Cases from kanne

United States Court of Appeals for the Seventh Circuit
7th Circuit Overturns Trade Secret Theft Damages Calculation

The 7th circuit vacated a $760,000 restitution penalty and three-year prison sentence against Yihao Pu. Pu allegedly used two employers’ proprietary stock trading programs for personal trading and lost $40,000.The U.S. Sentencing Commission’s guidelines permit district courts to determine the “intended loss” to the victim of trade secret theft when no “actual loss” occurs. However, on February 24, 2016, the 7th Circuit held that if a district court holds that the “intended loss” holds the same value as the cost of development of the trade secret, the court must have evidence that the defendant “intended to cause a loss to the victims that equaled the cost of development. On remand, the district court will have to reconsider Pu’s evidence that the loss to his employers was at most, $2,000. The 7th Circuit also held that the district court could consider Pu’s gains in determining an “intended loss” figure, but here it appeared that Pu did not have any financial gains from the use of the software.

Part of the original $760,000 included costs incurred to conduct an internal investigation to uncover Pu’s theft, including attorney’s fees for over 300 hours of work by lawyers, paralegals and legal assistance, 1,818 hours of forensic analyst work, as well as divers to retrieve hard drives from a canal. The Circuit court also held that plaintiff Citadel failed to give a complete accounting to support these figures used to calculate the $760,000 restitution. Without giving a further explanation through evidence “of how each professional’s time was spent investigating the data breach,” Citadel will not be awarded the full $760,000 restitution. For more details, read the full decision below.

Court of Appeals for the Seventh Circuit
Seventh Circuit Allows Attorney's Fees under UTSA for Suits Maintained in Bad Faith

§ 4 of the UTSA provides that “[i]f a claim of misappropriation is made in bad faith . . . the court may award reasonable attorney’s fees to the prevailing party.” A recent decision by the Seventh Circuit suggests that this provision applies to suits maintained in bad faith, even when the initial claim may have been meritorious.

In Tradesman, International, Inc. v. Black, a Seventh Circuit panel reversed and remanded a decision of the District Court for the Central District of Illinois denying a request of attorney's fees. The district court found that while the plaintiff had not initiated the suit in bad faith, bad faith had developed over the course of the litigation, as it became clear that the plaintiff’s claims were without merit. Nonetheless, the district court found that the phrase “made in bad faith” in UTSA § 4 applied only to the initial filing of a lawsuit, and denied the request accordingly

In reversing, the Seventh Circuit took a broader “common sense” reading of § 4, holding that “[a] claim is made in bad faith [under UTSA § 4] when it is initiated in bad faith, maintained in bad faith, or both.” The Seventh Circuit's decision suggests a new avenue for collecting attorneys' fees in trade secret cases.