SW Legal studies in Business

Damages for Trade Secret Theft Must Have Some Reasonable Basis
Description An Appeals court upheld the award of $4.6 million for trade secret misappropriation as being justified by expert testimony about the cost of development of such information, even if the information was not used by the defendant to generate profits.

Topic Intellectual Property
Key Words Trade Secrets; Misappropriation; Damages
C A S E   S U M M A R Y
Facts Johnson worked for Sonoco for 30 years before he went to work for competitor Newark. Sonoco sued Johnson and Newark, contending they misappropriated trade secrets related to the making of paper spiral tubes. The trial court found that when Johnson left Sonoco he took technical equipment, software, manuals, a videotape, customer lists, and pricing information, and that Newark used or gained knowledge from much of this material. An expert testified that the "cost of capital" damages-what it would have cost Newark to finance the development of the information stolen by Johnson-was worth up to $25 million, but that the damages could also be calculated as $4.6 million for the damages suffered by Sonoco. The trial court awarded $4.6 million in damages against Johnson and Newark jointly and severally, and also awarded $2.3 million in punitive damages. Johnson and Newark appealed.
Decision Affirmed. Colorado's Trade Secrets Act permits a plaintiff to recover for both compensatory damages and the defendant's profits from misappropriation. Damages may be measured by different methods: plaintiff's lost sales or profits or research and developments costs. Damages based on speculation are not allowed; here Sonoco presented alternative measures of damages and the trial court accepted a measure supported by substantial evidence that gave a reasonable basis for computation of the damages. The fact that defendants did not use much of the material misappropriated does not eliminate the basis for the suit since "misappropriation consists only of the improper disclosure or acquisition of a trade secret."
Citation Sonoco Products Company v. Johnson, 23 P.3d 1287 (Ct. App., Colo., 2001)

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