CACI 4409 Remedies for Misappropriation of Trade Secret

California Civil Jury Instructions CACI

4409 Remedies for Misappropriation of Trade Secret

If [name of plaintiff] proves that [name of defendant] misappropriated [his/her/nonbinary pronoun/its] trade secret[s], then [name of plaintiff] is entitled to recover damages if the misappropriation caused [[name of plaintiff] to suffer an actual loss/ [or] [name of defendant] to be unjustly enriched].

[If [name of defendant]’s misappropriation did not cause [[name of plaintiff] to suffer an actual loss/ [or] [name of defendant] to be unjustly enriched], [name of plaintiff] may still be entitled to a reasonable royalty for no longer than the period of time the use could have been prohibited. However, I will calculate the amount of any royalty.]

Directions for Use

Give this instruction with CACI No. 4401, Misappropriation of Trade Secrets—Essential Factual Elements, in all cases.

Select the nature of the recovery sought; either for the plaintiff’s actual loss or for the defendant’s unjust enrichment, or both. If the plaintiff’s claim of actual injury or loss is based on lost profits, give CACI No. 3903N, Lost Profits (Economic Damage). If unjust enrichment is alleged, give CACI No. 4410, Unjust Enrichment.

If neither actual loss nor unjust enrichment is provable, Civil Code section 3426.3(b) provides for a third, alternate remedy: a reasonable royalty for no longer than the period of time the use could have been prohibited. Both the statute and case law indicate that the question of a reasonable royalty should not be presented to the jury. (See Civ. Code, § 3426.3(b) [the court may order the payment of a reasonable royalty]; Unilogic, Inc. v. Burroughs Corp. (1992) 10 Cal.App.4th 612, 628 [12 Cal.Rptr.2d 741]; see also Civ. Code, § 3426.2(b) [court may issue an injunction that conditions future of a trade secret on payment of a reasonable royalty].) However, no reported California state court case has directly held that “reasonable royalty” issues should not be presented to the jury. (But see Unilogic, Inc., supra, 10 Cal.App.4th at p. 627.) Include the optional second paragraph if the court wants to advise the jury that even if it finds that the plaintiff suffered no actual loss and that the defendant was not unjustly enriched, the plaintiff may still be entitled to some recovery.

For simplicity, this instruction uses the term “damages” to refer to both actual loss and unjust enrichment, even though, strictly speaking, unjust enrichment may be considered a form of restitution rather than damages.

Sources and Authority

Remedies for Misappropriation of Trade Secret. Civil Code section 3426.3.

“Under subdivision (a), a complainant may recover damages for the actual loss caused by misappropriation, as well as for any unjust enrichment not taken into account in computing actual loss damages. Subdivision (b) provides for an alternative remedy of the payment of royalties from future profits where ‘neither damages nor unjust enrichment caused by misappropriation [is] provable.’ ” (Ajaxo Inc. v. E*Trade Group Inc. (2005) 135 Cal.App.4th 21, 61 [37 Cal.Rptr.3d 221].)

“[B]ased on the plain language of the statute, the Court—not the jury—determines if and in what amount a royalty should be awarded. See Cal. Civ. Code section 3416.3(b) (‘the Court may order payment of a reasonable royalty’).” (FAS Techs. v. Dainippon Screen Mfg. (N.D. Cal. 2001) 2001 U.S. Dist. LEXIS 15444, **9–10.)

“To adopt a reasonable royalty as the measure of damages is to adopt and interpret, as well as may be, the fiction that a license was to be granted at the time of beginning the infringement, and then to determine what the license price should have been. In effect, the court assumes the existence ab initio of, and declares the equitable terms of, a supposititious license, and does this nunc pro tunc; it creates and applies retrospectively a compulsory license.” (Altavion, Inc. v. Konica Minolta Systems Laboratory, Inc. (2014) 226 Cal.App.4th 26, 68 [171 Cal.Rptr.3d 714], original italics.)

“Nor was it necessary to submit the liability issue to the jury in order to allow the trial court thereafter to determine a reasonable royalty or to impose an injunction. Just as [cross complainant] presented no evidence of the degree of [cross defendant]’s enrichment, [cross complainant] likewise presented no evidence that would allow the court to determine what royalty, if any, would be reasonable under the circumstances.” (Unilogic, Inc. supra, 10 Cal.App.4th at p. 628.)

“It is settled that, in fashioning a pecuniary remedy under the CUTSA for past use of a misappropriated trade secret, the trial court may order a reasonable royalty only where ‘neither actual damages to the holder of the trade secret nor unjust enrichment to the user is provable.’ ‘California law differs on this point from both the [Uniform Act] and Federal patent law, neither of which require[s] actual damages and unjust enrichment to be unprovable before a reasonable royalty may be imposed.’ ” (Ajaxo Inc. v. E*Trade Financial Corp. (2010) 187 Cal.App.4th 1295, 1308 [115 Cal.Rptr.3d 168], internal citations omitted.)

“[W]here a defendant has not realized a profit or other calculable benefit as a result of his or her misappropriation of a trade secret, unjust enrichment is not provable within the meaning of section 3426.3, subdivision (b), whether the lack of benefit is determined as a matter of law or as a matter of fact. To hold otherwise would place the risk of loss on the wronged plaintiff, thereby discouraging innovation and potentially encouraging corporate thievery where anticipated profits might be minimal but other valuable but nonmeasureable benefits could accrue.” (Ajaxo Inc.supra, 187 Cal.App.4th at p. 1313 [jury’s finding that defendant did not profit from its misappropriation of trade secrets means that unjust enrichment is not “provable” within the meaning of section 3426.3(b)].)

Secondary Sources

13 Witkin, Summary of California Law (11th ed. 2017) Equity, §§ 92–93
Gaab & Reese, California Practice Guide: Civil Procedure Before Trial—Claims & Defenses, Ch. 10(II)-E ¶¶ 10:370–10:372 (The Rutter Group)
1 Milgrim on Trade Secrets, Ch. 15, Trial Considerations, § 15.02 (Matthew Bender)
3 Levy et al., California Torts, Ch. 40, Fraud and Deceit and Other Business Torts, § 40.54 (Matthew Bender)
49 California Forms of Pleading and Practice, Ch. 565, Unfair Competition, § 565.103[6], [7] (Matthew Bender)
Edelson & Kay, eds., Trade Secret Litigation and Protection in California (State Bar of California 2009) Ch. 11