Background
Comet Technologies and affiliated companies manufactured radio frequency (RF) components used in semiconductor fabrication. In February 2018, three senior engineers employed by Comet departed to work for XP Power, a competitor in the same market, and took with them thousands of confidential documents detailing Comet’s products, research and development strategy, and underlying technologies. Within nine days, these engineers delivered complete designs and a development plan for XP’s new product lines. A recorded call captured one engineer offering a “turnkey” (already completed) product design to XP’s headhunter—a smoking gun piece of evidence.
Comet sued XP Power under both the federal Defend Trade Secrets Act (DTSA) and California’s Uniform Trade Secrets Act (UTSA), alleging misappropriation of five trade secrets. During trial, Comet voluntarily dismissed its California UTSA claims to streamline the proceedings, leaving only DTSA claims. The jury rendered a special verdict finding that four of the five alleged trade secrets were protected under the DTSA and that XP had misappropriated three of them. The jury awarded $20 million in compensatory damages, $20 million in punitive damages for willful and malicious misappropriation, a permanent injunction, and over $17 million in attorney fees.
XP appealed, challenging the jury instructions on multiple grounds. The central issue was Instruction 20, which told the jury that XP bore the burden of proving that the alleged trade secrets were “readily ascertainable by proper means”—a critical element of trade secret protection under the DTSA.
The Court’s Holding
The Ninth Circuit panel reversed the judgment and remanded for a new trial, holding that the district court committed reversible error by instructing the jury on the wrong allocation of burden of proof. The DTSA defines a trade secret to require that “the information derives independent economic value . . . from not being generally known to, and not being readily ascertainable through proper means by, another person.” This places the burden on the plaintiff (Comet) to prove that trade secrets were not readily ascertainable—the opposite of what the jury was instructed. The erroneous instruction thus shifted a fundamental element of Comet’s claim onto the defendant’s shoulders.
The court rejected Comet’s argument that XP “invited” the error. Although XP had originally proposed Instruction 20 when Comet was pursuing both DTSA and UTSA claims (the latter places burden on the defendant), XP immediately objected and requested the instruction be amended when Comet dropped its state law claims. XP’s timely, correct objection preserved the issue and prevented any waiver. The court also rejected Comet’s alternative argument that XP’s reference to the instruction at a later charging conference amounted to invited error, finding instead that XP was merely preserving its previous objection in the alternative.
Most significantly, the panel held that the error was not harmless. Unlike the independent economic value element (which the jury was properly instructed on), ready ascertainability is a distinct statutory element focused on whether the information could theoretically be reverse-engineered or lawfully obtained by others—not on whether XP actually did so. The jury heard sharply conflicting expert testimony: XP’s expert testified that significant aspects of the alleged trade secrets were publicly disclosed in competitors’ patents, product bulletins, and standard industry practices, while Comet’s experts argued that manufacturing details, material properties, and design strategy were not readily ascertainable. The court found it impossible to determine from the verdict alone whether a properly instructed jury would have reached the same result, particularly given that damages calculations were tied to total R&D costs without clear apportionment between readily ascertainable and protected elements.
Key Takeaways
- Under the DTSA, the plaintiff bears the burden of proving that alleged trade secrets are not readily ascertainable by proper means—a critical and distinct element from proving independent economic value.
- Ready ascertainability focuses on what skilled persons in the field could theoretically learn through reverse-engineering or other legitimate means, not on what the defendant actually attempted or achieved.
- When parties dismiss claims during trial (here, state law UTSA claims), district courts must carefully adjust jury instructions to reflect the changed legal framework and burden allocations.
- An error that shifts the burden of proof on an essential element is harmless only when the record makes clear the jury would have reached the same result—conflicting expert testimony typically precludes such a finding.
- A party that objects timely and correctly to an instructional error does not invite that error by later proposing it as an alternative to complete removal.
Why It Matters
This decision highlights a critical distinction between federal and state trade secret law that traps even experienced trial courts. The DTSA and California UTSA allocate the burden of proof on ready ascertainability differently—a difference that matters enormously when a plaintiff must prove all elements of its federal claim. By remanding for a new trial, the court signals that getting the burden of proof right is non-negotiable, even when the underlying facts (misappropriation and willful conduct) appear undisputed. The reversed $40 million verdict—plus $17 million in attorney fees—underscores the stakes.
For practitioners, the decision reinforces that discovery and trial strategy in trade secret cases must prepare juries to evaluate not just what defendants did, but what others could have done through proper means. It also serves as a cautionary tale for district courts: mid-trial dismissals of claims require immediate reassessment of jury instructions, and a party that objects to erroneous instructions cannot be faulted for proposing alternatives when its correct position is rejected. On remand, Comet will face the burden of educating a new jury on the technical question of reverse-engineering feasibility—a notably harder task than the first trial’s focus on the defendants’ egregious conduct.