The Defend Trade Secrets Act was signed into law on May 11, 2016 which established federal cause for action for trade secret misappropriation. This act also established damage remedies available for trade secret owners. The damage remedy for each case depends on the facts and characteristics of each trade secret misappropriation case.
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There is no single accepted methodology for how courts must determine reasonable royalty damages for trade secret misappropriation. The facts and circumstances for each case may determine what reasonable royalty method should be used.
Unjust enrichment is measured through an accounting of the defendant’s actual profits earned through its misappropriation of the trade secrets. This measure of damages analyzes the infringing parties financial performance during the time period of the misappropriation. This can be in the form on increased revenue, a decrease in costs and/or an increase in profits. Experts need to determine which revenues and expenses are associated with the infringing acts and which are not.
Actual Loss (Lost Profits/Lost Value)
Actual damages may be awarded to the trade secret owner if the wrongful act is the proximate cause of the loss. Lost profits are the most common form of actual loss damages. Lost profits analysis compares the revenues and avoided costs under the but-for and actual scenarios. The difference in the contribution margin between the but-for and actual scenarios results in lost profits.
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