A recent decision from the Fifth Circuit showcased the usefulness of the “discovery rule” for trade secret plaintiffs facing statute of limitations issues. The court reversed the dismissal of a claim for misappropriation of trade secrets because the plaintiff could not have discovered the misappropriation using reasonable diligence within the applicable statute of limitations period.
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Partial Victory for L’Oreal In Hair Coloring Fight
As predicted, the trade secrets battle between Olaplex, Inc. and L’Oreal continues – and L’Oreal has scored a fresh victory. On May 6, 2021, the Federal Circuit Court of Appeals overturned a $66 million judgment against L’Oreal and ordered a new trial – but only on one of Olaplex’s patent claims. The panel stated that Olaplex had entirely failed to show that its information was eligible for trade-secret protection, and that no reasonable jury could find otherwise.
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Massachusetts Supreme Judicial Court Rules that Employees May be Held Liable to Their Employer Under Massachusetts’ Unfair and Deceptive Trade Practices Law
The Massachusetts Supreme Judicial Court (“SJC”) recently found that trade secret misappropriation by employees who then use the trade secrets to compete is actionable under Massachusetts’ Unfair and Deceptive Trade Practices Law. The SJC’s ruling in Governo Law Firm v. Bergeron means that Unfair and Deceptive Trade Practices Statute, Massachusetts General Laws Chapter 93A Section 11 (“Chapter 93A”), now applies to trade secret disputes in the employer-employer context. Previously, such cases were considered an “internal matter” and therefore not actionable.
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Ninth Circuit Allows Defend Trade Secrets Act Claims for Conduct Predating the DTSA
On December 16, 2020, the U.S. Court of Appeals for the Ninth Circuit held for the first time in Attia v. Google LLC that a misappropriation claim under the Defend Trade Secrets Act of 2016 (“DTSA”) may be brought for a misappropriation that started prior to the enactment of the DTSA as long as the claim also arises from post-enactment misappropriation or from the continued use of the same trade secret. The decision further expands the reach of the DTSA and provides a blueprint for other courts to rule along the same lines.
The case, which was originally filed in the Northern District of California in 2014, was brought by an architect and his firm against Google under the DTSA, the Racketeer Influenced and Corrupt Organizations Act (“RICO”), and state trade secret and contract laws for alleged misappropriation of the plaintiff’s “Engineered Architecture” technology.[1] Although the Ninth Circuit affirmed the District Court’s dismissal of the DTSA claim on the grounds that the architect lacked standing under the DTSA because Google’s 2012 patent applications based on the “Engineered Architecture” technology placed the contested information in the public domain, extinguishing any trade secret claims over it,[2] the Ninth Circuit’s ruling was significant for other reasons, namely the expansion of the DTSA’s potential applicability.
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Seventh Circuit Upholds $140 Million Compensatory Damages Award and Caps Punitive Damages at $140 Million in Trade Secret Case
In Epic Systems Corp. v. Tata Consultancy Services Ltd., Epic Systems Corp. (“Epic”) filed a case in the U.S. District Court for the Western District of Wisconsin accusing Tata Consultancy Services Ltd. (“TCS”) of stealing documents and confidential information related to software applications performing billing, insurance benefits management, and referral services for health care companies.
In 2016, a federal jury ruled in Epic’s favor on all claims, ordered TCS to pay $140 million for uses of the comparative analysis, $100 million for uses of “other” confidential information, and $700 million in punitive damages. We reported on the jury verdict here and permanent injunction here. The district court later struck the compensatory award for “other uses” and reduced the punitive damages award from $700 million to $280 million because of a Wisconsin statute capping punitive damages at two times compensatory damages. See Wis. Stat. § 895.043(6).
Shortly thereafter, both TCS and Epic appealed the verdict – TCS challenged the punitive damages decision and Epic appealed the decision to vacate the $100 million award relating to uses of “other” confidential information. On August 20, 2020, the Seventh Circuit issued an opinion which reduced the punitive damages amount, but upheld the jury’s $140 million verdict. The Seventh Circuit held that TCS gained an advantage in its development and competition from its use of the comparative analysis and stolen information and that “the jury would have a sufficient basis to award Epic $140 million in compensatory damages” based on TCS’s use of Epic’s information to make a comparative analysis. In addition, the Seventh Circuit concluded that Epic did not provide “more than a mere scintilla of evidence in support of its theory that TCS used any other confidential information” such that the $100 million award could not stand.
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Faulty Jury Instruction Wipes Out $740 Million Verdict
On June 3, 2020, the Fourth Court of Appeals of Texas overturned a jury verdict awarding HouseCanary, Inc. (“HouseCanary”) $740 million in damages for trade secret theft and fraud against Title Source, Inc., now known as Amrock.
Amrock and HouseCanary are competitors in the real estate sector. Amrock provides title insurance, property valuations, and settlement services in real estate transactions. HouseCanary is a real estate analytics company that developed software to determine property values. HouseCanary agreed to provide this software to Amrock, and, according to HouseCanary, Amrock reversed engineered it. After the relationship between the two broke down, Amrock sued HouseCanary for breach of contract and fraud, and HouseCanary counterclaimed for breach of contract, fraud, misappropriation of trade secrets, among other claims. The jury found for HouseCanary, awarding it compensatory and punitive damages as well as attorney’s fees.
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