What are Trade Secret Misappropriation Damages?

Trade secret misappropriation damages are those monetary recoveries available to a trade secret owner whose trade secret is acquired by another through improper means, by mistake or accident, or by a current or ex-employee.

A trade secret is any formula, process, design, or compilation of information, which is not generally ascertainable, by which a company can obtain an economic advantage over competitors or customers. These industry secrets can be misappropriated in three main ways. The first, and most common, method involves the acquiring of trade secrets by improper means. However, a trade secret is also misappropriated if it is acquired by mistake or accident where the acquirer had reason to know that it was a trade secret and used or disclosed it without consent anyways. The final method happens when someone who had authorized access to the trade secret, through the course of their employment or otherwise, goes beyond the scope of the trade secret owner’s consent in their use of the trade secret.

When this sort of improper conduct takes place, the trade secret owner may be entitled to misappropriation damages. Another form of relief—injunctive relief—is also proper, especially where the misappropriation is merely threatened and not yet actual. This involves a court telling the defendant they may not engage in any action which will likely result in misappropriation of the plaintiff’s trade secret.

What damages qualify as trade secret misappropriation damages?

Under the Uniform Trade Secrets Act (UTSA), which most states have adopted in some form, damages “[i]n addition to or in lieu of injunctive relief” can include “both the actual loss caused by misappropriation and the unjust enrichment caused by misappropriation that is not taken into account in computing actual loss.” See TUTSA Sec. 134A.004 (quoting the Texas Uniform Trade Secrets Act (TUTSA) as an example). Further, in lieu of damages measured by any other methods, “the damages caused by misappropriation may be measured by imposition of liability for a reasonable royalty for a misappropriator's unauthorized disclosure or use of a trade secret.” Id. Exemplary damages “in an amount not exceeding twice any award” for standard damages are available if willful and malicious misappropriation is proven by clear and convincing evidence. Id.

Attorneys’ Fees in Trade Secret Cases

The prevailing party of a misappropriation action may be awarded attorneys’ fees if: (1) a claim of misappropriation is made in bad faith; (2) a motion to terminate an injunction is made or resisted in bad faith; or (3) willful and malicious misappropriation exists.

A business seeking to protect its invaluable trade secrets should find qualified counsel to assist in recovering any due damages from a past misappropriation, as well as in securing injunctions to thwart any potential future misappropriation.

For more information on trade secrets and intellectual property in general, see our trade secret services page.

Klemchuk PLLC is a leading IP law firm based in Dallas, Texas, focusing on litigation, anti-counterfeiting, trademarks, patents, and business law. Our experienced attorneys assist clients in safeguarding innovation and expanding market share through strategic investments in intellectual property.

This article is provided for informational purposes only and does not constitute legal advice. For guidance on specific legal matters under federal, state, or local laws, please consult with our IP Lawyers.

What are Trade Secret Misappropriation Damages?