Assessing monetary damages in suits for trade secret misappropriation presents a unique set of challenges. Trade secret law provides that a plaintiff can disgorge only those profits from a defendant that were specifically derived from the misappropriation of its trade secret, not those profits that were legitimately earned. But once a plaintiff proves that a defendant has misappropriated its trade secret and derived some profits from the use of that trade secret, which party then has the burden of apportioning the profits the defendant derived from the misappropriated trade secret from those profits derived rightfully? This question can be very important when allocation is complicated and unclear.
Depending upon the product or service at issue, it can be difficult to discern which profits to attribute to the trade secret and which to attribute to legitimate business practices. For instance, a company may have secured a client in part by utilizing the trade secret idea of another. But that company’s prior relationships with the client, its reputation in the industry, and its experience in the field also may have played a part in its success. Where a defendant has been found to have misappropriated a trade secret in developing a product, profits from this misappropriation must be separated from profits derived from legitimate business investments such as production costs, research and development, and labor expenses.
