Jury Cannot Award Disgorgement of Profits in Trade Secret Misappropriation Cases

Tex. Advanced Optoelectronic Sols., Inc. v. Renesas Elecs. Am., Inc., Nos. 2016-2121, 2016-2208, 2016-2235, 2018  (Fed. Cir. May 1, 2018) (Before Dyk, Bryson, and Taranto, J.) (Opinion for the court, Taranto, J.)

The Federal Circuit affirmed a jury finding that Renesas was liable for trade secret misappropriation and patent infringement for a set of apparatus claims, but vacated the damages awards in the case and remanded for further proceedings.

Texas Advanced Optoelectronic Solutions (“TAOS”) and Renesas both sell ambient light sensors that adjust screen brightness in electronic devices. The parties previously shared confidential technical information during merger negotiations, but the merger fell through. Renesas later released sensors using the technical design TAOS had disclosed, and TAOS sued for patent infringement, and for trade secret misappropriation under Texas law.

At trial, a jury found Renesas liable for both patent infringement and trade secret misappropriation. The jury awarded a reasonable royalty for infringement and a disgorgement of profits for misappropriation. When TAOS moved for entry of final judgment, Renesas argued that the damages awards were duplicative. The district court disagreed and allowed both awards to stand.

Trade Secret Misappropriation

The Federal Circuit affirmed Renesas’s liability for misappropriation. However, the district court erred in awarding a disgorgement of profits. On appeal, Renesas argued that the district court should not have left the issue of disgorgement to the jury because it was an equitable issue that the district court should have decided itself. The Federal Circuit turned to the Seventh Amendment and ultimately agreed that juries are prevented from awarding disgorged profits in trade secrets cases.

The Seventh Amendment concerns the right to a jury trial and requires the court to undertake a historical analysis of the cause of action at issue to determine whether it was tried by a jury when the Seventh Amendment was enacted. If it was, the court can then evaluate whether remedy determinations after a finding of liability must also be decided by a jury in order to maintain the jury trial right. The Federal Circuit found that juries did not award disgorged profits as a remedy in trade secret cases or any other analogous area of intellectual property law at the time the Seventh Amendment was enacted in 1791, and therefore juries were prevented from doing so now. TAOS had no right to a jury decision on its request for a disgorgement of profits; the Federal Circuit vacated the award, stating that a disgorgement decision must be conducted by the trial court itself.

Patent Infringement 

TAOS asserted both apparatus and method claims against Renesas. The accused product had multiple modes of operation. Only one mode practiced all of the claim limitations, but there was no evidence that the infringing product ever operated in that mode. Therefore, the Federal Circuit found that there could be no infringement of the method claims. However, there could be infringement of the apparatus claims, because they only required that the infringing device be capable of operating in the infringing mode. Therefore, the Federal Circuit affirmed the jury’s finding of infringement with respect to the apparatus claims.

Even so, the Court vacated the entire damages award for infringement. This is in part because the damages for the patent and trade secret claims were based on the same act over the same time period, and “double recovery for the same injury is inappropriate.” The Court remanded to the district court to determine damages that did not permit double recovery for the same injury, and with respect to infringement, were limited only to the infringement of the apparatus claims.

Take Away

There is no right for a jury to award a disgorgement of profits in trade secret misappropriation cases under the Seventh Amendment. Double recovery of damages for essentially same injury is not justified by presenting two legal theories for relief.

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