Ninth Circuit Reverses $40 Million Trade Secret Verdict Due To Erroneous Jury Instructions On “Readily Ascertainable” Information Under The DTSA

Highlighting subtle but important differences between federal trade secrets law and the laws followed in several states, on July 14, 2026 the United States Court of Appeals for the Ninth Circuit in Comet Techs. USA, Inc. v. XP Power, LLC, 181 F.4th 988 (9th Cir. 2026) vacated a $40 million jury verdict on the grounds that the trial court erroneously instructed the jury with a jury instruction potentially applicable under the California Uniform Trade Secrets Act, which did not conform with the federal Defend Trade Secrets Act. The California claims had been dismissed before trial and the Ninth Circuit found the error was not harmless. The Ninth Circuit thus remanded the case for a new trial with a proper instruction on the burden of proof under the federal law.

PROCEEDINGS AND RULINGS

Background Facts and Proceedings

Comet Technologies USA, Inc. and its affiliates manufacture radio frequency power generators and matching-network technologies used in semiconductor fabrication. In 2018, three senior engineers left Comet for XP Power and allegedly took thousands of confidential documents, designs, testing data, and development materials. Following a jury trial, Comet obtained a $40 million verdict, a permanent injunction, and more than $17 million in attorney fees.

Ninth Circuit's Ruling

The DTSA Places the Burden on Plaintiffs to Prove Information Was Not Readily Ascertainable

The Ninth Circuit held that the district court improperly instructed the jury that XP bore the burden of proving the alleged trade secrets were readily ascertainable. Although some states, including California, put the burden of proof on the defendant by making ready ascertainability an affirmative defense to a trade secret claim (California Civil Jury Instructions No. 4420 (2025), under the DTSA, the plaintiff must prove that the information was not readily ascertainable through proper means. The court found that because the instruction shifted the burden on an essential element of the claim, it misstated federal trade secret law. See 18 U.S.C. § 1839(3)(B) (“[T]he information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.”).

XP Did Not Invite the Instructional Error

The court rejected Comet’s argument that XP waived the issue. Although XP initially proposed the instruction when both DTSA and CUTSA claims were pending, XP later objected and requested that the burden be shifted once the state-law claims were dismissed.

The Error Was Not Harmless

The court found the error prejudicial because the parties presented competing expert testimony regarding reverse engineering and public availability of aspects of the asserted trade secrets. The appellate court could not determine that the verdict necessarily would have been the same had the jury been properly instructed.

KEY TAKEAWAYS

• Unlike some state trade secret laws, under the DTSA, plaintiffs bear the burden of proving information was not readily ascertainable.
   
• Proof of theft alone does not establish DTSA trade secret status.
   
• Disputes concerning reverse engineering and public availability remain central trade secret issues.

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