Tuesday, July 10, 2018

Intersil wins at the CAFC on damages issue

This case initially did involve patent infringement, but a large
part of this CAFC opinion relates to trade secrets:

TAOS then
sued Intersil in federal district court for infringement of
U.S. Patent No. 6,596,981, as well as for trade secret
misappropriation, breach of contract, and tortious interference
with prospective business relations under Texas
state law. After a trial held in early 2015, a jury returned
a verdict for TAOS and awarded damages on all four
claims. The court ruled on the parties’ post-trial motions
and entered final judgment, and both parties appealed

Although the CAFC found one ground of liability for trade secret misappropriation,
the damages award was vacated because
there was no evidence of "how much" the award should be on this one ground:

The monetary award for trade secret misappropriation
must be vacated because we have determined that
misappropriation liability here can properly rest on only
one of the three grounds that TAOS presented to the jury.
TAOS’s calculation of monetary relief did not distinguish
among those grounds. TAOS’s expert testified that the
“trade secrets [were] the – the drivers of sales.”
J.A. 21137–38. But he did not explain which of the trade
secrets contributed to what amount of profit to be disgorged;
he assigned all profits to the misappropriation of
all trade secrets. On this record, we have no basis to
conclude that the remaining ground for liability—the
photodiode structure trade secret—supports the entire
award. This is one reason for vacating the award.

There is a second, independent reason. As to the loss
of trade secret status, the unrebutted evidence at trial
showed that TAOS’s 1:1 interleaved photodiode array was
accessible to Intersil by proper means long before the time
of many of the sales included in TAOS’s request for mone-
tary relief. Such accessibility existed no later than January
2006, when Intersil successfully reverse-engineered
the TSL2560, and perhaps as early as February 2005,
when TAOS “released” the TSL2560.8 We need not pinpoint
the date to know that it predated many of the sales
included in the calculation of monetary relief put before
the jury by TAOS’s expert.

Accessibility by proper means rendered the photodiode
array structure no longer a protected secret. See E.I.
duPont deNemours & Co. v. Christopher, 431 F.2d 1012,
1015 (5th Cir. 1970) (“[T]he Texas rule is clear” that
“[o]ne may use his competitor’s secret process if he discovers
the process by reverse engineering applied to the
finished product.”). Secrecy protection terminated at the
end of the period of time it would have taken Intersil,
after Intersil’s permissible discovery of the photodiode
structure, to recreate that structure in its own products.
See Research Equip. Co. v. C. H. Galloway & Sci. Cages,
Inc., 485 S.W.2d 953, 956 (Tex. Civ. App. 1972) (explaining
that “the trial court was called upon to determine that
period of time which would have been required for one
having no background in the cage manufacturing business
to launch such an enterprise”); see also Injunction Order,
2016 WL 1615741, at *3 (in denying TAOS’s motion for an
injunction based on the misappropriation, the trial court
acknowledged that “[w]hatever potential ‘head start’
[Intersil] may have gained from its misappropriation of
[TAOS]’s trade secrets occurred years ago and has no
bearing on any future harm”).

For those reasons, we vacate the jury’s monetary
award for misappropriation of trade secrets. On remand,
any determination of sales-based monetary relief for trade
secret misappropriation requires evidence and a determination
of the time at which the trade secret became
properly accessible to Intersil and the duration of any
head-start period.

Of 7th Amendment/equity issues:

TAOS does not dispute Intersil’s premise that Intersil
had a right to a non-jury decision on disgorgement unless
TAOS had a Seventh Amendment right to a jury decision
on disgorgement. We therefore proceed on that premise.
The parties debate whether TAOS has a Seventh
Amendment right to a jury decision on its request for
disgorgement of Intersil’s profits. We conclude that TAOS
does not have such a right, and we therefore vacate the
disgorgement award on this ground as well. Intersil is
entitled to a decision on disgorgement by the trial court,
with findings of fact and conclusions of law duly entered
in accordance with Rule 52.


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