Elmagin Capital, LLC sued Chao Chen, Karl Petty, and their entities, Entergrid, LLC and Entergrid Fund I, LLC, alleging misappropriation of trade secrets. Chen, a former employee, had signed a Non-Disclosure and Non-Competition Agreement prohibiting him from using Elmagin's confidential information, including its trading strategies. After leaving Elmagin, Chen formed Entergrid and developed new trading strategies, Hydra and Gryphon. Elmagin claimed these strategies copied its proprietary Breck and Faber strategies in violation of the Defend Trade Secrets Act (DTSA) and Pennsylvania's Uniform Trade Secrets Act (PUTSA). The case went to trial in May 2022, where the jury found that the Breck and Faber strategies were indeed trade secrets but that Chen did not use them to develop his new strategies. Chen subsequently requested attorneys' fees, arguing Elmagin brought the suit in bad faith. The district court denied Chen's fees, treating the jury's bad faith finding as advisory, and also denied Elmagin's post-trial motions for judgment as a matter of law and a new trial.
The Third Circuit applied a plenary standard of review to the denial of judgment as a matter of law, asking whether there was a legally sufficient evidentiary basis for the jury's verdict. Under the DTSA and PUTSA, a plaintiff must prove the existence of a trade secret, that it was protectible, and that it was misappropriated. While the jury found the strategies were trade secrets, it also found no misappropriation. The appellate court noted that misappropriation often relies on circumstantial evidence of access and similarity. However, when public information and a defendant's own knowledge confine the scope of the secret, more than mere similarity is required. The court found the jury's conclusion that the strategies were different enough to avoid misappropriation was supported by the evidence. Regarding the attorneys' fees claim, the court addressed Chen's argument that he was entitled to a jury decision under the Seventh Amendment. The court reasoned that while the DTSA and PUTSA are modern statutes, the determination of attorneys' fees has historical roots in English courts where it was decided by judges, not juries. Therefore, the district court did not err in deciding the fees claim as a matter of law.
The original jury verdict stands, meaning Elmagin's trade secret claims were not upheld despite the existence of the secrets. The decision clarifies that in trade secret cases involving similar strategies, plaintiffs must provide evidence beyond mere similarity to prove misappropriation, particularly when the defendant's knowledge is not entirely uninformed. Additionally, the ruling confirms that attorneys' fees determinations under the DTSA and PUTSA remain within the judge's discretion and are not subject to a jury trial, even if the plaintiff's conduct is questioned.
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