Background
Three senior engineers departed Comet Technologies—a semiconductor component manufacturer—and joined competitor XP Power in February 2018. They brought with them thousands of confidential documents detailing Comet’s products, research and development strategy, and underlying technologies. Within nine days, they delivered complete product designs and development plans for XP’s new product lines.
Comet sued under both the federal Defend Trade Secrets Act (DTSA) and California’s Uniform Trade Secrets Act (UTSA), alleging misappropriation of five trade secrets. The case proceeded to jury trial in the Northern District of California. Several days into trial, Comet voluntarily dismissed its California UTSA claims to streamline the proceedings, leaving only federal DTSA claims. A jury found misappropriation of four trade secrets and awarded $40 million in compensatory and punitive damages, a permanent injunction, and $17 million in attorney fees. XP appealed.
The Court’s Holding
The panel reversed the judgment and remanded for a new trial based on a reversible jury instruction error. The district court instructed the jury that XP bore the burden of proving that the alleged trade secrets were “readily ascertainable by proper means”—a key element of the DTSA definition of trade secret. This instruction was erroneous because the DTSA places the burden on the plaintiff to prove that information is not readily ascertainable. Unlike California’s UTSA, which treats ready ascertainability as an affirmative defense, the DTSA incorporates it as an element the plaintiff must prove.
The court rejected XP’s argument that it “invited the error” by supporting the flawed instruction at trial. XP had timely objected when Comet dropped its state law claims and correctly pointed out that the burden should shift to plaintiff. XP’s later argument in favor of the instruction was merely advocating in the alternative after the district court rejected its correction. The panel held this did not constitute invited error waiving appellate review.
The court also held the instructional error was not harmless. The jury heard sharply conflicting expert testimony on whether XP could have reverse-engineered the trade secrets. The jury’s verdict on what XP actually did (misappropriation and willful conduct) does not indicate how it would have ruled under correct instructions on what XP theoretically could have done through proper means. Because the damage calculations depended partly on trade secrets that may have been readily ascertainable, and the jury was never properly instructed on that distinction, reversal was warranted.
Key Takeaways
- The DTSA places the burden on the plaintiff to prove that trade secrets are not readily ascertainable by proper means; this is not an affirmative defense as it is under some state laws.
- Ready ascertainability and independent economic value are distinct DTSA elements; proving one does not automatically prove the other.
- When jury instructions contain errors on elements involving conflicting expert testimony, harmless error review requires more than showing the verdict reached the right result on other issues.
- A party does not invite an error merely by advocating in the alternative after a district court rejects the party’s timely objection to the error.
Why It Matters
This decision clarifies important procedural distinctions between the federal DTSA and state trade secret laws, particularly regarding burden of proof. DTSA plaintiffs must affirmatively prove lack of ready ascertainability; defendants cannot shift this burden simply by invoking it as an affirmative defense. The ruling underscores that when an element turns on conflicting expert testimony about technical feasibility, proper jury instructions are outcome-determinative—courts cannot simply assume the verdict would be the same despite an instructional error.
For practitioners, this case is critical guidance on DTSA litigation strategy, jury instruction drafting, and appellate review of instructional errors. It also highlights a significant distinction between federal trade secret law and California law that litigants must carefully navigate when asserting both types of claims.