Earlier this year, the United States Court of Appeals for the Fifth Circuit issued a significant decision in Trinseo Europe GmbH v. Kellogg Brown & Root, L.L.C., No. 24-20460, providing important guidance on damages calculation in trade secret misappropriation cases. The case demonstrates the importance of apportioning damages among the various trade secrets that are misappropriate or risk a loss of the damages award if less than all of the information misappropriated qualifies as trade secrets.

Background

The dispute involved polycarbonate manufacturing technology developed by Dow Chemical and later acquired by Trinseo. Trinseo alleged that former Dow employees formed a consulting group and, along with Kellogg Brown & Root (KBR), misappropriated ten trade secrets in violation of the Defend Trade Secrets Act (DTSA). At trial, the jury found liability on four of the ten alleged trade secrets and awarded Trinseo over $75 million in damages.

The Fatal Flaw: Failure to Apportion

Despite the jury’s favorable findings, Trinseo’s damages award was vacated because the damages expert failed to apportion damages between the ten “trade secrets” that were misappropriated.  Trinseo’s damages expert provided estimates that assumed misappropriation of all ten alleged trade secrets. The expert failed to individually value each trade secret or offer any methodology for the jury to calculate damages based on fewer than ten secrets.

The Fifth Circuit’s Analysis

The Fifth Circuit affirmed the district court’s decision, holding that trade secret damages must be apportioned when the plaintiff alleges multiple trade secrets but only proves misappropriation of some of them. The court applied the reasoning from patent infringement cases to conclude that when the accused technology does not comprise the entire accused product, damages must be apportioned between patented and unpatented features. The Fifth Circuit held that the same principle applies in trade secret cases. Because Trinseo presented damage estimates premised on all ten trade secrets, but the jury found only four were misappropriated, there was no reasonable basis for the jury to calculate damages.  Thus, the damage award was vacated because the plaintiffs bundled the trade secrets together without providing per-secret valuations.

TUTSA Preemption: No End-Run Around Trade Secret Standards

Also notable was the holding that the Plaintiff’s alternative common-law claims for “misappropriation of confidential information” were preempted by the Texas Uniform Trade Secrets Act (TUTSA).  Trinseo had asserted these claims in the alternative, hoping that if certain information failed to qualify as a trade secret, it might still recover under a common law claim of confidential information misappropriation.

The court held that the Texas Uniform Trade Secrets Act (TUTSA) preempts such claims when they are premised on the same information and facts as the trade secret claims. Looking to the substance of Trinseo’s pleadings—which alleged the confidential information was used in business, provided competitive advantage, and was kept substantially secret—the court concluded that the information fell within TUTSA’s definition of a trade secret and was therefore preempted by TUTSA and the district court’s dismissal of the common law claim on summary judgment was proper.

You can download the entire opinion in Trinseo Europe GmbH v. Kellogg Brown & Root, L.L.C. here.