Page 26 - Intellectual Property Disputes

"[I]n the case of a trade secret[,] appropriation is to be determined by reference to the analogous line of
cases involving patent infringement, just as patent infringement cases are used by analogy to determine
the damages for copyright infringement. Damages are allowed in trade secret cases, not upon the theory
of the taking of property, but rather upon the theory of a breach of a confidential relationship." fn 45
"However, it often happens that defendants have utilized protected technology to their advantage with
no obvious effect on the plaintiff, except for the relative differences in their competitive position." fn 46
Therefore, "[c]omputing damages in a trade secrets case is not cut and dry." fn 47

Although litigation precedent under the DTSA is nascent, for a trade secret misappropriation claim to
prevail under the UTSA, the trade secret needs to contain elements that are unique and potentially
unknown. Without this showing, the claim will be dismissed. For example, in In re Midgard Corp., the
Tenth Circuit Court of Appeals was

...hard-pressed to understand what this secret information is. Midgard claims only generally that
the secret is "the compilation of information as to [its] customers, suppliers, pricing and
practices." As the bankruptcy court found, Midgard made no effort to keep any of this
information confidential or to limit Todd’s use of the information. Midgard admitted it told
hundreds of people about its exclusivity agreement with its primary or sole customer, Medite.
There is no indication that the names of Midgard’s scrap suppliers were not easily ascertainable
by observation or by reference to directories. Midgard complains that Todd bought the same
piece of wood-grinding equipment that it was planning to buy, but this was an off-the-shelf
machine advertised in trade publications. . . We see no error in the bankruptcy court’s finding
that Midgard did not prove the existence of a trade secret. fn 48

As can be seen from this discussion, the protection of trade secrets arises under a complex body of
federal and state law, together with case law, that makes the calculation of damages potentially
challenging. As a result, a practitioner will benefit from being both flexible and analytic in developing
an approach for measuring damages in trade secret cases, in close consultation with counsel regarding
applicable remedies and case precedent.

Jurisdiction Summary

The following table summarizes the jurisdictions in which civil actions for intellectual property disputes
can be brought in the U.S. court system. Note that a federal court’s diversity jurisdiction may provide for
a federal forum even for disputes that are based exclusively on state law.

fn 45 Int’l Indus., Inc. v. Warren Petroleum Corp., 248 F.2d 696, 699 (3d Cir. 1957).

fn 46 D. Warden, W. Bratic, and C. Eggleston, "Trade Secrets and Patents: Comparison and Contrasts in Royalty Determination," les
Nouvelles (September 2000), 143.

fn 47 Am. Sales Corp. v. Adventure Travel, Inc., 862 F. Supp. 1476 (E.D. Va. 1994).

fn 48 In re Midgard Corp., 107 F.3d 880 (10th Cir. 1997) (unpublished opinion).

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