and New York law. However, it found that, in awarding damages for TriZetto's DTSA claim, the jury had improperly based its award not on "the actual loss TriZetto suffered post-DTSA from Syntel using its trade secrets," which TriZetto's expert had opined was $8.5 million in lost profits, but exclusively on the costs Syntel avoided by using TriZetto's trade secrets. Id. at 811. While the Second Circuit recognized that avoided costs could be factored into a compensatory damages award under the DTSA, it ruled that such avoided costs must be tied to the harm TriZetto actually suffered. Because TriZetto suffered no compensable harm beyondits lost profits, the Second Circuit held that, "as a matter of law, an unjust enrichment award of avoided costs was unavailable under the specific facts of this case." It therefore vacated the nearly $285 million award based on avoided costs and remanded for further consideration of the New York trade secret misappropriation and copyright infringement awards.2
On remand, the district court determined that it was bound to vacate the New York trade secret misappropriation and copyright infringement awards in like fashion. Specifically, it concluded that damages for trade secret misappropriation under New York law "must be measured by the plaintiff's actual losses," Syntel, 2024 WL 1116090, at *2 (quoting E.J. Brooks Co. v. Cambridge Sec. Seals, 105 N.E.3d 313 (N.Y. 2018)), and that the New York trade secret misappropriation award—which had been premised on a reasonable royalty that accounted exclusively for Syntel's avoided costs—did not reflect the injury TriZetto had suffered. The district court concluded similarly for the copyright infringement award. Id. at *4.
The district court, perhaps sympathetically, acknowledged that vacating the entire compensatory damages award was in "stark contrast to the jury's verdict" and "deprive[d] TriZetto of its lost profit damages of $8.5 million and, in effect, penalize[d] TriZetto for presenting a theory of damages that had yet to be addressed by the Second Circuit and had been accepted by the Seventh Circuit." Id. at *8. But Judge Schofield did find TriZetto was owed $14,548,992.98 in attorneys' fees.
Termination as Sanction
Metricolor, LLC v. L'Oreal USA, Inc., No. 2:18-CV-00364, 2024 WL 1376476, at *2 (C.D. Cal. Mar. 29, 2024).
The court in Metricolor granted L'Oreal's motion for terminating sanctions with prejudice on grounds that Metricolor and one of its founders (Salvatore D'Amico) had committed several discovery-related abuses to conceal the weaknesses in Metricolor's trade secret case.
The district court explained, in detail, that (1) Mr. D'Amico spliced together and otherwise manufactured documents to support Metricolor's case after litigation began; (2) Metricolor produced these manufactured files to L'Oreal and affirmatively relied on certain of them in the litigation; (3) Mr. D'Amico deleted thousands of files (many permanently) to hide unfavorable evidence; (4) Metricolor concealed the existence of a forensic image taken of Mr. D'Amico's computer, which would have documented the missing files, for over a year and a half; and (5) Metricolor sought to halt a forensic review of that same image and inappropriately withheld documents discovered during that forensic review.
Based on these facts, the district court concluded that Metricolor and Mr. D'Amico "ha[d] repeatedly fabricated, destroyed, and withheld evidence" and that such "misconduct was the result of 'willfulness, bad faith, and fault'" that supported terminating sanctions. Id. at *18 (quoting Conn. Gen. Life Ins. Co. v. New Images of Beverly Hills, 482 F.3d 1091, 1096 (C.D. Cal. Mar. 29, 2024)).
The district court further determined that terminating the case with prejudice was "the only appropriate sanction," id. at *21, because of:
- The delay resulting from Metricolor's concealment of the image of Mr. D'Amico's computer and other misconduct, which "resulted in extensive and prolonged discovery disputes and forensic reviews which w[ould] likely continue if th[e] case were to move forward," id. at *20;
- The significant prejudice L'Oreal would suffer from Metricolor's destruction of an unknowable quantity of potentially important evidence;
- The "doubt" Metricolor's misconduct cast "on the veracity and integrity of all evidence in th[e] case," which "ma[d]e it impossible for [the] court to be confident that the parties will ever have access to the true facts," id. at *21 (quoting Conn. Gen., 482 F.3d at 1097); and
- The fact that lesser sanctions would be neither a sufficient remedy for Metricolor's misconduct nor a sufficient deterrent for its future misconduct.
Metricolor has appealed.
New Trial for Magistrate's Non-Ministerial Tasks
PB Legacy, Inc v. Am. Mariculture, Inc., 104 F.4th 1258 (11th Cir. 2024).
After a jury awarded almost $10 million to Plaintiff-Appellant TB Food USA, LLC ("TB Food") on federal and state trade secret claims, the Eleventh Circuit examined the propriety of the magistrate judge's exercise of Article III authority at trial.
During trial, the district judge had informed the parties that, because of his travel plans, the trial needed to end by a certain date, threatening a mistrial if the parties failed to finish by his deadline. Although the parties had rested their cases, the jury was still deliberating when the deadline approached. The parties then agreed to have a magistrate judge step in to read the forthcoming verdict and poll the jury. However, the magistrate judge went further, responding to several questions and notes from the jury and denying defendants' request that he ask the jury to clarify its verdict.
These actions, the Eleventh Circuit concluded, were an improper exercise of Article III authority. First addressing TB Food's waiver argument—i.e., that defendants waived their challenge by not objecting to the magistrate judge's conduct before the district court—the Eleventh Circuit noted that it had previously "reviewed the merits of a challenge to a magistrate judge's authority to conduct matters at trial" under similar circumstances. Id. at 1264. It then explained that the Federal Magistrates Act ("FMA"), which authorizes the delegation of Article III authority to magistrate judges, "embodies a strong policy concerning the proper administration of judicial business," id. (citation omitted), and therefore required treatment of the issue as jurisdictional (and unwaivable).
After addressing waiver, the Eleventh Circuit acknowledged that the district court did not need the parties' consent to have the magistrate judge perform the "ministerial" functions of reading the verdict and polling the jury under the FMA. But party consent was required for non-ministerial functions, the Eleventh Circuit explained, including functions "critical" to trial. Id. The Eleventh Circuit concluded that such consent was not sought outside the district court judge's and magistrate judge's presence and expressed in writing, which is what the FMA typically requires. That consent also could not be implied from the parties' conduct, as the parties were not told that the magistrate judge would perform non-ministerial tasks or that they were entitled to withhold consent to such performance without the imposition of adverse consequences. The Eleventh Circuit therefore vacated the judgment and remanded for a new trial on TB Food's trade secret claims.
Undoing and Injunction
Insulet Corp. v. EOFlow, Co., 104 F.4th 873 (Fed. Cir. 2024).
The Federal Circuit held that a district court abused its discretion when it preliminarily enjoined EOFlow from manufacturing, marketing, and selling insulin pump patches accused of incorporating Insulet's alleged trade secrets and from communicating technical information to a potential acquiring company (Medtronic).
In reversing the injunction, the Federal Circuit identified error in the district court's analysis of the likelihood of success, both because it failed to evaluate whether plaintiff's claim was barred by the statute of limitations and because the district court "failed to identify any trade secret with sufficient particularity." Id. at 882. The Federal Circuit determined that the district court:
- Applied an overbroad definition of the term "trade secret," which allowed Insulet to "advance[] a hazy grouping of information that the court did not probe with particularity to determine what, if anything, was deserving of trade secret protection," id. at 881;
- Failed to identify what among EOFlow's patches and technical information likely would have encompassed Insulet's trade secrets;
- Conducted only a generalized analysis insufficient to support a conclusion that Insulet took reasonable steps to protect specific and identifiable trade secrets;
- Failed to account for whether Insulet's alleged trade secrets were generally known or otherwise readily ascertainable through, e.g., reverse engineering, particularly in view of "evidence of the public availability of [Insulet's product], multiple tear-down videos available on the internet, and Insulet's own publications" and patents, id. at 882; and
- Failed to assess whether Insulet's alleged trade secrets had independent economic value.
The Federal Circuit also noted errors in the district court's analysis on two other injunction factors. In the Federal Circuit's eyes, the district court made an error of law when it found that the irreparable harm prong had been satisfied "particularly [ ] because the evidence of likely success on the merits is strong." Id. at 883 (citation omitted). And on public interest, the Federal Circuit deemed that the district court "failed to meaningfully engage" with this prong and provided the "type of cursory analysis" that is "generally deficient." Id. at 884.
Establishing Extraterritoriality and Addressing Statutory Punitive Damages
Motorola Sols. Inc. v. Hytera Commc'ns Corp. Ltd., 108 F.4th 458 (7th Cir. 2024).
In a highly anticipated decision, the Seventh Circuit affirmed in part, reversed in part, and remanded an Illinois district court decision awarding $543.7 million in damages to Motorola for what the Seventh Circuit characterized as "a large and blatant theft of trade secrets" and associated copyright infringement by Hytera. Id. at 468. While the case tackled several different issues, we focus on just two here.
The first is, as the Seventh Circuit recognized, an issue of first impression for a federal appellate court: whether the DTSA applies extraterritorially. The court agreed with the district court's analysis and concluded that, while the DTSA is subject to the presumption against extraterritoriality, it rebuts that presumption under the first step of the framework set forth in RJR Nabisco v. European Community, 579 U.S. 325, 337 (2016). Specifically, the Seventh Circuit reasoned—as did the district court—that (1) the DTSA should be interpreted in the context of the entirety of title 18, chapter 90; (2) 18 U.S.C. § 1837 expressly rebutted the presumption against extraterritoriality and applied to all of chapter 90, including the DTSA-amended § 1836; and (3) Congress's legislative purposes and findings, which were included in the DTSA, evidenced its concern with foreign operations that relied on the misappropriation of U.S. trade secrets and supported the extraterritorial application of the statute. Thus, the Seventh Circuit concluded, the DTSA applies extraterritorially provided that "an act in furtherance of [an] offense"—e.g., trade secret misappropriation—"[i]s committed in the United States." Motorola, 108 F.4that 483 (quoting 18 U.S.C. § 1837(2)). The Seventh Circuit also held that Hytera committed such an act in the U.S. because it marketed the products incorporating Motorola's trade secrets at U.S. trade shows.3 Because of this, all damages stemming from Hytera's sales of such products worldwide were at issue.
Second, the Seventh Circuit rebuffed Hytera's contention that the $271.6 million punitive damages award (a 2:1 ratio to compensatory damages) violated its Fifth Amendment due process rights. In doing so, the Seventh Circuit concluded that its review of a punitive award differs from a traditional assessment of the three guideposts set forth in BMW of North America v. Gore, 517 U.S. 559 (1996), because the damages were awarded pursuant to a federal statute expressly authorizing them, not to state common law punitive damages. In such a case, the Seventh Circuit explained, the Gore guideposts are "less necessary or appropriate." Motorola, 108 F.4th at 496 (quoting Ariz. v. ASARCO LLC, 773 F.3d 1050, 1056 (9th Cir. 2014) (en banc)). The court then considered whether the statutory damages cap under the DTSA complies with due process and answered that question in the affirmative.
The Seventh Circuit had "no doubt that the DTSA's exemplary damages provision complies with due process," pointing out that the concerns of fair notice are alleviated by the intent requirement (willful and malicious) for punitive awards. Id. Regarding the DTSA's 2:1 statutory cap, the Seventh Circuit explained that the DTSA functions like a host of other federal statutes authorizing double or treble damages whose constitutionality is "virtually beyond question." Id. at 497. In the Seventh Circuit's view, the 2:1 limit on punitive damages under the DTSA is "strong evidence" that "Congress supplanted traditional ratio theory and effectively obviated the need for a Gore ratio examination" of awards that comport with the DTSA's statutory scheme. Id. (quoting ASARCO, 773 F.3d at 1057).Concluding that Congress had made a "specific and reasonable legislative judgment about punitive damages" in DTSA cases, id. at 498, the court deemed it unnecessary to search outside the text of the DTSA for legislative guidance in analogous contexts. Accordingly, it held that the punitive award was consistent with Gore and its progeny.
A Billion-Dollar Reversal and Remand
Pegasystems, Inc. v. Appian Corp., 904 S.E.2d 247 (Va. Ct. App. July 30, 2024).
In Pegasystems, the Virginia Court of Appeals reversed a jury verdict of over $2 billion entered by the Fairfax Circuit Court for a trade secret misappropriation claim under the Virginia Uniform Trade Secrets Act ("VUTSA")—one of the largest awards ever granted in a trade secret case—and remanded the case for a new trial. Despite concluding that Appian had presented sufficient evidence that it possessed identifiable trade secrets, the panel ruled that the trial court had nevertheless erred in several respects.
First, the panel concluded that the trial court had inappropriately prevented Pegasystems from introducing evidence on the number of people who accessed Appian's platform and wrongly instructed the jury that such evidence was irrelevant. While acknowledging that such evidence would not be dispositive, the panel agreed with Pegasystems that this evidence was "hardly irrelevant." Id. at 283. As the panel explained, "who is given access to such information, and in what numbers, are among the most important factors in assessing both whether the information was generally available and the reasonableness of efforts to maintain its secrecy." Id.
Second, the panel determined that the trial court wrongly granted a jury instruction that shifted Appian's burden to prove the causal link for its damages claims—i.e., to establish that the net profits for all Pegasystems' sales were attributable to Pegasystems' misappropriation—and forced Pegasystems to prove that said net profits were not so attributable. In other words, as the panel explained, "the instruction [wrongly] removed any causation nexus between the sales and the misappropriation," such that "Appian only had to establish Pega[systems'] enrichment—it did not have to prove 'unjust' enrichment." Id. at 269. The panel found that this burden-shifting instruction "contravene[d] Virginia case law, [the] VUTSA's express language, and the Restatement[ (Third) of Unfair Competition]'s . . . burden-shifting framework." Id. at 274.
And third, the panel concluded the trial court had exacerbated the problematic jury instruction by prohibiting Pegasystems from presenting evidence or conducting cross-examination to show that a significant proportion of its sales stemmed from other lines of business with which Appian did not compete. This, the panel concluded, constituted a serious "error in judgment" that—"in tandem with [the erroneous instruction's] emphasis on Pega[systems'] total sales—exponentially increased the likelihood of a runaway damages verdict that had no correlation to proximate cause." Id. at 276.
Enjoining the FTC
Ryan, LLC v. Fed. Trade Comm'n, No. 3:24-CV-00986, 2024 WL 3879954 (N.D. Tex. Aug. 20, 2024).
Ryan is one of at least three district court cases challenging the enforceability of the Federal Trade Commission's ("FTC") April 23, 2024 Final Rule that sought to prospectively andretroactively ban almost all employer-employee noncompete agreements—a move that would make it easier for employees to leave their current jobs and join or start rival companies. Id. at *3–4. As the FTC itself explained, under the Final Rule, "existing noncompetes for the vast majority of workers w[ould] no longer be enforceable after the rule's effective date," and "employers [would be] banned from entering into or attempting to enforce any new noncompetes, even if they involve senior executives." The FTC contended that it was authorized to promulgate such a rule under Section 6(g) of the FTC Act ("FTCA") because noncompete clauses constituted "unfair methods of competition." Id. at *4.
Filed the same day the Final Rule was promulgated, Ryan culminated in cross-motions for summary judgment, with the district court siding against the FTC for two primary reasons. First, the district court concluded that the FTC lacked the statutory authority to promulgate substantive rules like the Final Rule at issue. This conclusion, the district court stated, was reinforced by the FTC's extensive history of not issuing substantive rules under Section 6(g) of the FTCA. And second,the district court deemed the Final Rule arbitrary and capricious under the Administrative Procedure Act ("APA"), observing that it was "unreasonably overbroad," lacked "a reasonable explanation," and "impose[d] a one-size-fits-all approach with no end date, which fails to establish a 'rational connection between the facts found and the choice made.'" Id. at *13 (citation omitted). In particular, the district court noted that the FTC imposed a categorical prohibition on noncompete agreements based on state data regarding limitations on noncompete enforcement in specific factual situations, without accounting for inconsistencies and other errors in that data, the positive impacts of noncompetes, or the significant evidence that supports the existence of noncompetes. Moreover, the district court found that the FTC had failed to properly evaluate alternatives or explain why the far-reaching Final Rule was the best option.
Consequently, the district court enjoined enforcement of the Final Rule nationwide. However, the FTC has appealed this ruling, so the Final Rule now awaits further evaluation by the Fifth Circuit.
As for the two other cases challenging the enforceability of the Final Rule, here is where they stand:
- Props. of the Villages v. Fed. Trade Comm'n, No. 5:24-cv-316 (M.D. Fla.): The district court granted plaintiff's motion to stay the Final Rule's effective date and preliminarily enjoin its enforcement against plaintiff on August 15, 2024. The FTC noticed its appeal of this ruling on September 24, 2024, and the district court case has been administratively closed for the duration of the appeal.
- ATS Tree Servs., LLC v. Fed. Trade Comm'n, No. 24-1743 (E.D. Pa.): In contrast to Ryan and Properties of the Villages, the district court in ATS denied plaintiff's motions to stay the Final Rule's effective date, preliminarily enjoin its enforcement against plaintiff, and stay further proceedings for the pendency of the Ryan appeal. In denying plaintiff's first motion, the district court concluded that the FTCA "provides the FTC with the authority to promulgate rules prohibiting unfair methods of competition," including substantive rules; that the FTC's rule-making process involved "extensive and thorough research"; and that the FTC did not exceed its authority in issuing the Final Rule. ATS Tree Servs., LLC v. Fed. Trade Comm'n, No. 24-1743, 2024 WL 3511630, at *12-19 (E.D. Pa. July 23, 2024). Thereafter, plaintiff voluntarily dismissed its case against the FTC without prejudice, choosing to rely (at least for now) on Ryan's nationwide injunction against the Final Rule's enforcement.
Confirming a Conspiracy
United States v. Zheng, 113 F.4th 280 (2d Cir. 2024).
In perhaps one of the more high-profile trade secret cases of the year, the Second Circuit affirmed a district court judgment that upheld a jury's conviction of Xiaoqing Zheng for conspiracy to commit economic espionage under the Economic Espionage Act ("EEA") and sentenced Mr. Zheng to 24 months' imprisonment and one year of supervised release. In affirming this judgment, the Second Circuit addressed two aspects of the district court's decision that directly impact trade secret case law, reinforcing the breadth of the EEA's proscription against economic espionage.
First, the Second Circuit assessed whether a conviction for economic espionage under 18 U.S.C. § 1831(a)—which essentially requires that a person intend or know that their misappropriation will benefit a foreign government—requires proof beyond a reasonable doubt that the foreign entity sponsored or coordinated the defendant's misconduct. Rejecting that proposition, the Second Circuit explained that the unambiguous focus of the statute is on the defendant's mens rea (i.e., mental state when committing the offense) and that the statute refers to a foreign government as an object—an intended beneficiary—of the defendant's offense. This conclusion, the Second Circuit noted, was supported by both the structure and legislative history of the EEA. In other words, as the Second Circuit put it: "Under § 1831, a volunteer spy is just as guilty as one recruited and handled by a foreign government." Id. at 295.
And second, the Second Circuit addressed whether the district court erred in not instructing the jury that, to prove the alleged conspiracy, the defendant must "firmly believe"—rather than "reasonably believe"—that the information he misappropriated constituted trade secrets. The court rejected this proposition, explaining that Mr. Zheng's "firmly believed" standard was unsupported by United States v. Nosal, 844 F.3d 1024 (9th Cir. 2016), the case he relied on, and subsequent case law. As the Second Circuit explained, those courts agreed that for a conspiracy offense, "all that matters is the facts as the defendant believed them to be," which aligns with the general mens rea requirement under § 1831(a). Zheng, 113 F.4that 299.
Reviewing Standing at Case Commencement
I-Mab Biopharma v. Inhibrx, Inc., No. 1:22-cv-276, Dkt. 409 (D. Del. Sept. 19, 2024).
In I-Mab, a magistrate judge mostly rebuffed defendants' efforts to have the case dismissed (1) for failure to join two co-owners of the asserted trade secrets under Federal Rule of Civil Procedure 19, and (2) on grounds that plaintiff lacked standing because it did not own some of the asserted trade secrets.
The court dispatched defendants' nonjoinder arguments fairly easily, concluding defendants had failed to satisfy their burdens under Rule 19(a)(1) and (b). The court found that defendants "did not address whether the absent parties" (i.e., the co-owners of the asserted trade secrets) were "subject to personal jurisdiction" in the court, and thus could not show joinder was "infeasible" under Rule 19(a)(1). Id. at 10. Additionally, the court determined that defendants' argument as to why the absent parties were "indispensable" under Rule 19(b) "ignore[d] nearly all of the Rule 19(b) factors," and thus could "not come close to meeting [defendants'] burden of demonstrating that [those] factors require[d] dismissal." Id. at 12, 14.
The court also decided the standing issue in plaintiff's favor. Defendants argued plaintiff lacked standing for its DTSA misappropriation claims for three of the asserted trade secrets because sole ownership of those trade secrets had been transferred to another entity over two years after the action was filed. The court disagreed, concluding that 18 U.S.C. § 1836(b)(1) requires only that the plaintiff in a DTSA misappropriation action "own[]" the asserted trade secret(s) when the action is commenced. Since plaintiff here owned the three trade secrets at issue when it filed the action, the court held it retained standing to sue for misappropriation of those claims under the DTSA.
Analyzing Accrual
Insulet Corp. v. EOFlow, Co., No. 23-11780, 2024 WL 4635197 (D. Mass. Oct. 31, 2024), and Woodall v. Walt Disney Co., No. 2:20-cv-03772, Dkt. 558 (C.D. Cal. Nov. 1, 2024).
Finally, we address a pair of cases—decided a day apart—that reached different conclusions as to when misappropriation claims under the DTSA accrue.
In Insulet, defendants moved for summary judgment on the ground that plaintiff's misappropriation claim was barred by the DTSA's three-year statute of limitations. The defendants claimed that the proper standard for determining when the claim accrued was "inquiry notice"—that is, as soon as the plaintiff had reason to be concerned about misappropriation. Plaintiff, on the other hand, argued that DTSA claims accrue only when "the misappropriation . . . is discovered or by the exercise of reasonable diligence should have been discovered," 18 U.S.C. § 1836(d), and that this language should be construed in a manner consistent with Merck & Co. v. Reynolds, 559 U.S. 633 (2010). In Merck, the Supreme Court examined the accrual of claims for securities fraud under 28 U.S.C. § 1658(b), which, under the "discovery rule," occurred either upon "the discovery of the facts constituting the violation" or "when a reasonably diligent plaintiff would have discovered [those facts]." Insulet, 2024 WL 4635197, at *8. As the district court explained, the Merck Court "expressly rejected" the proposition that, under this standard, "the limitations period began to run [on § 1658(b) claims] when the plaintiff was on 'inquiry notice.'" Id. In view of the Merck decision, the district court observed similarities between § 1658(b) and the DTSA, and it noted that Congress is presumed to be aware of relevant precedent when it enacts statutes. The district court thus rejected defendants' contention that plaintiff's DTSA claim accrued on mere inquiry notice. Accepting plaintiff's view, the district court concluded that material factual issues remained as to whether the statute of limitations barred plaintiff's DTSA claim and denied summary judgment on that basis.
In its analysis, the district court explicitly recognized its holding "appear[ed] to conflict with the conclusion of every court to have thus far considered th[is] issue." Id. at *9 (discussing cases). However, it forged ahead because none of these other courts considered whether Merck's rationale should apply to DTSA claims or otherwise explained why they had applied the "inquiry notice" standard in the DTSA context.
The Woodall decision, which issued the next day, reached the opposite result. In Woodall, plaintiff asserted trade secret misappropriation claims under both the DTSA and California Uniform Trade Secrets Act ("CUTSA"), and defendants moved for summary judgment on grounds that those claims were barred by the DTSA's and CUTSA's three-year statutes of limitations. Citing several California state and federal cases, the Woodall court concluded that "[t]he limitations period [on DTSA claims] begins once the plaintiff has notice or information of circumstances to put a reasonable person on inquiry."4 Id. at 3–4 (citation omitted). The district court further held that, since the facts showed that plaintiff suspected misappropriation in either December 2016 or March 2017—yet filed DTSA and CUTSA claims on April 24, 2020—those claims were time-barred.
Honorable Mentions:
Not every case could make our top ten list, and here are a few of our runners-up:
- In P2i Ltd. v. Favored Tech USA Corp., No. 23-cv-01690, 2024 WL 4294652 (N.D. Cal. Sept. 24, 2024), the district court dismissed plaintiff's DTSA misappropriation claim without leave to amend because, inter alia, the claim was time-barred. The court explained that plaintiff was at least on "inquiry notice" of its claim in 2019, when it "had enough insight" to sue an entity related to defendants for infringement of a Chinese patent directed to nano-coating process parameters that "overlap[ped] with its trade-secret allegations." Id. at *6.
- In U.S. Equipment Rental and Sales v. Tysver, No. 1:23-cv-14274, Dkt. 83 (N.D. Ill. Sept. 27, 2024), the district court granted two defendants' motions to dismiss for lack of personal jurisdiction. Plaintiff asserted that the court had personal jurisdiction because the defendants marketed and sold in Illinois products resulting from the misappropriation and/or used trade secrets a third defendant misappropriated from Illinois. But the district court found that the sales and marketing had "only an attenuated connection" to the litigation, and therefore were insufficient to satisfy the "arising from" requirement for specific personal jurisdiction. Id. at 2. And while the third defendant was alleged to have stolen the trade secrets from an Illinois factory, the court ruled that the third defendant's allegedly tortious activity could not be attributed to either of the other defendants.
- In Thompson Safety LLC v. Jones, No. 4:24-CV-2483, 2024 WL 4108788 (S.D. Tex. Sept. 6, 2024), and Sun Nong Dan Foods, Inc. v. Daeho Dining Group, No. 2:23-cv-09779, Dkt. 78 (C.D. Cal. Nov. 19, 2024), the district courts ruled against trade secret plaintiffs because their alleged trade secrets were ascertainable through publicly available sources.
In Thompson, the plaintiff, which ran a fire extinguisher servicing business, moved for a preliminary injunction based on the alleged misappropriation of its trade secret pricing information and customer lists. In denying plaintiff's motion, the Thompson court found that plaintiff's customers freely shared the pricing information, and that the customer lists were made available via tags that plaintiff was legally required to display on serviced fire extinguishers.
In Sun Nong Dan, the alleged trade secrets included the restaurant plaintiff's method of taking customer orders. Because anyone who walked into plaintiff's restaurant was exposed to this order-taking method, the Sun Nong Dan court determined that plaintiff could not claim trade secret protection and granted defendants' motion to dismiss plaintiff's misappropriation allegations.
- In MSHB Restaurant, LLC v. Nepal Business Investment, LLC, No. 4:24-cv-1973, 2024 WL 4804070 (S.D. Tex. Nov. 14, 2024), the district court rejected defendants' assertion that plaintiff's trade secret misappropriation claims—which arose from acts occurring after a settlement agreement disposing of plaintiff's earlier misappropriation claims—were time-barred under the doctrine of continuing misappropriation. The district court concluded that "[t]here can be no continuing misappropriation of settled misappropriation claims, especially where the [d]efendants denied using any of the . . . trade secrets," and that the later claims could not have been brought in the earlier suit or released in the parties' settlement agreement. Id. at *3.
Needless to say, 2024 saw substantial developments in trade secret case law. We welcome questions and comments from anyone interested in further exploring the potential ramifications of these cases.
Footnotes
1. These two jury awards were previously cut to avoid duplicative damages.
2. The Second Circuit did not limit the value of the DTSA damages award to $8.5 million because TriZetto—in an effort to avoid double-counting damages—did not ask the jury to determine its entitlement to lost profits and did not argue on appeal that it was entitled to lost profits if the avoided costs damages were vacated.
3. The Seventh Circuit further agreed with the district court that "this case would still amount to a permissible domestic application of the DTSA under RJR Nabisco's step two." Id. at 488.
4. The district court did not distinguish between DTSA and CUTSA claims.
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