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Tick tock: Related trade secrets have single accrual date under DTSA statute of limitations

by | Jun 11, 2026 |

The US Court of Appeals for the Federal Circuit reversed a judgment awarding damages and a permanent injunction, finding that the plaintiff’s trade secret misappropriation claims were barred by the statute of limitations under the Defend Trade Secrets Act (DTSA). Insulet Corp. v. EOFlow, Co. Ltd., Case No. 25-1807 (Fed. Cir. May 28, 2026) (Dyk, Reyna, JJ.) (Prost, J., dissenting).

Insulet manufactures the Omnipod, an adhesive wearable insulin patch pump currently sold in 25 countries. EOFlow developed a competing product, the EOPatch 2, marketed in Europe and South Korea. On August 3, 2023, Insulet filed suit against EOFlow alleging trade secret misappropriation under the DTSA and patent infringement.

The misappropriation allegedly occurred when EOFlow hired several former Insulet employees to develop the EOPatch 2. The employees included Steve DiIanni, former director of mechanical engineering at Insulet, who possessed “detailed technical information” about the Omnipod. Between March and May 2018, DiIanni provided EOFlow with computer-aided design (CAD) files and information regarding the Omnipod’s soft cannula and occlusion-detection algorithm.

The district court bifurcated the DTSA and patent claims. At trial on the DTSA claims, the jury found misappropriation of four trade secrets, including the Omnipod CAD files, and concluded that none of Insulet’s claims were barred by the statute of limitations. The jury initially awarded $170 million in compensatory damages and more than $280 million in exemplary damages. These amounts were reduced to $26 million and $34 million, respectively, with the district court’s grant of a permanent injunction. Insulet’s patent claims were dismissed without prejudice.

On appeal, Insulet moved to transfer to the Court of Appeals for the First Circuit. The Federal Circuit denied the motion, concluding that it retained jurisdiction because the dismissal of the patent claims functioned, at least in part, as a dismissal with prejudice, since the statute of limitations expired with respect to certain alleged acts of patent infringement. The Court then addressed two issues under the DTSA statute of limitations: when the statute of limitations begins to run and whether related trade secrets are subject to a single accrual date.

On the first issue, the parties disputed the applicable standard. EOFlow argued that the statute of limitations began to run under an inquiry-notice standard while Insulet contended that the Supreme Court’s 2010 decision in Merck & Co. v. Reynolds required application of a discovery standard under which the limitations period begins when the plaintiff discovers or reasonably should have discovered the facts underlying its claim. The Federal Circuit declined to decide which standard governed, concluding that Insulet’s claims were time-barred even under the more demanding Merck standard. Applying an access-plus-similarity framework, the Court found that, before the critical date, Insulet knew or should have known that EOFlow had access to its trade secrets through a former Insulet employee, and possessed sufficient information regarding similarities between the EOPatch 2 and Insulet’s trade secret technology to plead a misappropriation claim.

On the second issue, for which there was no controlling First Circuit authority, the Federal Circuit determined that the [...]

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Trade secret owner may pursue unjust enrichment damages despite licensing history

by | Jun 4, 2026 |

The US Court of Appeals for the Federal Circuit affirmed in part, reversed in part, and vacated in part a district court’s post-trial rulings in a trade secret and contract dispute, finding that a trade secret plaintiff may pursue unjust enrichment damages under both the Defend Trade Secrets Act (DTSA) and the Michigan Uniform Trade Secrets Act (MUTSA) even where the parties have a prior licensing relationship. The Court also reinstated the jury’s breach-of-contract damages award and rejected the defendant’s attempt to impose a heightened knowledge requirement for combination trade secrets. Versata Software, LLC v. Ford Motor Co., Case No. 24-1140 (Fed. Cir. May 22, 2026) (Moore, Taranto, Hughes, JJ.)

Ford licensed Versata’s automotive configuration software under a Master Subscription and Services Agreement. When the agreement was about to expire, the parties failed to agree on renewal terms, and Ford released its own software, which it had developed while still licensing Versata’s software. Versata alleged that Ford misappropriated several combination trade secrets embodied in Versata’s software and breached the parties’ agreement. A jury found Ford liable for misappropriating three trade secrets and for breach of contract, awarding more than $22 million in trade secret damages and $82.26 million in contract damages.

Before trial, the district court had limited Versata to a reasonable royalty theory based on the parties’ licensing history and had excluded damages models that measured the value Ford allegedly derived from using the trade secrets. After trial, the district court reduced the trade secret damages award to $0 and the contract award to $3. Versata appealed.

The Federal Circuit found that the district court had legally erred by categorically precluding unjust enrichment damages. The Court explained that the plain language of both the DTSA and the MUTSA permits recovery of unjust enrichment caused by misappropriation that is not accounted for in actual loss. While prior licensing history may be relevant to damages, it does not foreclose unjust enrichment as a matter of law. The Court therefore vacated the zeroed-out trade secret damages judgment and remanded for a new damages trial, instructing the district court to reconsider the reasonable royalty models it had previously excluded because they were not based solely on licensing history.

On the contract award, the Federal Circuit reversed the district court’s decision and reinstated the jury’s $82 million award. Applying Michigan law, the Court concluded that Versata had given the jury a reasonably certain damages path in the form of three annual license figures ($17 million, $14.95 million, and $10.95 million) multiplied by seven and a half years. The jury’s $82.26 million award equated to about $10.97 million per year, which fell within the range supported by the evidence and did not shock the conscience.

The Federal Circuit also affirmed liability for trade secret misappropriation. Ford argued that Versata had to show that Ford knew the specific elements of each combination trade secret at the time of use or disclosure. The Court rejected that proposed heightened requirement, concluding that neither the DTSA nor the MUTSA [...]

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Patent disclosure erases trade secret protection

by | Apr 30, 2026 | ,

Addressing the boundary between patent disclosures and trade secret protection, the US Court of Appeals for the Federal Circuit reversed a jury’s findings of trade secret misappropriation, breach of contract, and improper inventorship, concluding that the asserted “trade secrets” were generally known and therefore not protectable under California law. The Court affirmed, however, a $1 million statutory damages award for trademark counterfeiting. International Medical Devices, Inc. v. Cornell, Case Nos. 25 1580; 1605 (Fed. Cir. Apr. 17, 2026) (Dyk, Reyna, Taranto, JJ.)

International Medical Devices, Menova International, and Dr. James Elist (collectively, the plaintiffs) manufacture and sell the Penuma® cosmetic penile implant. The plaintiffs sued Dr. Robert Cornell and associated individuals and entities after Cornell attended a Penuma® surgical training session under a nondisclosure agreement (NDA) and later helped develop a competing implant. The plaintiffs asserted claims for misappropriation of trade secrets, breach of the NDA, trademark counterfeiting based on unauthorized use of the Penuma® mark, and invalidity of two cosmetic implant patents for failure to name Elist as an inventor.

A jury found for the plaintiffs on all claims. After a bench trial on remedies, the district court awarded more than $17 million in trade secret and exemplary damages, entered a permanent injunction, and awarded $1 million in statutory damages for counterfeiting. Cornell appealed.

The Federal Circuit reversed the trade secret verdict in its entirety, concluding that none of the asserted trade secrets were protectable under California law. The Court concluded that the alleged technical trade secrets were disclosed in publicly available patents and thus were “generally known” as a matter of law.

In doing so, the Federal Circuit reaffirmed the long-standing principle that “that which is disclosed in a patent cannot be a trade secret.” Once information enters the public domain through patent disclosures, it cannot later be reclaimed as confidential business information through trade secret law.

The plaintiffs’ remaining alleged trade secret (a list of surgical instruments) fared no better. The Federal Circuit found that the list had been emailed to the defendants without any confidentiality designation or obligation, defeating any claim that reasonable measures were taken to maintain its secrecy.

Because the plaintiffs failed to identify any confidential information beyond the alleged trade secrets, the Federal Circuit also reversed the breach of contract verdict. The NDA expressly excluded information that was “generally available to the public,” and the Court found that an NDA cannot transform public domain information into protected confidential material.

The Federal Circuit reached a different conclusion on trademark counterfeiting, however, and affirmed the jury’s finding and the $1 million statutory damages award. The Court explained that the evidence showed that Cornell had advertised and offered Penuma® implants without authorization. Cornell argued that the Penuma® mark was registered only for goods, not services, and therefore could not support a counterfeiting claim tied to surgical procedures. The Court rejected that argument, concluding there was sufficient evidence that Cornell offered the Penuma® implant itself as a good, not merely a medical service.

Finally, the Federal Circuit [...]

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Sedona Conference releases draft model DTSA jury instructions

by | Dec 18, 2025 |

The Sedona Conference published the first comprehensive draft Model Jury Instructions for the Defend Trade Secrets Act of 2016 (DTSA) and invites public comment through January 17, 2026. The draft instructions, which have been three years in development, aim to provide clear, consensus-driven guidance on the key issues that juries must resolve in DTSA cases, against the backdrop of an evolving and often inconsistent body of federal trade secret law.

Background

Although the DTSA has been in effect since 2016, federal courts are only now beginning to generate a meaningful body of appellate decisions interpreting the statute, largely because of the slowdown in trial activity during the COVID-19 pandemic. According to the Sedona Conference’s announcement, more than 9,600 federal trade secret cases were filed between 2017 and 2022, but only about 300 reached a jury verdict in that period. This emerging landscape has underscored the need for model jury instructions that can guide courts and litigants in identifying, framing, and presenting DTSA issues at trial.

The draft instructions were prepared by members of the Sedona Conference Working Group 12 on Trade Secrets, a group dedicated to developing nonpartisan, consensus-based principles for managing trade secret litigation. As described in the commentary, the working group has published influential guidance on governance of trade secrets, clean room practices, and interorganizational sharing of confidential information.

Overview of the draft instructions

The Model Jury Instructions consist of core DTSA concepts and follow a familiar model instruction format, pairing proposed instructions with supporting authority and explanatory commentary. As summarized in the one-page publication outline, the instructions cover an introduction to DTSA claims, the elements of misappropriation, existence of a trade secret, misappropriation theories, and damages.

Key issues highlighted in the draft

Identifying trade secrets with “sufficient particularity”

Recent cases suggest that in some circumstances, the jury may need to decide whether the asserted trade secrets have been identified with sufficient specificity, although most practitioners agree that courts should police this issue before trial. This specificity requirement reflects a growing tension between early disclosure obligations and strategic concerns about revealing sensitive information.

What constitutes “reasonable measures”?

Whether a plaintiff took “reasonable measures” to maintain secrecy remains a fact-intensive inquiry. The commentary notes emerging case law holding that general confidentiality policies, cybersecurity protections, or “need to know” restrictions may be insufficient if not specifically tied to the trade secrets at issue. At least one court has suggested that failing to affirmatively tell an employee that a piece of proprietary information (such as source code) is a trade secret may defeat DTSA protection.

Combination trade secrets and proof of misappropriation

The draft rejects a patent-style “all-elements” test and instead endorses assessing substantial similarity between the combination trade secret and the accused method or system. This recommendation reflects a shift away from rigid element-by-element comparisons toward more flexible, fact-driven analyses.

Whether retention alone can constitute misappropriation

One unresolved issue is whether mere retention of trade secret information (once lawfully acquired) can [...]

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Vague definitions deflate tire trade secret claims

by | Dec 18, 2025 | ,

The US Court of Appeals for the Federal Circuit affirmed a district court’s judgment as a matter of law (JMOL) that the plaintiff failed to prove misappropriation of five alleged trade secrets related to self-inflating tire (SIT) technology and separately rejected the plaintiff’s claim for correction of inventorship of defendant’s patent related to the alleged trade secrets. Coda Dev. S.R.O., et al. v. Goodyear Tire & Rubber Co., et al., Case No. 23-1880 (Fed. Cir. Dec. 8, 2025) (Lourie, Dyk, Cunningham, JJ.)

Coda sued Goodyear in the Northern District of Ohio, alleging that Goodyear misappropriated trade secrets disclosed during SIT-technology collaboration discussions and that Coda’s founder should be added as an inventor on Goodyear’s patent related to the same technology. A jury initially found for Coda on five trade secrets (TS 7, 11, 20, 23, and 24) and awarded more than $64 million in compensatory and punitive damages. The district court, however, granted Goodyear JMOL, holding that the asserted trade secrets were insufficiently definite, not secret, and/or never used or disclosed by Goodyear. It later denied Coda’s inventorship claim of a Goodyear patent related to the alleged trade secrets after a bench proceeding. Coda appealed.

Trade secret claims

TS 24 concerned the “optimal” pump location in a tire sidewall above the rim. The Federal Circuit found that Coda had already disclosed this placement in a 2007 PCT application and a 2008 Tire Technology article, both of which discussed pump placement in the sidewall. At trial, Coda confirmed that these publications described the same location. The Federal Circuit determined that because the information was public, it could not be a trade secret.

Coda’s attempt to narrow TS 24 post hoc by adding qualifiers such as “conventional tire sidewall” failed because those limitations did not appear in Coda’s interrogatory responses in compliance with the district court’s order to provide “a complete list of the trade secrets (with particularity).” The Federal Circuit rejected Coda’s attempt to belatedly introduce additional specificity into the trade secret based on trial testimony and attorney arguments.

The Federal Circuit similarly affirmed that TS 7, 11, and 20 (which described broad categories of SIT system components and functions) failed the definiteness requirement. Each trade secret identified a list of desired features but did not specify the underlying “design and development” knowledge Coda claimed to own. Without a concrete articulation of the claimed technical know-how, the Court found that the descriptions were too vague to distinguish trade secret information from general design concepts already known in the field.

TS 23 comprised a set of pump-pressure test results. At trial, Coda offered only a single 2009 email that mentioned one of the pressure values listed in TS 23. The Federal Circuit found that this partial overlap could not sustain a verdict of “use,” particularly when no evidence showed Goodyear had received or relied on the totality of the testing data. The Court also found that Coda’s arguments about Goodyear proceeding with its SIT project after the email failed to establish a [...]

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No specifics, no case? DTSA trade secret disclosure timing differs from CUTSA

by | Aug 21, 2025 |

The US Court of Appeals for the Ninth Circuit found that a district court abused its discretion by striking several of the plaintiff’s trade secrets, concluding that the court improperly relied on Rule 12(f) and failed to support dismissal as a discovery sanction under Rule 37. The Court emphasized that the fact-specific question of “reasonable particularity” in Defend Trade Secrets Act (DTSA) cases is generally reserved for summary judgment or trial, not for resolution at the discovery stage. Quintara Biosciences, Inc. v. Ruifeng Biztech, Inc., et al., Case No. 23-16093 (9th Cir. Aug. 12, 2025) (VanDyke, Johnstone, JJ., Christensen, Dist. J.)

Quintara and Ruifeng are DNA sequencing analysis companies that engaged in a business arrangement. The relationship soured when Quintara alleged that Ruifeng locked Quintara out of its office, took possession of its equipment, and hired Quintara employees. Quintara sued Ruifeng under the DTSA for misappropriating nine trade secrets.

During discovery, Ruifeng moved for a protective order to pause proceedings until Quintara identified its trade secrets with reasonable particularity, as required by the California Uniform Trade Secrets Act (CUTSA), Cal. Civ. Pro. Code § 2019.210, the California version of the DTSA. The district court agreed with Ruifeng and ordered Quintara to disclose each allegedly misappropriated trade secret with reasonable particularity. Quintara filed an amended trade secret disclosure, but Ruifeng found it deficient and again moved to halt discovery. To resolve the impasse, the district court gave Ruifeng a choice: either accept the disclosure and proceed with discovery, or move to strike the disclosure, withhold discovery, and risk consequences if the motion failed. Ruifeng chose the latter and moved to strike Quintara’s trade secrets in the disclosure under Fed. R. Civ. Pro. 12(f).

Citing its broad discretion over discovery and Fed. R. Civ. Pro. 16, the district court granted Ruifeng’s motion, holding that Quintara failed to comply with § 2019.210. As a result, the court struck nine of the 11 trade secrets from the disclosure, effectively dismissing Quintara’s misappropriation claims as to those trade secrets. Quintara appealed.

The question before the Ninth Circuit was when in the litigation, and with what level of particularity, a plaintiff under the DTSA must identify its alleged trade secrets. The Court began by noting that CUTSA requires a plaintiff to identify the alleged trade secret with “reasonable particularity” before discovery begins. In contrast, the federal DTSA imposes no such requirement regarding the timing or scope of trade secret identification. Instead, DTSA cases proceed under the Federal Rules of Civil Procedure, which do not require plaintiffs to specify their trade secrets with particularity at the outset of the case. The Court explained that under the DTSA, a plaintiff must demonstrate that the claimed trade secret is described with sufficient particularity to distinguish it from general knowledge in the industry or from the specialized knowledge of those skilled in the trade. At an early stage of litigation, particularly when no discovery has yet occurred, it is not fatal to a plaintiff’s claim if the trade secret disclosure [...]

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From confidential to careless: The case of the unprotected customer list

by | Aug 14, 2025 |

The US Court of Appeals for the Tenth Circuit affirmed a summary judgment dismissal of a trade secret misappropriation complaint, finding that the plaintiff failed to take reasonable measures to maintain the secrecy of a customer list. The Court also reversed the district court’s Daubert ruling, finding that it improperly exceeded the scope of Fed. R. of Evid. 702. John Snyder v. Beam Technologies Inc., Case No. 24-1136 (10th Cir. Aug. 5, 2025) (Matheson, Bacharach, Federico, C.J.)

John Snyder downloaded a national customer list containing more than 40,000 names from his former employer’s client-relationship management system. According to metadata analysis, Snyder last modified the file only three minutes after its creation, strongly suggesting that no meaningful changes or additions were made after the download. Snyder’s employment with the company ended in 2016. Following a two-year period of unemployment, he accepted a position with Beam in 2018.

Synder claimed that Beam induced him to join the company by promising compensation in exchange for customer information he obtained from his former employer. After beginning his employment at Beam, Synder created derivative documents containing subsets of the customer list. However, he inadvertently included the entire customer list as a separate tab in each of the documents he emailed to Beam employees. The documents were sent without any confidentiality markings or indications that they contained trade secrets. Snyder did not restrict access to the documents, apply password protection, or notify Beam that any of the content was proprietary or confidential.

After realizing he had distributed the full list to multiple Beam employees, Snyder took no action to object to Beam’s use of the data or attempt to retrieve the documents. He also failed to inform Beam that he considered any of the materials to be trade secrets. Instead, Snyder appeared to ratify the disclosure, telling Beam’s chief executive officer that he had intentionally shared the customer list with the recipients. A few months later, Beam terminated Snyder for unexplained reasons.

Synder sued Beam for trade secret misappropriation and several state law claims. Beam moved for summary judgment on the trade secret claims, which the district court granted, finding that Synder failed to show that he owned the customer list. The district court denied Beam’s motion on Synder’s other claims.

Both parties filed motions to exclude expert witness testimony at trial. The district court granted Beam’s motion to exclude Snyder’s damages expert under Fed. R. of Evid. 702, ruling that the expert could not support Snyder’s claimed damages for the remaining causes of action.

The district court found that Synder failed to show that he could obtain lost wages damages on any of the surviving claims. Expanding the scope of its ruling, the district court excluded not only the expert testimony, but also all evidence and fact witnesses related to lost wages damages at trial. Following the court’s ruling, Snyder and Beam settled one of the claims and jointly moved to dismiss the remaining claims. Snyder then appealed.

Synder argued that the district court erredin [...]

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State court action doesn’t create reasonable apprehension of related federal claims

by | Jul 17, 2025 |

Addressing whether a federal district court had jurisdiction over an action for declaratory relief that certain trade secrets and trademarks were invalid and not infringed, the US Court of Appeals for the Eighth Circuit concluded that state law claims for breach of contract, trade secret misappropriation, and trademark infringement did not create a reasonable apprehension of federal litigation sufficient to give rise to federal jurisdiction. Thunderhead of Ankeny, Inc. v. Chicken Bones of Kearney, Inc., Case No. 24-2741 (8th Cir. July 8, 2025) (Colloton, Arnold, Gruender, JJ.)

Nearly 20 years ago, David Anders sold his equity in Chicken Bones of Kearney, Inc., which ran a bar and grill called the Chicken Coop. Anders subsequently opened a new Chicken Coop restaurant. Chicken Bones sued Anders for misappropriating Chicken Bones’ trade secrets, trademarks, and trade dress. The parties settled, and Anders received a limited license to the Chicken Coop intellectual property. Anders then opened several other Chicken Coop locations under that license.

Believing that Anders had not complied with the license in opening the new restaurants, Chicken Bones sued Anders in state court for breach of the settlement agreement, misappropriation of trade secret recipes, and infringement of the Chicken Coop trademarks and trade dress. In response, Anders sued Chicken Bones in federal court, seeking declarations of noninfringement and invalidity. The district court dismissed the suit for lack of jurisdiction. Anders appealed.

The parties and the Eighth Circuit assumed that the district court would have jurisdiction only if the suit presented a federal question. The Eighth Circuit explained that to assess federal question jurisdiction in the case of a declaratory action, the Court must imagine a traditional action that presents the same controversy and determine whether a federal claim would appear on the face of the resulting complaint. “If, but for the availability of the declaratory judgment procedure, the federal claim would arise only as a defense to a state created action, jurisdiction is lacking.”

Applying this principle, the Eighth Circuit concluded that the district court did not have jurisdiction over Anders’ declaratory action because he primarily sought vindication of his defenses to Chicken Bones’ pending state law claims. While the Court recognized that Anders also sought declaratory relief in anticipation of potential federal trade secret, trademark, and trade dress claims, the Court reasoned that any federal law controversy between the parties was too speculative to support jurisdiction. While a threat of litigation can give rise to a justiciable controversy, there was no evidence that Chicken Bones would assert overlapping and duplicative federal law claims against Anders. The Eighth Circuit further found that Chicken Bones’ petition to cancel Anders’ federal trademark registration of a Chicken Coop logo did not change its analysis, because the petition merely confirmed the existence of a trademark infringement dispute between the parties, which Chicken Coop elected to adjudicate in state court.

The Eighth Circuit distinguished cases involving state law trade secret claims concerning a patented invention. Because there is no state patent system, such trade secret claims can [...]

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Tell Us Your Secret: Case Dismissed for Failure to Identify Trade Secrets

by | May 1, 2025 |

The US Court of Appeals for the Tenth Circuit affirmed a district court’s grant of summary judgment in favor of the defendants for the plaintiff’s failure to identify the trade secrets at issue with sufficient particularity. Double Eagle Alloys, Inc. v. Hooper, Case No. 24-5089 (10th Cir Apr. 22, 2025) (Bacharach, Seymour, Phillips, JJ.)

Double Eagle and Ace Alloys are direct competitors and distributors of specialty metals for companies in the oil and gas industry. After working for Double Eagle for decades, including five years as an inside sales manager, Michael Hooper left to join Ace. As he departed, Hooper took with him 2,660 digital files downloaded from his Double Eagle computer to an external storage device. After discovering the download, Double Eagle sued Hooper and Ace for trade secret misappropriation and civil conspiracy. The parties cross moved for summary judgment.

Double Eagle argued that the files Hooper downloaded contained financial, technical, and business information that qualified as trade secrets. Double Eagle categorized the files as pump-shaft-quality (PSQ) specifications, pricing, and customer drawings. Ace argued that the alleged trade secrets were not protectable since Double Eagle shared the information with customers or posted the information online. The district court granted summary judgment to the defendants on all claims, holding that “Double Eagle failed to identify its alleged trade secrets with sufficient particularity and clarity to proceed to trial,” that it failed to present evidence of the information’s secrecy to support the misappropriation claim, and accordingly that there was no underlying tort on which to base the claim for civil conspiracy. Double Eagle appealed.

Double Eagle argued that the summary judgment grant was improper because there were genuine issues of material fact on the issue of whether it identified its trade secrets with sufficient particularity and whether the business information was confidential. Double Eagle also argued that the district court erred by not allowing it an opportunity to supplement the evidence in support of its claim. The Tenth Circuit disagreed and affirmed on all counts.

The Tenth Circuit agreed with the district court that Double Eagle failed to introduce evidence that its alleged trade secrets were “known only to a limited number of people, were not readily ascertainable, or were valuable because they were not widely known.” The Court noted that Double Eagle’s PSQ specifications were readily ascertainable through proper means, its pricing was shared with customers without any protection to prevent customers from sharing those prices, and the customer drawings originated from the customers and were not owned by Double Eagle.

The Tenth Circuit similarly agreed with the district court’s dismissal of the misappropriation claim, explaining that the same lack of secrecy that defeated the trade secret claim also defeated the misappropriation claim. Finally, the Court rejected Double Eagle’s argument concerning its ability to supplement the record because the district court invited the parties to submit briefing on the issues, including an opportunity to move for leave to submit more evidence, but Double Eagle chose not to do so. Having [...]

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Ill-Gotten Gains: Unjust Enrichment Remedy Not Barred by Limitation of Liability Provision

by | Apr 17, 2025 |

Examining the issue of trade secret misappropriation when parties have contractually limited their liability from breach, the US Court of Appeals for the Eleventh Circuit reversed the district court’s dismissal of the case, finding that a plaintiff could still recover damages under a theory of unjust enrichment. Pemco Aircraft Engineering Services Inc. v. The Boeing Company, Case No. 22-13776 (11th Cir. Apr. 4, 2025) (Pryor, Branch, Carnes, JJ.)

Pemco and Boeing, who are usually competitors, entered into an agreement to jointly bid for a government contract. The parties’ contract had three separately executed parts that functioned as one agreement. When the contractual relationship fell apart, Pemco sued Boeing for breach of contract and trade secret misappropriation. Based on Boeing’s contractual breach, a jury awarded Pemco more than $2 million of out-of-pocket damages. The district court dismissed the trade secret misappropriation claim, however, as time-barred under Alabama law. After Pemco appealed, the Eleventh Circuit reviewed and determined that the trade secret misappropriation claim arose under Missouri law, not Alabama law, and that under Missouri law, Pemco’s trade secret claims were not time-barred. On remand, Pemco brought amended trade secret misappropriation claims under Missouri law, which the district court dismissed based on the parties’ contract, which limited liability. Pemco appealed.

The issue on appeal was whether the parties’ contractual limitation of liability provision precluded any damages, even for misappropriation. The contractual provision lists the categories of damages that the parties disclaimed, namely, incidental, punitive, and exemplary, or consequential damages. The Eleventh Circuit explained that two sophisticated parties negotiating at arm’s length are permitted by Missouri public policy considerations to contractually limit future recovery for even intentional torts. By including punitive and exemplary damages, which are available only for tort claims and not contractual ones, the parties clearly intended to include torts related to the contract within its scope. Thus, even though trade secret misappropriation is a tort and not a contractual claim, the Court found that the claim was restricted by this provision and Pemco was therefore limited in its potential recovery.

The Eleventh Circuit next looked to whether the jury award had sufficiently compensated Pemco. The district court found that a Missouri trade secrets claim was barred in this context because of a full recovery under the related contract claim. The Court, however, distinguished the two causes of action. So long as the trade secrets claim provides a separate, non-duplicative remedy, it can stand on its own despite other recoveries under the contract. The Missouri Trade Secrets Act explicitly provides for an unjust enrichment remedy not available for contractual breach and the parties chose not to limit recovery for unjust enrichment. Thus, the Court concluded that this remedy was available as a trade secret claim that was not, and could not have been, available to Pemco under the contract.

Boeing advanced two arguments against the availability of an unjust enrichment remedy. Boing argued that any further award would be duplicative of the previous jury award and that unjust enrichment constitutes a [...]

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