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Archive for the ‘Damages’ Category

Tenth Circuit Denies Prejudgment Interest for Lack of Certainty Even Where Jury Found Lost Profits and Awarded Unjust Enrichment

In Damages, Prejudgment Interest, Sister State Construction of UTSA on August 16, 2011 at 5:15 pm
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In a trade secrets case where the jury awarded plaintiff ClearOne Communications, Inc. damages on lost profits and unjust enrichment, the Tenth Circuit held that prejudgment interest was not appropriate because the damages calculations were based on speculation and assumptions and lacked the mathematical certainty required to justify an award of prejudgment interest.  ClearOne Communications v. Chang, et al., 2011 WL 3468215, No. 09-4128 (10th Cir. Aug. 9, 2011) (slip op.).

Background

ClearOne licensed to Biamp Systems Corporation an acoustic echo cancellation (AEC) algorithm for an average price of $83.49 per channel in 2002. Id. *1. In 2004, WideBand Solutions, Inc. and associated individual defendants agreed to develop AEC software for Biamp and allegedly developed said software based upon ClearOne’s trade secret computer code. Id. Biamp stopped making payments to ClearOne and instead began a licensing agreement with WideBand in 2005. Id. Biamp allegedly used the infringing code to develop its product.  Id. In 2006, Biamp developed its own technology and stopped licensing WideBand’s allegedly illicit code. Id.

Damages Calculations

ClearOne’s damages expert Richard Hoffman calculated lost profits and unjust enrichment. Id. Hoffman calculated lost profits by multiplying the number of channels Biamp licensed from WideBand by $83.49 (the average price per channel from the ClearOne/Biamp contract). Id. The jury found that ClearOne was entitled to $956,000 in lost profits against the WideBand defendants, and $956,000 in lost profits against Biamp. Id. Read the rest of this entry »

Approaches to Damages in Trade Secret Cases

In Damages, Practice articles, Reasonable Royalty, Unjust enrichment on October 20, 2010 at 7:59 pm
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Once a trade secret lawsuit progress beyond the preliminary injunction stage, the key battleground usually shifts to damages.  Assessing damages can be particularly difficult in a trade secret case because of the problematic uncertainty in measuring the value of trade secrets.  Marc Pensabene and Christopher Loh summarized some of the flexible approaches that plaintiffs and defendants might pursue in arguing for and against trade secrets damages calculations.

From the plaintiff’s perspective, the authors offer the following aggressive approaches (not all of which have been accepted by California courts):

  • In calculating lost profits, argue that the amounts should include not only lost sales that were diverted from the plaintiff to the defendant, but also losses attributable to price erosion or to increased costs cause by the misappropriation, such as the costs of an advertising campaign to recoup market share stolen by defendant
  • Argue for provable future profits, overhead costs, general and administrative expenses, lost profits on reorder or spare parts or other natural follow-on items
  • Ask the court to calculate plaintiff’s lost profits by applying the defendant’s profit margins to the plaintiff’s lost sales
  • In seeking unjust enrichment, if the defendant does not incorporate the trade secret into a product but rather uses it to promote its existing products or to develop new and different products, ask for a portion from those products
  • If plaintiff is unable to prove lost profits or unjust enrichment, seek development costs (so-called “head-start” damages), the diminution of the value of the plaintiff’s business or stock, or a reasonable royalty based either on the actual royalties that have been paid to the plaintiff, or a hypothetical royalty that the litigants would have negotiated at the time of the misappropriation Read the rest of this entry »

Fifth Circuit Declines to Apply Restatement’s Burden Shifting Scheme in Proving Trade Secret Damages

In Damages, Restatement on September 13, 2010 at 9:26 pm
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The Fifth Circuit reversed a denial of summary judgment on a misappropriation of trade secrets claim In MGE UPS Systems, Inc. v. GE Consumer and Industrial, Inc., et al., 612 F.3d 760 (5th Cir. 2010).  In that case, an owner of copyrighted software sued unauthorized user of the software for copyright infringement, misappropriation of trade secrets, unfair competition, and violation of Digital Millennium Copyright Act (DMCA). Read the rest of this entry »

Northern District Notes That Trade Secret Law Allows Recovery of Saved Development Costs

In Damages, Remedies, Unjust enrichment on September 9, 2010 at 7:37 am
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In a non-trade secrets intellectual property case, The Northern District of California noted, in dictum, that “trade secret law allows recovery of saved development costs.”  Oracle Corp. v. SAP AG, No. C 07-1658 PJH, — F.Supp.2d —-, 2010 WL 3258603, *14 (N.D. Cal. Aug. 17, 2010). Read the rest of this entry »

Sixth District Holds That Reasonable Royalties Available When a Defendant Has Not Realized a Profit or Other Calculable Benefit

In California Appellate Opinions, Damages, Reasonable Royalty, Unjust enrichment on August 30, 2010 at 3:53 pm
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Today, in Ajaxo Inc. v. E*Trade Financial Corporation, — Cal.Rptr.3d —-, H033631, 2010 WL 3386479 (Cal. Ct. App. 6th Dist. Aug. 30, 2010), the Sixth District held that where a defendant has not realized a profit or other calculable benefit as a result of his or her misappropriation of a trade secret, unjust enrichment is not provable within the meaning of section 3426.3(b). Thus, the trial court had discretion pursuant to section 3426.3(b) to order payment of a reasonable royalty.

Plaintiff Ajaxo Inc. (Ajaxo), sued defendant E*Trade Financial Corporation (E*Trade) for misappropriation of trade secrets under the California Uniform Trade Secret Act.  E*Trade was found liable in a prior jury trial, where a jury determined that E*Trade had willfully and maliciously misappropriated Ajaxo’s trade secrets.  Id. *1.  A second trial determined the extent to which E*Trade had been unjustly enriched by its misappropriation.  Id. Read the rest of this entry »