Background
Comet Technologies USA, Inc. sued XP Power, LLC under the Defend Trade Secrets Act, alleging that three senior engineers stole confidential documents and designs to help XP develop competing products. A jury found XP liable for misappropriating several trade secrets and awarded Comet forty million dollars in damages, a permanent injunction, and over seventeen million dollars in attorney fees. The district court had instructed the jury that XP bore the burden of proving the secrets were readily ascertainable by proper means, an instruction Comet later argued was unnecessary after dropping state law claims.
The court’s reasoning
The Ninth Circuit held that the jury instruction incorrectly flipped the burden of proof on the essential element of whether the trade secrets were readily ascertainable. The court found that XP did not invite the error because it objected timely when Comet dropped its state law claims. The court further determined the error was not harmless because the jury heard conflicting expert testimony on whether the information could be reverse-engineered, and the damages award was based on total development costs that could not be separated from potentially ascertainable elements.
The dissent
Dissenting, Judge Bumatay agreed with the majority that the district court used an erroneous jury instruction, but he would hold that the error was harmless because the wealth of undisputed evidence introduced at trial easily established that it was more probable than not that the jury would have reached the same verdict had it been properly instructed.
Patrick J. Bumatay
What it means going forward
The reversal and remand require a new trial on liability and damages for the trade secrets found to be misappropriated, potentially altering the financial exposure and injunctive relief available to Comet Technologies.