MIAMI BUSINESS LITIGATION: TRADE SECRET REMEDIES AND DAMAGES

A trade secret could be the lifeblood of a business, and it is critical for businesses to protect their trade secrets. If a business’ trade secret is misappropriated, the business likely will want to commence litigation. What remedies can the business obtain for the trade secret misappropriation? Determining the remedies for trade secret misappropriation is a complicated matter and highly dependent on the factual circumstances of each particular case. The Miami business litigation attorneys of the Mavrick Law Firm represent businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

Under the Defendant Trade Secrets Act (DTSA), an injunction and damages can be remedies. 18 U.S.C. § 1836. These remedies are not exclusive of each other; therefore, a plaintiff can obtain both. An injunction is typically used to prevent “any actual or threatened misappropriation” going forward. An injunction may also require the defendant to take affirmative steps to protect the trade secret. Further, in “exceptional circumstances,” the injunction “may condition further use of the trade secret upon payment of a reasonable royalty for no longer than the period of time for which such use could have been prohibited.”

DTSA also sets out two monetary damages options. One option is actual loss caused by the misappropriation and any unjust enrichment caused by the misappropriation not addressed in computing actual loss damages. Damages for actual loss and unjust enrichment are both available as long as there is no double counting. LBF Travel Management Corp. v. DeRosa, 2024 WL 1298001 (S.D. Cal. March 26, 2024). Actual loss damages are intended to put the plaintiff in the position it would have been had the misappropriation not occurred. Actual loss is usually measured by the plaintiff’s lost profits, while unjust enrichment damages are usually calculated by the revenues the defendants generated misappropriating the trade secret. See, e.g., FX Group, LLC v. Astorga, 2021 WL 8200229 (M.D. Fla., Sept. 27, 2021) (analyzing lost profits in assessment of actual loss). But sometimes actual loss can include price erosion and lost investments. See Salsbury Laboratories, Inc. v. Merieux, 735 F. Supp. 1555 (M.D. Ga. 1989) (allowing the plaintiff to use price erosion to calculate actual loss damages).

The second option is a reasonable royalty. “A reasonable royalty is a ‘court-determined fee imposed on a defendant for use of a misappropriated trade secret.’” Galderma Laboratories, L.P. v. Tisckos, 2024 WL 2208096 (C.D. Cal. 2024). “The reasonable royalty is an attempt to measure a hypothetically agreed value of what the defendant wrongfully obtained from the plaintiff.” Determining a reasonable royalty is complex. Courts have looked to patent case law for determining methods of calculating a reasonable royalty, which uses a variety of methods to calculate a reasonable royalty. A common method is the “hypothetical negotiation” method. Motorola Solutions, Inc. v. Hytera Communications Corporation Ltd., 2021 WL 6690279 (N.D. Ill. 2021). “The hypothetical negotiation approach tries to recreate a licensing negotiation scenario and the describe the resulting agreement.” See Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301 (Fed. Cir. 2009). Although “this involves an element of approximation and uncertainty, any reasonable royalty must be supported by relevant evidence in the record.”

Determining the best remedies model in a trade secret case is a complicated matter. There are few clear rules and few controlling cases on how to determine remedies. Courts take a flexible approach in deciding the remedies in a trade secret action. Syntel Sterling Best Shores Mauritius Limited v. The TriZetto Group, Inc., 68 F.4th 792 (2d Cir. 2023). Thus, in trade secret litigation, it is important for a business to closely analyze the various remedies to determine the best option to pursue.

The Miami business litigation lawyers of the Mavrick Law Firm also represent clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.