Trade secret litigation often turns on fast-moving disputes over information, competition, and control. Each month, we highlight notable rulings, verdicts, and enforcement actions shaping trade secret risk and litigation outcomes.
Ninth Circuit Reverses $40 Million Verdict Over Jury Instruction on Burden of Proof
Misplaced burden on defense forces new trial in chip-component trade secret case
The Ninth Circuit reversed a $40 million jury verdict for Comet Technologies against XP Power, sending the Defend Trade Secrets Act case back for a new trial due to an improper jury instruction on which side bore the burden of proving whether the alleged trade secrets were “readily ascertainable by proper means.”
Comet had alleged that three departing engineers carried Comet's confidential design files to XP and used them to develop competing radio-frequency components for computer chip manufacturing in a matter of days. The jury found in Comet’s favor on three of five asserted trade secrets, awarding $20 million in compensatory damages and $20 million in punitive damages. The Court added on a permanent injunction and more than $17 million in attorney fees.
The reversal stemmed from the court’s jury instruction wrongly placing the burden of proof on the defendant to prove that the alleged trade secret was “readily ascertainable by proper means” as an affirmative defense. This was not consistent with the federal DTSA, where the plaintiff must establish that an alleged trade secret is not "readily ascertainable" as an element of the trade secret claim. The error apparently stemmed from a leftover artifact of California state law jury instructions, which do make “readily ascertainable” an affirmative defense. The plaintiff had apparently dropped the state law claim mid-trial, but did not adopt the DTSA’s approach.
The panel held that XP had not invited the error, since it objected as soon as the state claims were dropped, and that the mistake was not harmless. The court explained that a properly instructed jury still had to weigh conflicting expert testimony over whether the design details could have been reverse-engineered from public patents and competitors' products already on the market — a factual dispute the appellate court was not positioned to resolve itself.
What this means: In federal trade secret cases that begin alongside state-law claims, litigants should watch closely for tension between federal and state law when crafting jury instructions, particularly on burden-shifting elements (such as whether a trade secret is readily ascertainable).
Eighth Circuit Affirms Denial of Injunction in Bank Software Dispute
Lost customers and price cuts don't equal irreparable harm
The Eighth Circuit affirmed a district court's refusal to preliminarily enjoin Commerce Bank from using software that Revenue Management Solutions (RMS) claimed was built from its trade secrets and in breach of a licensing contract. RMS had supplied Commerce with a white-labeled healthcare revenue platform since 2014; after Commerce built its own competing system, RMS sought to block its use while the underlying case proceeded.
The appeals court's ruling turned almost entirely on one element: the plaintiff's failure to prove irreparable harm. The plaintiff’s claims of price erosion and lost market did not meet that standard. As the court explained, “revenues and customers lost to competition which can be regained through competition are not irreparable,” and any damages here were calculable under the contract's own pricing schedule. The court also found RMS's reputational-harm argument too speculative, noting that Commerce's customers had only ever seen the Commerce brand under the white-label arrangement.
The court also rejected the argument that a contract's injunctive-relief clause can compel a court to issue an injunction. Parties can agree that a legal remedy would be inadequate, but that agreement does not bind the federal court.
What this means: A contractual right to seek an injunction is not a guarantee of one. Plaintiffs relying on price erosion or reputational harm should build a factual record — not simply an expert's list of things that "may" happen — and should raise trade secret disclosure as its own basis for irreparable harm rather than folding it into a lost-profits theory.
For more information regarding Alto Litigation's litigation practice, please contact one of Alto Litigation's partners: Bahram Seyedin-Noor, Bryan Ketroser, Joshua Korr, or Kevin O'Brien.