The Technology & Information Law Blog

Analysis by Charles Gideon Korrell

Month: April 2025

  • OSRAM v. Renesas Electronics: When Reverse Engineering Ends Trade Secret Protection

    OSRAM v. Renesas Electronics: When Reverse Engineering Ends Trade Secret Protection

    In AMS-OSRAM USA Inc. v. Renesas Electronics America, Inc., the Federal Circuit clarified key principles governing trade secret damages under Texas law, including how “head start” periods are calculated and when exemplary damages may be awarded in conjunction with equitable remedies. The decision also affirms that parallel contract damages are permissible where tied to non-overlapping sales and provides important guidance on the calculation of prejudgment interest.

    Background and Procedural History

    The dispute between AMS-OSRAM (formerly TAOS) and Renesas (formerly Intersil) dates back to 2008, when TAOS sued Intersil for trade secret misappropriation and breach of a confidentiality agreement relating to ambient light sensor technology. Patent claims were ultimately dismissed, and liability on the trade secret and contract claims is no longer contested.

    Following a 2015 jury trial and a prior appeal in Texas Advanced Optoelectronic Solutions, Inc. v. Renesas Electronics America, Inc., 895 F.3d 1304 (Fed. Cir. 2018) (“TAOS 2018”), the Federal Circuit remanded for a redetermination of damages under a narrower liability theory and confirmed that equitable remedies like disgorgement must be tried to the bench, not a jury.

    Disgorgement and the “Proper Accessibility” Date

    On remand, the district court awarded $8.546 million in disgorgement based on Intersil’s pre-April 28, 2007, sales of the ISL29003 to Apple. The court found TAOS’s trade secret became “properly accessible” to Intersil in January 2006, when Intersil reverse-engineered TAOS’s publicly released product.

    The Federal Circuit reversed this finding, holding that the proper accessibility date was February 28, 2005, when reverse engineering first became possible—not when Intersil actually performed it. The court emphasized that under Texas and Fifth Circuit law, information is no longer protectable as a trade secret once it is readily ascertainable by proper means (citing Tewari De-Ox Sys., Inc. v. Mountain States/Rosen, L.L.C., 637 F.3d 604, 612 (5th Cir. 2011); Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 155 (1989)).

    Head Start and Causation Findings Upheld

    Despite the earlier accessibility date, the Federal Circuit affirmed the district court’s 26-month head start period, citing sufficient evidence that Intersil lacked the expertise to compete in the ambient light sensor market absent its use of TAOS’s confidential information. The head start ended in April 2007, and Intersil’s iPod Touch design win in September 2006—preceding that date—was thus found to justify full disgorgement of profits from subsequent related sales.

    The court affirmed that TAOS could recover the full profits from those sales without apportionment, as evidence showed the trade secret was central to Intersil’s ability to compete.

    Exemplary Damages for Equitable Disgorgement

    Intersil argued that exemplary damages were unavailable because disgorgement is an equitable remedy. However, the court deemed this argument waived because it was not raised in the prior appeal. It further held that the jury—not the judge—properly determined the amount of exemplary damages, ultimately capped at twice the disgorgement award ($17.092 million) per Tex. Civ. Prac. & Rem. Code § 41.008.

    Breach of Contract and Election of Remedies

    Intersil’s challenge to a parallel reasonable royalty award under the confidentiality agreement was rejected. The court found no impermissible double recovery because the trade secret and contract claims were tied to non-overlapping product lines.

    Moreover, the jury’s adoption of a 10-year license duration in the hypothetical royalty negotiation was supported by evidence of similar industry practice and the high value of early market access. The court also affirmed the award of attorneys’ fees under the agreement’s indemnity clause, finding that it encompassed direct breach actions.

    Prejudgment Interest: Reversed and Remanded

    The one point of reversal came on prejudgment interest. The court vacated the district court’s award, holding that interest cannot accrue before the damages-triggering sales occurred. The district court must now determine appropriate accrual dates within the permissible window of November 25, 2008 (complaint filing), to June 3, 2014 (license expiry), guided by both Texas and California law (see Matthews v. DeSoto, 721 S.W.2d 286, 287 (Tex. 1986); Lewis C. Nelson & Sons, Inc. v. Clovis Unified Sch. Dist., 108 Cal. Rptr. 2d 715 (Ct. App. 2001)).

    Key Takeaways

    • Accessibility matters: Trade secrets lose protection once reverse engineering becomes feasible—even if not yet performed.
    • Head start periods are factual and compensatory: Courts may award profits earned within a justifiable window even after trade secrets become accessible.
    • Exemplary damages are not foreclosed for equitable remedies if liability is tried to a jury and preserved on appeal.
    • Contract and trade secret remedies can coexist where sales and theories are distinct.
    • Prejudgment interest must reflect when the actual injury occurred, not merely the date of suit.

    This opinion underscores the importance of properly framing remedies on remand and preserving all damages theories early on appeal.

    By Charles Gideon Korrell

  • In re Forest: No Patent Term, No Provisional Rights

    In re Forest: No Patent Term, No Provisional Rights

    In In re Forest, the Federal Circuit dismissed an appeal involving a patent application that would have issued after its statutory 20-year term expired. The court held that the applicant lacked any legally cognizable interest in obtaining such a patent, because it would confer neither enforceable rights under § 154(a) nor provisional rights under § 154(d). The decision reinforces the principle that expired patents are just that—expired—and cannot serve as vehicles for recovering damages through provisional rights alone.

    While the court did not invoke the term, this case is a clear echo of the now-extinct “submarine patent” strategy that once plagued the U.S. patent system. Before the 1995 amendments to the Patent Act, U.S. patents had a term of 17 years from issuance. Applicants could delay prosecution and keep their applications hidden for years, only to surface with claims that covered industries that had developed in the meantime—hence the “submarine” metaphor. When those patents finally issued, they delivered a full 17-year term of enforceability, often wreaking havoc on unsuspecting companies.

    Congress addressed this problem in the Uruguay Round Agreements Act of 1994 by shifting patent term to 20 years from the earliest claimed priority date for applications filed after June 8, 1995. This change curtailed the submarine threat by tying term to a fixed date, regardless of delays in prosecution.

    Forest appears to be an attempted end-run around those reforms. The application at issue claimed priority back to 1995, meaning any resulting patent would have expired in 2015. Forest filed the application in 2016, long after that expiration. Aware that no exclusionary rights could issue, he argued instead for provisional rights under § 154(d)—the right to a reasonable royalty for infringing uses during the period between publication and issuance.

    The Federal Circuit rejected this argument, holding that provisional rights are only granted “in addition to” exclusionary rights and cannot be awarded in isolation. Drawing on the plain meaning and structure of § 154, the court emphasized that provisional rights are inherently temporary and only exist to bridge the gap between publication and enforceable rights. If no enforceable rights can issue, there’s no basis for provisional rights either.

    The court supported its interpretation with several statutory construction principles and Supreme Court precedents. Citing King v. Burwell, 576 U.S. 473 (2015), the court noted that words must be understood in context and within the overall statutory scheme. It also leaned on Institut Pasteur v. Focarino, 738 F.3d 1337 (Fed. Cir. 2013), which held that the PTO may not grant rights beyond the statutory term, and Jones v. Hendrix, 599 U.S. 465 (2023), which cautions against interpreting statutes in ways that contradict foundational legal principles absent a clear statement from Congress.

    The court also reviewed the legislative history underlying § 154(d), finding nothing to support the idea that provisional rights could extend beyond the patent term. On the contrary, statements from stakeholders made clear that the purpose of provisional rights was to compensate for time lost during examination—not to revive expired claims.

    Key Takeaways:

    • Patent rights are time-limited by statute and the Constitution. A patent application that would issue after its 20-year term has no enforceable rights and therefore cannot support an appeal.
    • Provisional rights under § 154(d) are not freestanding. They are temporary, pre-issuance rights that depend on the eventual issuance of a valid patent with enforceable term.
    • Attempts to revive “submarine-like” strategies will fail. Forest is a reminder that creative attempts to recover value from expired applications are unlikely to succeed under the modern patent regime.

    In the end, In re Forest underscores that the system Congress designed to eliminate submarines is still watertight. Provisional rights are not a loophole—they are a limited remedy tethered to valid, timely patents. Practitioners should be vigilant in managing prosecution timelines and wary of investing in patents long after their statutory clock has run out.

    By Charles Gideon Korrell