The next set of blog posts will discuss trade-secret damages. Trade-secret law, unlike patent law, is governed by both state and federal law in the U.S. As a result, the law is not necessarily uniform throughout the U.S. Nevertheless, trade-secret damages, generally, can take one of three forms: actual loss caused by misappropriation, unjust enrichment and reasonable royalties.
One commentator has identified four different measures of the actual loss damages calculation. See Mark A. Glick, Lara A. Reymann, Richard Hoffman, “Intellectual Property Damages,” John Wiley & Sons, 2003, at p. 336-339. These measures include lost profits, price erosion, value of the trade secret and head-start damages. The commentator indicates that lost-profits damages should be calculated in the same manner in which lost profits are calculated in patent cases.
Another type of lost-profits calculation involves determining “the ‘defendant's sales volume at plaintiff's profit margin’ method.” Advanced Research Sys. v. Coldedge Techs., 2014 Pa. Super. Unpub. LEXIS 910 *22 n. 5 (Pa. Super. 2014); see also Salsbury Laboratories v. Merieux Laboratories, 735 F. Supp. 1555, 1573 (M.D. Ga. 1989).
Lost profits can also be calculated “from a plaintiff’s lost ‘net profits’ or ‘incremental profits.’” Robert J. Hanna, Thomas R. Simmons. Stephanie A. Rzepka, “Trade Secrets Damages: Understanding the Law is a Framework for Success,” Tucker Ellis, LP (citing Glenn Perdue, The Broad Spectrum of Trade Secrets Damages, Am. Bar Assoc. (Apr. 18, 2012), available at http://apps.americanbar.org/litigation/committees/intellectual/articles/spring2012-0412 broad-spectrum-trade-secret-damages.html).
At least two court decisions have recognized that “lost profits may not be an appropriate measure of damages where the plaintiff and defendant are not competitors.” Douglas G. Smith, “Application of Patent Law Damages Analysis to Trade Secret Misappropriation Claims: Apportionment, Alternatives, and Other Common Limitations on Damages,” Seattle University Law Review, Vol. 25:821 at 859 (citing Pioneer Hi-Bred Int'l v. Holden Found. Seeds, Inc., 35 F.3d 1226, 1244 (8th Cir. 1994); Univ. Computing v. Lykes-Youngstown Corp., 504 F.2d 518, 535 (5th Cir. 1974)).