On March 11, 2014, The Tenth Circuit held that a plaintiff may recover damages under a reasonable royalty theory, even in cases where the defendant had not profited financially from the misappropriation.
StorageCraft Technology Corp. (StorageCraft), a developer of data storage and recovery software, brought suit against James Kirby, a former officer and director who was also one of the company’s original founders. The complaint alleged that Kirby had misappropriated StorageCraft’s trade secrets, and had subsequently shared this information with NetJapan, one of StorageCraft’s main competitors. The complaint did not allege that Kirby had profited financially from the misappropriation. A jury awarded StorageCraft $2.92 million in damages based on the estimate of what would constitute a reasonable royalty for use of the misappropriated trade secrets. Kirby appealed, arguing that the award was excessive because he had not profited from the misappropriation.
The Tenth Circuit rejected Kirby’s argument and affirmed the award, noting that the Utah Uniform Trade Secrets Act “doesn’t distinguish between a misappropriator’s venial motives.” While reasonable royalty damages are commonly sought in cases where the defendant has profited financially from the misappropriation of the plaintiff’s trade secrets, this decision makes clear that, at least in Utah, such damages are available regardless of the defendant’s motive in the misappropriation.