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Don’t Share Trade Secrets With Your Fiancé: A Cautionary Tale

by | Aug 15, 2024 |

The US Court of Appeals for the First Circuit largely affirmed a multimillion-dollar award against a temp agency for misappropriation of trade secrets and unjust enrichment due to its employee’s act of obtaining proprietary information from his fiancée, who worked at a competitor placement firm. BioPoint, Inc. v. Dickhaut, et al., Case No. 23-1575 (1st Cir. July 30, 2024) (Rikelman, Lynch, Howard, JJ.) (Rikelman, dissenting in part).

BioPoint is a Massachusetts-based life sciences consulting firm that places highly skilled candidates in temporary positions at pharmaceutical, biopharmaceutical and medical device companies. Leah Attis was one of the company’s top salespeople. Catapult is a Texas-based placement company. It opened a Boston office in 2017 and hired Attis’s fiancé, Andrew Dickhaut, as managing director. When business did not go well at Catapult’s Boston office, Attis began to help Dickhaut place candidates by giving him proprietary information about candidates and rates from BioPoint’s database, even though Catapult did not initially operate in the life sciences sector. As a result, Catapult eventually entered into a managed services provider agreement with biotechnology company Vedanta, whereby Catapult would manage all of Vedanta’s labor contracts and would have the first opportunity to fill openings there. Attis continued to give Dickhaut information on candidates from BioPoint’s system to help with Vedanta openings.

Upon discovering that it lost a candidate placement to Catapult because of Attis’s interventions, BioPoint fired her in December 2019. BioPoint then sued Catapult and Dickhaut for federal and state law claims, alleging misappropriation of trade secrets, tortious interference, and unfair and deceptive trade practices. The case proceeded to trial, and the district court divided the claims between a jury trial for the legal claims and a bench trial for equitable relief. The jury found that Catapult had misappropriated trade secrets and tortiously interfered with BioPoint’s relationship with the candidate that Attis helped Dickhaut place. The jury awarded BioPoint more than $300,000 in damages. At the bench trial on the equitable claims, the district court found that all profits that Catapult derived from its relationship with Vedanta arose on account of misappropriation of trade secrets and were recoverable as unjust enrichment. The district court awarded treble damages jointly against Dickhaut and Catapult, totaling more than $5 million. Catapult appealed.

While the First Circuit largely affirmed the district court and the jury’s findings, the First Circuit found two errors. First, the Court found that the district court erred in awarding BioPoint both the lost profits from the placement of the candidate and the unjust enrichment that accrued to Catapult as the result of the placement. The Court explained that the law does not permit the lost profits to be counted twice and reduced the award by more than $150,000, which was the amount that the district court had awarded for the loss of the candidate.

Second, the First Circuit found that the district court erred in finding Dickhaut jointly and severally liable for the entirety of his employer’s unjust enrichment, calling it “a bridge too far.” Since the [...]

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Missed Appropriation: Massive Trade Secret Verdict Vacated

by | Aug 8, 2024 |

The Court of Appeals of Virginia vacated a $2 billion award in a trade secret misappropriation case based on a series of evidential errors and improper jury instructions. Pegasystems Inc. v. Appian Corporation, Case No. 1399-22-4 (Va. Ct. App. 2024) (Beales, Friedman, Callins, JJ.)

Pegasystems and Appian are both companies in the business process management (BMP) industry and offer platforms that allow third parties to build software applications. Appian accused Pega of trade secret misappropriation, presenting evidence that Pega used the employee of a licensee of Appian’s technology to pass trade secrets to Pega, thereby enabling Pega to better market its own technology and exploit Appian’s weaknesses. Pega’s “spy,” Youyong Zou, recorded almost 100 videos of Appian’s platform and used them to demonstrate the strengths and weaknesses of Appian’s system in tutorials sent to Pega. Appian brough an action against Pega and Zou under the Virginia Uniform Trade Secrets Act (VUTSA) and the Virginia Computer Crimes Act. At trial, the jury returned a verdict in favor of Appian, finding that Pega and Zou misappropriated Appian’s trade secrets in violation of VUTSA. The jury awarded Appian damages in excess of $2 billion, which was the largest damages verdict in Virginia’s history. Pega appealed.

The Appellate Court found that although Appian did not fail as a matter of law to prove evidence of trade secret misappropriation, the trial court erred in instructing the jury by failing to place the burden of proximate causation on Appian, as required by both VUTSA and Virginia precedent. The Appellate Court found that this error resulted in a potentially excessive award that assumed all of Pega’s sales were tainted by the misappropriation. The Appellate Court instructed that on remand, Appian bears the burden of proving that the misappropriation caused the alleged damages and proving the amount of damages attributable to the trade secret with reasonable certainty. The Appellate Court also found that the trial court erroneously excluded key evidence that could have established that much of Pega’s revenue had nothing to do with the alleged misappropriation.

The Appellate Court further found that the trial court erred in excluding evidence that Pega argued would establish that many of the allegedly stolen features actually predated Pega’s contact with Zou. The trial court had excluded the evidence because the original laptop with this evidence had become inoperable. The trial court had refused to allow Pega the opportunity to authenticate the evidence and introduce the software on a new laptop. The Appellate Court found that this refusal was an abuse of discretion. The Appellate Court concluded that Pega was entitled to introduce a copy of this software under the rules of evidence, even if it was not on the original laptop.

Finally, the Appellate Court determined that the trial court erred in instructing the jury that the number of people with access to Appian’s trade secrets was “not relevant” to “any issue in this case.” The Appellate Court found that Pega’s evidence that “thousands” of people potentially had access to Appian’s [...]

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Message Received: Trade Secret Law Damages Available for Sales Outside US

by | Jul 18, 2024 | ,

The US Court of Appeals for the Seventh Circuit affirmed, in a matter of first impression, a district court’s decision to apply trade secret law extraterritorially and award trade secret damages for foreign sales while also finding that the copyright damages award needed to be reduced to eliminate foreign sales. Motorola Solutions, Inc. v. Hytera Communications Ltd., Case Nos. 22-2370; -2413 (7th Cir. July 2, 2024) (Hamilton, Brennan, St. Eve., JJ.)

Motorola Solutions and Hytera compete globally in the market for two-way radio systems. Motorola spent years and tens of millions of dollars developing trade secrets embodied in its line of high-end digital mobile radio (DMR) products. Hytera struggled to overcome technical challenges to develop its own competing DMR products. After failing for years, Hytera hatched a plan to “leap-frog Motorola” by stealing its trade secrets. Hytera, headquartered in China, hired three engineers from Motorola in Malaysia, offering them high-paying jobs in exchange for Motorola’s proprietary information. Before the engineers left Motorola, acting at Hytera’s direction, they downloaded thousands of documents and computer files containing Motorola’s trade secrets and copyrighted source code. Hytera relied on the stolen material to develop and launch a line of DMR radios that were functionally indistinguishable from Motorola’s DMR radios. Hytera sold these DMR radios in the United States and abroad.

Motorola sued Hytera for copyright infringement and trade secret misappropriation. The jury found that Hytera had violated both the Defend Trade Secrets Act of 2016 (DTSA) and the Copyright Act. The jury awarded compensatory damages under the Copyright Act and both compensatory and punitive damages under the DTSA for a total award of $765 million. The district court later reduced the award to $544 million, which included $136 million in copyright damages and $408 million in trade secrets damages. Hytera appealed.

Hytera conceded liability and instead challenged the damages award under both the Copyright Act and the DTSA. Among other things, Hytera argued that copyright and trade secret damages should not have been awarded for its sales outside the US. With respect to the copyright award, the Seventh Circuit agreed that Motorola failed to show a domestic violation of the Copyright Act and therefore was not entitled to recover damages for any of Hytera’s foreign sales of infringing products as unjust enrichment. Specifically, to show a domestic violation of the Copyright Act, Motorola had asserted that its code was copied from servers based in Chicago. While the district court accepted Motorola’s argument, the Seventh Circuit found that this factual finding lacked adequate support in the record, citing Motorola’s expert’s admission that there was no evidence of downloads from the Chicago servers. The Court instead found that given the location of the employees in Malaysia, it was likelier that the code was downloaded from Motorola’s Malaysia server. The Court therefore reversed the $136 million copyright award and remanded with instructions to limit the copyright award to Hytera’s domestic sales of infringing products.

The Seventh Circuit affirmed with respect to the trade secret award. Like the [...]

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E for Effort? PI Analysis in Trade Secret Suit Riddled With Errors

by | Jun 27, 2024 |

The US Court of Appeals for the Federal Circuit reversed the granting of a sweeping preliminary injunction (PI) in a trade secret suit against a competitor, finding that the district court’s analysis failed to consider potentially dispositive issues and the requirements of the Defend Trade Secrets Act (DTSA). Insulet Corp. v. EOFlow, Co., Case No. 24-1137 (Fed. Cir. June 17, 2024) (Lourie, Prost, Stark, JJ.) Among other things, the district court:

  • Failed to consider whether the plaintiff’s claims were time-barred.
  • Used an incorrect definition of “trade secret.”
  • Based its irreparable harm analysis on an unsubstantiated fear of a competitor’s potential acquisition of the defendant.
  • Failed to meaningfully assess the balance of harm and the public interest factors.

Insulet and EOFlow are medical device manufacturers that make insulin pump patches. Insulet began developing its OmniPod product in the early 2000s and launched next-generation models in 2007 and 2013. EOFlow began developing its own insulin pump product, the EOPatch, in 2011 and began work on its second-generation product in 2017. Around the time that EOFlow began developing its second-generation device, four Insulet employees joined EOFlow.

In early 2023, Medtronic allegedly started a diligence process to acquire EOFlow. Shortly thereafter, Insulet sued EOFlow for trade secret misappropriation, seeking an injunction to bar all technical communications between EOFlow and Medtronic. The district court granted Insulet’s request, finding that Insulet was likely to succeed on its trade secret claim because EOFlow had hired former Insulet employees who retained Insulet’s confidential documents, and Medtronic’s intended acquisition of EOFlow would cause irreparable harm to Insulet. The injunction broadly prevented EOFlow from “manufacturing, marketing, or selling any product that was designed, developed, or manufactured, in whole or in part, using or relying on the Trade Secrets of Insulet.”

EOFlow appealed the injunction. EOFlow argued that the district court failed to address whether Insulet’s claim was time-barred under 18 U.S.C. § 1836(d) of the DTSA and to consider factors relevant to Insulet’s likelihood of success or meaningfully assess the balance of harm and public interest factors.

The Federal Circuit first observed that the district court had expressed no opinion regarding EOFlow’s § 1836(d) statute of limitations (SoL) argument, even though Insulet’s compliance with the SoL was a material factor that would significantly impact Insulet’s likelihood of success. This alone constituted an abuse of discretion meriting reversal.

The Federal Circuit found that even if the district court had addressed the SoL, the injunction was not adequately supported. The Federal Circuit explained that the district court had improperly and broadly defined “trade secret” as “any and all Confidential Information of Insulet,” where “Confidential Information” was defined by the district court to mean any materials marked “confidential” as well as any CAD files, drawings or specifications. The Federal Circuit explained that the district court should have required Insulet to define the allegedly misappropriated trade secrets with particularity. Instead, the district court allowed Insulet to “advance a hazy grouping of information” and stated that “it would be unfair to require at [...]

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Fifth Circuit Rejects Recruiter’s Trade Secret Misappropriation and Contract Defenses

by | Apr 18, 2024 |

The US Court of Appeals for the Fifth Circuit affirmed a district court’s decision finding trade secret misappropriation and breach of contract based on a recruiter’s improper use of confidential client information. Counsel Holdings, Incorporated v. Jowers, Case No. 22-50936 (5th Cir. Apr. 1, 2024) (King, Ho, Engelhardt, JJ.) (per curiam).

In April 2006, Evan Jowers was hired by MWK (whose successor is Counsel Holdings) as a legal recruiter. Jowers signed an employment agreement with noncompete and nonsolicitation covenants. During his employment, Jowers relocated to Hong Kong, where he began recruiting for law firms in Asia. Jowers resigned from MWK in December 2006, after which he began working for another recruiting firm in Hong Kong called Legis Ventures.

MWK sued Jowers for trade secret misappropriation and breach of the restrictive covenants in the employment contract. MWK alleged that while Jowers was still employed with MWK, he submitted its candidates for employment through Legis Ventures. After a bench trial, the district court found in favor of MWK on both claims. As to the trade secret claim, the district court concluded that MWK’s customers’ “names, their clients, how much their practices were worth, their language skills, their goals for switching firms, and their law school records” constituted trade secrets. As for the contract claim, the district court found that enforcement of the restrictive covenants was justified because MWK’s client information was a legitimate business interest. Jowers appealed.

The Fifth Circuit affirmed. As to the trade secret claim, the Court explained that Jowers’s employment agreement explicitly required confidentiality and that MWK’s customers requested that Jowers keep their information secret. Despite the restrictions, Jowers divulged MWK’s customer information to others, including a competing recruitment firm, without authorization. The Fifth Circuit agreed with the district court’s determination that Jowers’s actions constituted trade secret misappropriation.

As to the breach of contract claim, Jowers argued that MWK lacked a “legitimate business interest.” The Fifth Circuit found no clear error with the district court’s determination that MWK’s client information was a legitimate business interest that justified enforcement of the restrictive covenant.



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In Good Hands: Compilation of Publicly Available Information Can Still Be a Trade Secret

by | Sep 21, 2023 |

The US Court of Appeals for the First Circuit affirmed a district court decision, finding that a compilation of customer-related information, even if publicly available, is a protectable trade secret. Allstate Insurance Co. v. Fougere, Case No. 22-1258 (1st Cir. Aug. 29, 2023) (Gelpi, Lynch, Thompson, JJ.)

Allstate hired two agents—James Fougere and Sarah Brody-Isbill—to sell the company’s auto and casualty insurance products in Massachusetts. In connection with their employment, both agents signed exclusive employment agreements that imposed numerous responsibilities, including an obligation to maintain information identified by Allstate as confidential, an undertaking not to misuse or improperly disclose the information and a promise to return the information to Allstate when their agency relationships terminated. Allstate eventually terminated its agreement with the agents because of noncompliance with Allstate regulations and Massachusetts state law.

After the agreements were terminated, Allstate believed the agents had retained confidential information belonging to Allstate and had been using it to solicit Allstate customers. Allstate ultimately learned that the agents had kept confidential Allstate spreadsheets that contained the names of thousands of Allstate customers, along with their renewal dates, premiums, types of insurance, Allstate policy numbers, driver’s license numbers, home addresses, phone numbers and email addresses.

Allstate filed suit against the former agents, bringing claims under both Massachusetts law and the federal Defend Trade Secrets Act (DTSA). The agents brought counterclaims under Massachusetts law, alleging that Allstate failed to provide adequate notice before their terminations, misappropriated information that belonged to the agents and wrongfully interfered with the agents’ contractual relations by engaging in bad-faith business practices. On summary judgment, the district court found that the agents misappropriated Allstate’s trade secrets and dismissed the agents’ counterclaims. The agents appealed.

The agents argued that the customer information was available from various publicly available sources and therefore did not constitute a trade secret. The First Circuit disagreed, explaining that the compilation of publicly available information could constitute trade secrets, particularly where attempts to duplicate that information would be “immensely difficult.” The Court also found that the factual record suggested that not all of the customer information was publicly available—and certainly not in the same compilation as it would be from Allstate.

The agents also argued that the customer information had no economic value. In analyzing this argument, the First Circuit looked to the employment agreements between the former agents and Allstate, which specifically stated that the misuse of Allstate’s confidential information would cause “irreparable damages” to Allstate. The employment agreements also provided a mechanism for terminated agents to sell their “economic interest” back to Allstate. The Court also relied on its finding that this sort of information would be valuable to Allstate’s competitors in attempting to market policies to Allstate customers so that the competitor could offer lower pricing. Taken together, the Court found that the customer data had economic value.

The agents next argued that Allstate had not sufficiently protected the customer information. The First Circuit, affirming the district court, found that Allstate had multiple protections in place. [...]

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No Lost Value Damages Despite Trade Secret Misappropriation

by | Jun 8, 2023 |

The US Court of Appeals for the Second Circuit vacated a damages award, finding that although there was liability for appropriating trade secrets, the trade secret proprietor was only entitled to compensatory damages under federal trade secret law, not avoided cost damages based on alleged estimated research and development or loss of value. Syntel Sterling Best Shores Mauritius, Ltd., et al. v. The TriZetto Grp., Inc., et al., Case No. 21-1370 (2d Cir. May 25, 2023) (Wesley, Raggi, Lohier, JJ.)

This case involved trade secrets concerning healthcare insurance software called Facets® that was developed by TriZetto and alleged misappropriation by a TriZetto subcontractor, Syntel Sterling. In 2010, TriZetto and Syntel entered a Master Service Agreement (MSA) under which Syntel agreed to support TriZetto’s Facets customers. In exchange, TriZetto granted Syntel access to its trade secrets related to Facets. In 2012, the parties amended the MSA to allow Syntel to compete directly with TriZetto for consulting services. A dispute arose in 2014 when Syntel’s competitor Cognizant acquired TriZetto. Syntel terminated the amended MSA and requested payment of rebates owed. TriZetto refused, raising concerns about Syntel’s continued use of confidential trade secrets post-termination.

Syntel filed suit for breach of contract in the Southern District of New York, and TriZetto counterclaimed. During trial, TriZetto proceeded on trade secret misappropriation counterclaims related to the Facets software under the Defend Trade Secrets Act (DTSA) and New York law. Syntel argued that the amended MSA authorized Syntel to compete for Facets services business while using TriZetto’s trade secrets.

During discovery, the district court issued a preclusion order that sanctioned Syntel for discovery misconduct, finding that “Syntel was actively creating a repository of [TriZetto’s] trade secrets on its own . . . to be used in future work.” Citing the preclusion order, the district court instructed the jury that Syntel had misappropriated two of 104 asserted trade secrets.

With respect to damages, TriZetto presented expert testimony that established that Syntel avoided spending about $285 million in research and development costs because of the misappropriation covering the period between 2004 and 2014, an amount that covered only a portion of TriZetto’s overall $500 million research and development costs. Syntel’s expert did not counter that amount. Instead, Syntel argued that these avoided costs did not apply here for several reasons: because the alleged misappropriation did not destroy the value of Facets since Syntel could have used Facets for free by entering a third-party access agreement with TriZetto because TriZetto continued to make millions using its Facets software, and because Syntel was not a software company but a competing service provider. The jury instructions included Syntel’s avoided development costs as one form of unjust enrichment that applied to the federal claims but not the state claims.

The jury returned a verdict in favor of TriZetto on all counts. The jury awarded TriZetto $285 million in avoided development costs under the DTSA as compensatory damages and double that amount in punitive damages. Following trial, Syntel renewed its motion for judgment as [...]

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A Healthy Dose of Seeds: Unique Combination Trade Secrets Entitled to Protection

by | Nov 29, 2022 |

The US Court of Appeals for the Sixth Circuit upheld a jury verdict finding a dietary supplement company liable for misappropriating another company’s research and development (R&D) related to broccoli-seed extract. Caudill Seed & Warehouse Co., Inc. v. Jarrow Formulas, Inc., Case No. 21-5354 (6th Cir. Nov. 10, 2022) (per curiam) (Moore, J., concurring in part and dissenting in part). The decision addressed several issues relating to so-called “combination” trade secrets.

Caudill manufactures and sells various nutritional supplements, including a supplement made using broccoli-seed extract. Caudill sued Jarrow Formulas for trade secret misappropriation after its Director of Research Ken Ashurst left Caudill and joined Jarrow. Ashurst had led Caudill’s R&D efforts for nine years, including extensively researching the development of broccoli-seed derivatives and assembling a large body of research related to broccoli seeds. After he joined Jarrow, Ashurst delivered a curated collection of broccoli product research to Jarrow and helped it bring its own competing broccoli-seed extract supplement to the market in just four months.

The case proceeded to trial. The jury found that Caudill had a protectable trade secret; Jarrow misappropriated said trade secret; and Caudill was entitled to more than $2 million in actual losses, more than $400,000 in unjust enrichment damages, and exemplary damages. Jarrow moved for judgment as a matter of law and for a new trial. After the district court denied the motions, Jarrow appealed.

Jarrow argued that Caudill improperly asserted a “kitchen-sink theory” of trade secrets by broadly defining all its research activities as a single trade secret. Jarrow also argued that Caudill failed to show that it had acquired the alleged trade secret. Finally, Jarrow challenged the damages awards on legal grounds. The Sixth Circuit rejected each of Jarrow’s arguments on appeal.

The Sixth Circuit first found that Caudill properly defined its alleged trade secret as its “research and development on supplements, broccoli, and chemical compounds.” The Court treated Caudill’s alleged trade secret as a “combination” trade secret (i.e., a collection of elements that individually are generally known but are unique in combination.) The Court concluded that Caudill demonstrated it had assembled a unique collection of processes and information relating to its R&D process, and therefore, Caudill properly defined its entire R&D process as a trade secret. The Court rejected Jarrow’s argument that Caudill’s alleged trade secret mostly consisted of public domain materials on the basis that the materials were unique in combination.

The Sixth Circuit also rejected Jarrow’s argument that Caudill failed to show that Jarrow acquired and used the entire combination trade secret. The Court noted differing authority on whether a plaintiff alleging a combination trade secret must show acquisition and use of the entire combination but concluded that trade secret law does not require proving acquisition of “each atom” of the combination trade secret. The Court reasoned that when a trade secret consists of a “mass of public information” that has been collected, the defendant will always be able to identify some minute detail of the combination that it did [...]

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A Window into Trade Secret Damages: R&D Costs Can Quantify Unjust Enrichment

by | Sep 15, 2022 |

The US Court of Appeals for the Third Circuit affirmed a district court’s finding of damages in a trade secrets case under Pennsylvania’s version of the Uniform Trade Secrets Act. The Third Circuit explained that it is appropriate to quantify damages under the unjust enrichment standard by considering the trade secret owner’s research and development costs as an indicator of the research and development costs that the defendant avoided but would have incurred if not for its misappropriation. PPG Indus. Inc. v. Jiangsu Tie Mao Glass Co. Ltd. et al., Case No. 21-2288 (3rd Cir. Aug. 30, 2022) (Jordan, Porter, Phipps, JJ.)

PPG is the maker of OpticorTM, a novel plastic for airplane windows. PPG sued Jiangsu Tie Mao Glass (TMG), asserting trade secret misappropriation, among other things. PPG alleged that TMG persuaded a former PPG employee to provide TMG with a treasure trove of trade secrets and that TMG used the trade secrets to begin making plans to produce Opticor-quality windows and to build a factory to manufacture its product. After TMG failed to appear in the case for more than a year, the district court entered a default judgement for PPG. Only then did TMG show up. The district court declined to set aside the default judgment and ultimately awarded damages for TMG’s unjust enrichment totaling about $9 million, which it then trebled to $26.5 million, and issued a permanent injunction against TMG. TMG appealed.

The Third Circuit began by analyzing whether TMG was unjustly enriched as a result of its acts. Trade secret damages are commonly determined either by calculating actual loss to the plaintiff or by quantifying the defendant’s unjust enrichment from the use of the trade secret. The Court found that although TMG did not sell products containing the Opticor technology, TMG was unjustly enriched by its use of the trade secrets. For example, TMG used PPG’s proprietary drawings (minus PPG’s name and logo) to ask a subcontractor to “manufacture for TMG the same molds that it did for PPG.” TMG also was building, or had plans to build, a production facility to manufacture its version of the Opticor technology. The Court determined that TMG was unjustly enriched because TMG used PPG’s trade secrets to completely skip the research and development phase of its version of the Opticor technology and instead move directly to the phase of preparing for production.

Next, the Third Circuit considered whether the damages amount awarded to PPG was appropriate. Unjust enrichment requires the defendant to pay the plaintiff the value of the benefit conferred from the use of plaintiff’s trade secrets. This benefit can be a cost that was avoided and may include development costs. The Court found it appropriate to consider the research and development costs PPG incurred in developing the Opticor technology as an indicator of the research and development costs TMG would have sustained to develop its own version of the Opticor technology in the absence of misappropriation. In short, “[t]he costs a plaintiff spent in development [...]

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There Should Be No Secret about Scope of Trade Secret Injunction

by | May 26, 2022 |

In the context of an interlocutory appeal, the US Court of Appeals for the Federal Circuit vacated a portion of a preliminary injunction in a case involving alleged misappropriation of trade secrets for failing to provide sufficient specificity as to what it prohibits. Carl Zeiss Meditec, Inc. v. Topcon Medical Systems, Inc. et al., Case No. 2021-1839 (Fed. Cir. May 16, 2022) (Hughes, Linn and Stoll, JJ.)

Topcon Medical filed an interlocutory appeal, seeking vacatur of a preliminary injunction granted by a district court in the Northern District of California. Topcon asserted that the injunction failed to satisfy Federal Rule of Civil Procedure 65(d) because it did not provide an adequate description of what specific acts are prohibited. Topcon argued that the injunction is ambiguous as to whether it applies to all of its platform or only to a certain module. Topcon further argued that the ambiguities are exacerbated by the district court’s misunderstanding of evidence presented from a declaration and deposition in the case and the court’s use of that evidence to draw conclusions about the misappropriation of trade secrets.

The Federal Circuit agreed with Topcon that the preliminary injunction failed to provide any notice required under Rule 65(d) as to whether—and to what extent—Topcon’s continued use of the platform and modules is outlawed. As to the basis for the injunction, the Court noted that “the district court did not address whether all [the] information [asserted in the complaint] was confidential, or whether it was acquired, used, or disclosed improperly. Second, as Topcon convincingly argues, the scope of the asserted trade secrets captured under CZMI’s argument is staggering, including unspecified software architecture, unnamed user interfaces, generically noted research, and other information simply identified as trade secrets.” The Court explained that Rule 65(d) expressly requires that the injunction order must “describe in reasonable detail—and not by referring to the complaint or other document—the act or acts restrained or required.” The Court further agreed with Topcon that the district court’s reference to declaration evidence related to data that was not the data on which the misappropriation claim was based, which “exacerbate[d] the ambiguity of the injunction and in no way support[ed] extending the injunction to cover [other parts of the accused] platform or …decoder.”

Because the grant of injunction did not identify the specific acts prohibited, the Federal Circuit vacated and remanded the injunction to the district court to clarify the scope of the injunction.



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