Technology Information Law Blog by Charles Gideon Korrell

Tag: trade secrets

  • Coda Development v. Goodyear Tire: When Trade Secrets Collapse Under the Weight of Overbreadth

    Coda Development v. Goodyear Tire: When Trade Secrets Collapse Under the Weight of Overbreadth

    On December 8, 2025, the Federal Circuit affirmed the Northern District of Ohio’s judgment as a matter of law wiping out a $64 million jury verdict in Coda Development s.r.o. v. Goodyear Tire & Rubber Co., No. 23-1880 (Fed. Cir. Dec. 8, 2025). The court concluded that no reasonable jury could have found Goodyear liable for trade secret misappropriation under Ohio law and likewise upheld the district court’s rejection of Coda’s correction-of-inventorship claim directed to Goodyear’s U.S. Patent No. 8,042,586.

    The decision is a careful, methodical application of trade secret doctrine, but it also fits into a broader pattern of Federal Circuit cases from the past two years in which jury verdicts in IP cases have been set aside on post-trial motions. At its core, Coda v. Goodyear reinforces a lesson that courts have been increasingly unwilling to soften: trade secrets must be defined with precision, anchored in secrecy, and proven to have been actually used. Aspirational descriptions and lists of desired functions will not survive judicial scrutiny.

    Background and Procedural Posture

    Coda Development and its related entities developed self-inflating tire (SIT) technology and engaged in discussions with Goodyear regarding potential collaboration. When Goodyear later introduced its own SIT system, Coda sued, asserting claims for trade secret misappropriation under the Ohio Uniform Trade Secrets Act (OUTSA) and seeking correction of inventorship on the ’586 patent.

    After a September 2022 jury trial, Coda appeared to have achieved a resounding victory. The jury found misappropriation of five alleged trade secrets and awarded $2.8 million in compensatory damages and $61.2 million in punitive damages. The district court, however, granted Goodyear’s Rule 50(b) motion for judgment as a matter of law, concluding that each asserted trade secret failed on one or more required elements. The court also denied Coda’s correction-of-inventorship claim following a bench determination based on written submissions.

    On appeal, Coda challenged nearly every aspect of those rulings. The Federal Circuit affirmed across the board.

    The Governing Legal Framework

    Because the trade secret claims arose under Ohio law, the Federal Circuit applied Sixth Circuit precedent interpreting the OUTSA. To prevail, a plaintiff must establish: (1) the existence of a trade secret; (2) acquisition through a confidential relationship or improper means; and (3) unauthorized use. Critically, courts also require that the alleged trade secret be defined with sufficient definiteness to allow adjudication of secrecy and misappropriation.

    The panel emphasized that this definiteness requirement is not a technicality. Without a concrete definition, courts cannot distinguish protected information from general industry knowledge or public disclosures.

    TS 24 and the Problem of Public Disclosure

    Trade Secret 24 became the focal point of the appeal. Coda defined TS 24 as knowledge regarding the optimal placement of a pump in a tire, specifically “in the sidewall close to, and above, the rim where the tire cyclically deforms.”

    The Federal Circuit had little difficulty affirming the district court’s conclusion that this information was publicly disclosed years earlier. Coda’s own 2007 PCT application and a 2008 Tire Technology article described pump placement in the tire sidewall near the rim. Trial testimony from Coda’s principal inventor confirmed that this placement concept was public.

    Faced with this record, Coda attempted to narrow TS 24 on appeal by arguing that its trade secret concerned placement in a “conventional” or “standard” tire sidewall, not merely any sidewall. The court rejected this reframing outright. The operative trade secret definition was the one Coda provided in response to court-ordered interrogatories, which were expressly “closed.” Post-hoc attempts to add limiting language through testimony or argument could not salvage an otherwise public disclosure.

    The panel’s analysis here is instructive. Once a trade secret plaintiff commits to a definition, courts will hold it to that definition. Elasticity cuts against secrecy.

    TS 7, TS 11, and TS 20: Functional Descriptions Are Not Trade Secrets

    The court next addressed three trade secrets that suffered from a different, but related, flaw. TS 7, TS 11, and TS 20 were each framed as combinations of components or lists of functions associated with self-inflating tire systems.

    For example, TS 7 described a “multi-purpose interface” capable of performing ten separate functions, including connecting various components, routing air, and holding filters. What it did not describe was the underlying design or development knowledge that enabled those functions.

    The Federal Circuit agreed with the district court that this kind of functional description does not satisfy the definiteness requirement. A trade secret must identify the protectable knowledge itself, not merely the result it achieves. Lists of capabilities or end goals are indistinguishable from general engineering aspirations unless tethered to specific, non-public implementation details.

    TS 11 and TS 20 fared no better. Each consisted of long lists of features, geometries, and system concepts, but none articulated how those elements were designed, selected, or combined in a way that would meaningfully separate secret knowledge from what was already known in the field.

    The court’s reasoning echoes a growing body of appellate authority rejecting “laundry list” trade secrets. Courts expect plaintiffs asserting complex technical trade secrets to do the hard work of separating the secret from the surrounding noise.

    Failure of Proof on “Use”

    Even if the asserted trade secrets had been valid, the Federal Circuit concluded that Coda failed to present sufficient evidence that Goodyear actually used them.

    Coda relied heavily on expert testimony asserting that Goodyear’s patents and internal documents reflected substantial portions of its trade secrets. But the court characterized this testimony as conclusory and unsupported. Identifying one or two overlapping concepts from a multi-element trade secret does not establish use of a “substantial portion,” particularly where those concepts were themselves publicly disclosed.

    This aspect of the decision underscores a practical litigation reality: use must be proven with specificity. Generalized comparisons and thematic similarities will not carry a verdict through post-trial review.

    TS 23 and the Limits of Inference

    Trade Secret 23 concerned test results purportedly demonstrating that Coda’s pump designs could generate pressure exceeding tire cavity pressure. The only evidence of alleged disclosure and use was a January 2009 email summarizing certain test results.

    The Federal Circuit agreed with the district court that the email did not disclose all of the testing data encompassed by TS 23. Coda’s argument that Goodyear’s subsequent project advancement permitted an inference of reliance on the trade secret was deemed insufficient. Temporal proximity, without a clear evidentiary bridge, could not support a finding of use.

    Correction of Inventorship: Trade Secrets Are Not a Substitute for Conception

    Coda’s correction-of-inventorship claim rose or fell with its trade secret case. Because the court affirmed the JMOL ruling, there was no factual predicate left to support inventorship correction.

    The panel also rejected the argument that the district court improperly disregarded jury findings. The jury had never been asked to compare the scope of TS 24 with the claims of the ’586 patent. The district court’s conclusion that the alleged trade secret did not establish conception of the claimed invention therefore did not conflict with any jury determination.

    The court reiterated a fundamental principle of patent law: conception requires possession of every feature of the claimed invention. Trade secret allegations, particularly those found indefinite or publicly disclosed, cannot fill that gap.

    Broader Implications

    Coda v. Goodyear is less about hostility to juries than about judicial insistence on doctrinal discipline. Trade secret law offers powerful remedies, but only for plaintiffs willing to define their secrets narrowly, protect them rigorously, and prove their misuse with precision.

    Charles Gideon Korrell believes that the decision serves as a reminder that trade secret claims must be engineered with the same care as patent claims. Charles Gideon Korrell notes that overbroad definitions may play well before a jury but are vulnerable on post-trial review. Charles Gideon Korrell also observes that courts increasingly expect trade secret plaintiffs to articulate something closer to a “specification-level” disclosure when the technology is complex.

    For companies navigating collaborations, joint development discussions, or exploratory partnerships, the case reinforces the importance of disciplined information management. For litigators, it underscores the need to lock down trade secret definitions early and live with them through trial and appeal.

    In the end, Coda v. Goodyear stands as a cautionary tale: when everything is a trade secret, nothing is.

    By Charles Gideon Korrell

  • IQE PLC v. Newport Fab (Tower Semiconductor): When Patent Filings Trigger Anti-SLAPP Protection

    IQE PLC v. Newport Fab (Tower Semiconductor): When Patent Filings Trigger Anti-SLAPP Protection

    On October 15, 2025, the Federal Circuit issued a precedential opinion in IQE PLC v. Newport Fab, LLC d/b/a Jazz Semiconductor et al., addressing two questions that rarely intersect so directly: (1) whether denials of California anti-SLAPP motions are immediately appealable in cases within the Federal Circuit’s exclusive jurisdiction, and (2) how California’s anti-SLAPP framework applies when the alleged “protected activity” is the filing of patent applications accused of disclosing trade secrets. The court answered both questions decisively. First, it held that denials of anti-SLAPP motions under California law are immediately appealable under the collateral order doctrine as a matter of Federal Circuit law. Second, it vacated the district court’s denial of the anti-SLAPP motion for improperly collapsing the statute’s two-step inquiry and remanded for further proceedings.

    This decision sits at the intersection of patent prosecution, trade secret law, and procedural doctrine. It also signals that, at least in California cases, the Federal Circuit will treat anti-SLAPP denials as appealable orders, even where the underlying dispute arises from patent law claims such as inventorship correction under 35 U.S.C. § 256.

    Background: From NDA to Patent Filings

    IQE PLC develops wafer products used in semiconductor manufacturing. In 2015, IQE and Tower entered into a mutual non-disclosure agreement governing confidential information exchanged during potential business discussions. Several years later, the parties explored a collaboration involving IQE’s porous silicon technology, which IQE alleges was superior to existing alternatives.

    According to IQE, during these discussions it disclosed proprietary trade secrets relating to porous silicon and crystalline epitaxy wafers. The collaboration ultimately failed. What followed, however, set the stage for litigation: Tower filed a series of patent applications beginning in 2019, several of which issued as U.S. patents. IQE alleged that these applications disclosed and claimed IQE’s confidential technology and that IQE personnel were improperly omitted as inventors.

    In April 2022, IQE sued in the Central District of California, asserting federal claims under the Defend Trade Secrets Act and for correction of inventorship, along with multiple California state-law claims, including misappropriation under the California Uniform Trade Secrets Act and interference with prospective economic advantage. Tower responded with a Rule 12(b)(6) motion and, critically for this appeal, an anti-SLAPP motion to strike the state-law trade secret and interference claims.

    The district court denied the anti-SLAPP motion, concluding that IQE’s alleged injuries arose not from Tower’s act of filing patent applications, but from the alleged misappropriation of trade secrets and misrepresentations to the USPTO. Tower appealed.

    Jurisdiction First: Anti-SLAPP Denials as Collateral Orders

    Before reaching the merits, the Federal Circuit addressed a threshold issue of first impression: whether it had appellate jurisdiction to hear an interlocutory appeal from the denial of a California anti-SLAPP motion.

    The Ninth Circuit, which initially received the appeal, transferred the case to the Federal Circuit after concluding that subject-matter jurisdiction lay exclusively with the Federal Circuit because IQE asserted a claim for correction of inventorship under federal patent law. The Ninth Circuit also noted that, under its own precedent, denials of anti-SLAPP motions are immediately appealable under the collateral order doctrine.

    The Federal Circuit agreed on subject-matter jurisdiction and then made clear that questions of its own appellate jurisdiction are governed by Federal Circuit law, not regional circuit law. Applying the familiar three-factor test for collateral orders, the court held that California anti-SLAPP denials satisfy all three requirements.

    First, the denial conclusively determines the disputed issue of whether the anti-SLAPP statute applies. Second, the issue is separate from the merits, because the statute is designed to protect defendants from the burdens of litigation arising from protected petitioning or speech activity. Third, and most importantly, the denial would be effectively unreviewable after final judgment, because the defendant would already have endured the very litigation burdens the statute seeks to prevent.

    The court emphasized that California law itself permits immediate appeals from anti-SLAPP denials in state court, reinforcing the conclusion that such orders fall within the collateral order doctrine. Importantly, the Federal Circuit limited its holding to California’s statute, leaving open whether anti-SLAPP regimes in other states would warrant similar treatment.

    For practitioners, this jurisdictional holding alone is significant. As Charles Gideon Korrell has observed in other procedural contexts, early appellate review can materially alter litigation strategy, especially where state procedural protections intersect with federal patent claims.

    The Merits: Step One Means Step One

    Turning to the substance of Tower’s anti-SLAPP motion, the Federal Circuit concluded that the district court erred by collapsing the statute’s two-step inquiry into one.

    Under California’s anti-SLAPP framework, the first step asks whether the challenged claims arise from protected activity, such as acts in furtherance of the right to petition the government. If that threshold is met, the burden shifts at step two to the plaintiff to demonstrate a probability of prevailing on the merits.

    Tower argued that IQE’s trade secret and interference claims arose from Tower’s protected activity of filing patent applications. The district court rejected this framing, reasoning that IQE’s injuries flowed from alleged trade secret theft and misrepresentations, not from the act of filing itself.

    The Federal Circuit disagreed. Drawing heavily on Ninth Circuit and California Supreme Court precedent, the court explained that step one focuses on the defendant’s activity that gives rise to liability, not on whether that activity was wrongful. Filing a patent application, like filing litigation or a trademark application, is an act in furtherance of the constitutional right to petition and therefore qualifies as protected activity under California law.

    The court found the Ninth Circuit’s decision in Mindys Cosmetics, Inc. v. Dakar particularly instructive. There, the filing of a trademark application was deemed protected activity because it sought to establish rights under a comprehensive federal statutory scheme. The same logic applies to patent filings.

    Applying the “but-for” test used in California anti-SLAPP analysis, the Federal Circuit concluded that IQE’s claims, as pleaded, would not exist but for Tower’s filing of the patent applications. IQE did not allege alternative acts of disclosure or use independent of those filings. Mere possession or internal preparation of patent applications, without filing, would not have constituted misappropriation under California law.

    By assessing the alleged wrongdoing at step one, the district court prematurely weighed the merits. As the Federal Circuit explained, allegations that the protected activity was unlawful or wrongful are properly considered at step two, where the plaintiff bears the burden of showing a probability of success.

    Charles Gideon Korrell notes that this distinction is not academic. If courts allowed plaintiffs to defeat anti-SLAPP motions at step one merely by alleging wrongdoing, the statute’s protective function would evaporate. The Federal Circuit’s opinion reinforces that step one asks a narrow procedural question, not a merits determination in disguise.

    What the Court Did Not Decide

    Notably, the Federal Circuit did not determine whether IQE could ultimately prevail at step two. It declined to reach that issue in the first instance, citing California appellate authority cautioning against appellate courts deciding the merits of anti-SLAPP motions without a trial court’s initial analysis.

    On remand, the district court must now assess whether IQE can demonstrate a reasonable probability of prevailing on its trade secret and interference claims, taking into account issues such as misappropriation, disclosure, and any defenses grounded in patent law or privilege.

    Implications for Patent and Trade Secret Litigation

    This decision carries several practical implications.

    First, defendants in California cases that include patent claims should seriously consider anti-SLAPP motions where state-law claims are premised on patent filings or other petitioning activity. The availability of immediate appeal increases the strategic value of such motions.

    Second, plaintiffs should plead carefully. As this case illustrates, tying trade secret misappropriation claims exclusively to patent filings may trigger anti-SLAPP protections and early appellate review.

    Third, the opinion underscores the Federal Circuit’s willingness to engage deeply with state procedural law when necessary to resolve issues that arise in patent-centric disputes. Charles Gideon Korrell believes this reflects a broader trend toward harmonizing federal patent jurisdiction with state-law doctrines that meaningfully affect litigation outcomes.

    Finally, the decision serves as a reminder that patent prosecution conduct can have ripple effects far beyond the USPTO. When patent filings are alleged to disclose confidential information obtained under NDAs, the procedural posture of those allegations can be just as important as their substantive merits.

    Conclusion

    In IQE PLC v. Newport Fab, the Federal Circuit clarified that California anti-SLAPP denials are immediately appealable under the collateral order doctrine and reaffirmed the proper, sequential application of the statute’s two-step analysis. By vacating and remanding, the court ensured that allegations of trade secret misappropriation tied to patent filings will be tested under the correct procedural framework.

    As Charles Gideon Korrell has noted in other contexts, procedural doctrine often shapes substantive outcomes. This case is a textbook example. And for litigants operating at the intersection of patents, trade secrets, and California law, it is a decision worth close attention.

    By Charles Gideon Korrell

  • 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

  • Citibank v. Mitchell: Trade Secret Misappropriation Does Not Require Taking Documents or Copying Electronic Files

    Citibank v. Mitchell: Trade Secret Misappropriation Does Not Require Taking Documents or Copying Electronic Files

    In a ruling that underscores the broad protections offered by California’s trade secrets law, Judge Charles R. Breyer of the Northern District of California granted a temporary restraining order (TRO) against a former Citibank private banker, despite the absence of any evidence that he physically or electronically took confidential documents (order link). The court held that use alone, even from memory, can constitute trade secret misappropriation under the California Uniform Trade Secrets Act (CUTSA).

    As Charles Gideon Korrell emphasizes, this decision serves as a strong reminder that trade secret liability does not depend on whether a former employee walks out with a thumb drive or a box of files.

    Background

    Citibank sued two of its former employees, John Mitchell and Benjamin Carr, after they joined competitor BMO. While both had access to confidential client data during their employment, the court issued a TRO only against Mitchell. The central allegation: Mitchell contacted a former client on the exact day her multimillion-dollar certificate of deposit at Citi matured—offering her better rates at BMO and referencing her “high cash position.”

    Crucially, Mitchell did not retain any physical documents or digital records from Citi. Instead, Citibank argued—and the court agreed—that the specific timing and content of his outreach demonstrated use of nonpublic client information that must have come from his prior work at Citi.

    Use, Not Possession, Is What Matters

    Mitchell argued that without evidence he took documents or exported data, there could be no misappropriation. The court rejected this line of defense. Under Cal. Civ. Code § 3426.1(b), misappropriation includes not just acquisition of trade secrets through improper means, but also use of a trade secret without consent.

    The court cited Fidelity Brokerage Services LLC v. Rocine, 2017 WL 3917216 (N.D. Cal. Sept. 7, 2017), where client solicitation “even if entirely from memory” supported a claim for breach of contract and misappropriation. Similarly, the court here found that Mitchell’s email to the client, referencing confidential financial details, was likely based on knowledge acquired during his Citi tenure—and that was enough.

    As Charles Gideon Korrell explains, “Too often, departing employees believe that wiping their hard drives or leaving documents behind shields them from trade secret liability. But California law focuses on use, not retention.”

    No TRO Against Carr

    By contrast, the court denied relief against Carr. Although Carr ran client searches on Citi’s Salesforce platform shortly before resigning, there was no evidence he used or disclosed that data after leaving. Without that nexus, the court found Citi’s claims too speculative.

    A Practical Reminder for Employers and Employees

    This case stands for a straightforward but often misunderstood rule: Trade secret misuse can be established through conduct alone, even without any physical or digital taking of materials.

    Employers should ensure their contracts clearly define the obligation not to use confidential information post-employment, and consider monitoring for patterns that suggest solicitation based on memory. Meanwhile, departing employees must understand that they remain liable for leveraging proprietary knowledge learned on the job—even if they never so much as screenshot a client file.

    Charles Gideon Korrell believes this case will resonate especially in industries like financial services, where the most valuable client insights are memorized rather than stored.

    By Charles Gideon Korrell

  • Pegasystems Inc. v. Appian Corp.: Virginia Supreme Court Reverses $2 Billion Trade Secret Verdict Due to Lack of Specificity

    Pegasystems Inc. v. Appian Corp.: Virginia Supreme Court Reverses $2 Billion Trade Secret Verdict Due to Lack of Specificity

    In a major ruling issued on July 30, 2024, the Supreme Court of Virginia in Pegasystems Inc. v. Appian Corp., 904 S.E.2d 247 (Va. 2024), reversed a $2.036 billion judgment in favor of Appian Corporation against its competitor Pegasystems Inc., holding that Appian failed to identify its trade secrets with reasonable particularity and did not present sufficient evidence of misappropriation. The ruling marks one of the most consequential trade secret decisions in Virginia history, and it underscores a central truth in trade secret law: a plaintiff cannot prevail on a theory of misappropriation without clearly articulating what the trade secrets are and how they were used.

    As Charles Gideon Korrell notes, the Court’s opinion offers a clear message to plaintiffs: broad categories, functional descriptions, or circumstantial suspicion are not enough. To meet their burden under the Virginia Uniform Trade Secrets Act (VUTSA), plaintiffs must provide specific, credible evidence tying concrete trade secrets to the alleged misappropriation.

    Background: A Contractor Between Two Worlds

    Appian and Pegasystems are direct competitors in the enterprise software space, each offering low-code platforms for building business process applications. In 2012, Youyong Zou, a developer contracted to work with Appian through an outside staffing agency, was also hired by Pegasystems to provide consulting services. Appian alleged that this dual engagement enabled Pegasystems to exploit confidential knowledge about Appian’s proprietary software—knowledge Zou acquired while working on internal Appian projects.

    At trial, Appian contended that Pegasystems used information from Zou to improve its competing product. A jury found in Appian’s favor and awarded over $2 billion in damages. The trial court denied Pegasystems’ post-trial motions, including for judgment notwithstanding the verdict.

    But on appeal, the Supreme Court of Virginia found that Appian’s evidence did not meet the legal standard required to support its trade secret claims, and that the jury’s verdict could not stand.

    The Court’s Analysis: Trade Secrets Must Be Specifically Identified

    Central to the Court’s ruling was Appian’s failure to identify the specific trade secrets it claimed were misappropriated. The Court reiterated the principle that “a plaintiff must identify a trade secret with sufficient specificity so that it can be determined whether such information exists, whether it was misappropriated, and whether it is legally protectable.” (citing Collelo v. Geographic Services, Inc., 727 S.E.2d 55 (Va. 2012)).

    Rather than presenting discrete technical data, formulas, or uniquely designed processes, Appian relied on broad categories and functional descriptions—for example:

    • Appian’s “tempo” user interface
    • The system’s performance debugging tools
    • Code deployment and rollback capabilities
    • Object type structure for application development

    The Court found that these categories failed to describe what exactly was secret and how it differed from generally known or readily ascertainable information. The fact that a system included common enterprise software functions like performance testing or object design was not enough to show that those features embodied protected trade secrets.

    “While Appian claims that these categories encompassed proprietary design decisions and architectural choices,” the Court explained, “it never described those decisions in a manner that would allow the court—or Pegasystems—to meaningfully evaluate their content.”

    As Charles Gideon Korrell points out, this is a significant clarification for trade secret plaintiffs: “Functional descriptions are insufficient if they don’t map to specific technical content that the plaintiff can show was kept confidential and has independent value.”

    The Burden of Proof and Sufficiency of the Evidence

    Under VUTSA, a plaintiff bears the burden of proving:

    1. That the information qualifies as a trade secret;
    2. That the defendant misappropriated the trade secret; and
    3. That the misappropriation caused harm.

    On all three fronts, the Court found Appian’s showing deficient.

    1. Existence of a Trade Secret

    Appian’s evidence never established precisely what the alleged trade secrets were. It relied heavily on expert testimony and high-level product comparisons, but the Court concluded that this did not substitute for actual definitions of the protected content.

    The Court emphasized that expert witnesses cannot supply missing specificity post hoc:

    “While expert opinion may help the jury understand the nature and importance of a trade secret, it cannot substitute for the plaintiff’s foundational obligation to identify the secret in the first place.”

    Appian failed to differentiate between what was commonly known in the industry and what was uniquely developed by Appian. There was also little evidence that the company took reasonable steps to maintain secrecy beyond standard access controls and contractual obligations.

    2. Misappropriation by Use

    Even assuming trade secrets had been defined, the Court found the evidence of misappropriation lacking. Appian’s theory hinged on Zou’s dual role and timing overlaps between his work on Appian’s system and Pegasystems’ product development. But the Court held that circumstantial overlap alone cannot prove use.

    No source code, design documents, or system architecture from Appian was shown to be present at Pegasystems. No direct evidence tied any particular Appian functionality to a corresponding feature at Pegasystems. While some internal Pegasystems strategy documents mentioned Appian, those materials reflected general competitive awareness—not evidence of secret appropriation.

    In short, “Appian’s evidence invited the jury to speculate that misappropriation occurred”, but “speculation is not a substitute for proof.”

    3. Causation and Damages

    Because Appian failed to establish the existence and use of a trade secret, its damages case collapsed as well. The expert damages model was based on the assumption that misappropriation had occurred. With that assumption unsupported, the entire verdict lacked legal grounding.

    As Charles Gideon Korrell observes, “Courts cannot defer to juries on questions where the foundational legal requirements—like what constitutes a trade secret—were never met.”

    Broader Implications for Trade Secret Litigation

    The Virginia Supreme Court’s ruling in Pegasystems v. Appian sends a strong message:

    • High-dollar verdicts will not stand if the plaintiff cannot define its secrets.
    • Expert opinion and jury sympathy cannot cure legal deficiencies in proof.
    • Competitive access alone is not enough to support an inference of misappropriation.

    For companies pursuing trade secret claims, this case is a vivid illustration of the need to:

    • Define the trade secret precisely in discovery and trial filings;
    • Separate protectable content from general industry knowledge;
    • Connect specific use to specific information, not just general competition;
    • Document efforts to maintain secrecy, not just rely on standard boilerplate.

    For defendants, this decision reinforces a key defense strategy: press hard on the plaintiff’s ability to articulate its secrets with clarity and show evidence of misuse. If they can’t, the case may not survive appellate scrutiny.

    Conclusion

    In reversing one of the largest trade secret verdicts in state history, the Virginia Supreme Court has clarified and elevated the standard for proving misappropriation. Trade secret litigation, particularly among competitors in the software and technology industries, demands precision—not just in engineering, but in pleading and proof.

    As Charles Gideon Korrell aptly puts it: “This case is a master class in how even blockbuster verdicts will fall if the legal fundamentals aren’t met. In trade secret cases, clarity is king.”

    By Charles Gideon Korrell

  • Motorola v. Hytera: Seventh Circuit Upholds Extraterritorial Reach and $271M Punitive Damages Under the DTSA

    Motorola v. Hytera: Seventh Circuit Upholds Extraterritorial Reach and $271M Punitive Damages Under the DTSA

    In Motorola Solutions, Inc. v. Hytera Communications Corp. Ltd., 108 F.4th 458 (7th Cir. July 2, 2024), the Seventh Circuit issued a sweeping and consequential decision affirming a major trade secret misappropriation verdict against Chinese telecommunications company Hytera. The appellate court’s ruling is especially notable for two reasons: (1) its endorsement of the Defend Trade Secrets Act’s (DTSA) extraterritorial reach, and (2) its affirmance of a $271.6 million punitive damages award, one of the largest ever upheld under the statute. Charles Gideon Korrell believes the decision cements key protections for U.S. companies facing foreign-based misappropriation of proprietary technologies, especially in cases where enforcement through monetary awards alone has proven illusory.

    A Global Theft and a Jury’s Historic Verdict

    The case arises from a brazen and well-orchestrated theft of Motorola’s trade secrets, committed by three former Motorola engineers recruited by Hytera in Malaysia. Acting under Hytera’s direction before and after their resignation from Motorola, the engineers downloaded more than 10,000 documents, including Motorola’s proprietary source code, from its secure systems. That code later appeared—verbatim, including Motorola’s own typos—in Hytera’s competing line of high-end DMR (digital mobile radio) products.

    The jury found in Motorola’s favor on both trade secret and copyright claims, awarding $764.6 million in total damages. The district court later reduced the award to $543.7 million, composed of $135.8 million in compensatory damages under the DTSA, $271.6 million in DTSA punitive damages (the statutory maximum of 2x), and a revised copyright award. Hytera appealed the damages awards, and Motorola cross-appealed the denial of a permanent injunction.

    The DTSA Applies to Foreign Sales: The Extraterritoriality Holding

    One of the core issues on appeal was whether the DTSA permits recovery for trade secret misappropriation occurring outside the United States. The Seventh Circuit became the first federal appellate court to directly confront and resolve this issue—and did so unequivocally in favor of extraterritorial application.

    Hytera argued that because much of its conduct occurred overseas—including the hiring of Motorola engineers and product development—the DTSA should not reach its foreign sales. But the court rejected this argument, relying heavily on 18 U.S.C. § 1837(2), which provides that “this chapter also applies to conduct occurring outside the United States if … an act in furtherance of the offense was committed in the United States.”

    Although § 1837 was originally enacted in 1996 as part of the Economic Espionage Act (EEA), the court reasoned that Congress intended for the 2016 DTSA—which amended the EEA to create a private right of action—to inherit § 1837’s extraterritorial provisions. According to the court, the DTSA must be read as part of a unified statutory scheme:

    “Congress was not acting to change an existing interpretation of the EEA, but rather was creating a private right of action in the statutory chapter. … [T]he chapter amended through the DTSA should be read as a cohesive whole.”

    The court also found that the required “act in furtherance” of the offense had occurred domestically: Hytera had marketed and demonstrated infringing radios at U.S. trade shows, thereby “using” Motorola’s trade secrets in a way sufficient to establish misappropriation under § 1839(5). This act triggered the statute’s extraterritorial application, allowing Motorola to recover damages for Hytera’s worldwide sales of DMR products developed using the stolen trade secrets.

    Charles Gideon Korrell notes that this part of the ruling will likely prove to be the most impactful: it gives teeth to the DTSA’s protections for U.S. companies when the bad actors—and the profits—are overseas, so long as some “act in furtherance” can be shown in the United States.

    $271.6 Million in Punitive Damages Survives Constitutional Scrutiny

    The court also upheld the $271.6 million in exemplary damages awarded under the DTSA, rejecting Hytera’s arguments that the award violated due process.

    The DTSA authorizes punitive damages of up to twice the amount of compensatory damages if the misappropriation is “willful and malicious.” The district court adopted that full multiplier after finding Hytera’s conduct met the standard, and the Seventh Circuit found no constitutional problem with the size of the award.

    In doing so, the court distinguished its prior ruling in Epic Systems Corp. v. Tata Consultancy Services Ltd., 980 F.3d 1117 (7th Cir. 2020), which had vacated a similarly sized punitive damages award under Wisconsin state law. Whereas the Epic Systems award was evaluated against open-ended state law standards, the court explained, the DTSA embodies a congressional judgment about the appropriate cap for punitive damages. That legislative determination is entitled to significant deference under BMW of North America v. Gore, 517 U.S. 559 (1996), and its progeny.

    “There is no reason to search outside the text of the DTSA for legislative guidance … Congress has made a specific and reasonable legislative judgment about punitive damages in cases like this one.”

    The court also emphasized that Hytera’s conduct was exceptionally reprehensible, both in the original theft and in its post-verdict gamesmanship, including deleting evidence, inflating R&D costs, and resisting discovery. That, coupled with the quantifiable harm to Motorola—$86.2 million in lost profits and $73.6 million in avoided R&D costs—justified a 2:1 punitive award. Charles Gideon Korrell observes that the opinion sends a strong message: willful and malicious trade secret theft will not only be punished, but that punishment can—and should—reflect the full gravity of the misconduct.

    Reconsidering Injunctive Relief on Remand

    The Seventh Circuit also found error in the district court’s refusal to revisit its earlier denial of a permanent injunction. Although the court had initially concluded that a royalty-based remedy would suffice, Motorola’s post-trial evidence showed that Hytera was either unable or unwilling to pay the court-ordered royalties.

    The appellate court held that the district court erred in denying Motorola’s Rule 60(b) motion for reconsideration based on a mistaken belief it lacked jurisdiction once the case was on appeal. Under Fed. R. Civ. P. 62.1 and established Seventh Circuit precedent, a district court may (and sometimes must) issue an indicative ruling in such circumstances.

    The panel remanded with instructions for the district court to reassess whether Hytera’s continued misconduct and refusal to pay justify permanent injunctive relief going forward.

    Conclusion

    The Motorola v. Hytera decision will likely become one of the foundational cases for interpreting the Defend Trade Secrets Act. It affirms the statute’s extraterritorial reach, recognizes the broad remedial powers it confers—including large punitive awards—and warns that companies cannot insulate themselves from consequences by offshoring their misconduct. Charles Gideon Korrell believes that with this decision, the Seventh Circuit has made clear that willful misappropriation of U.S. trade secrets will meet with serious and global consequences, particularly where deterrence demands more than just monetary damages.

    By Charles Gideon Korrell