One area in Texas commercial litigation that continues to evolve is the cause of action for theft of trade secrets. State and federal statutes have recently been enacted making it easier for businesses to protect their trade secrets. This is becoming increasingly important in the digital age when large amounts of information including protected trade secrets can be downloaded in seconds or minutes.
The Texas Supreme Court seems to be following the trend. In its recent June 2016 opinion of Southwestern Energy Production Co. v. Hefland, Opinion No. 13-0986, the court decides whether to uphold a verdict for trade secret theft of over $30 million. The underlying allegations involve the alleged misappropriation of data identifying highly productive oil and gas formations. Although, the court remands the case for a new trial on the grounds the plaintiff proved up some but not all of the damages, the court cites legal precedent stating, “A “flexible and imaginative” approach is applied to the calculation of damages in misappropriation-of-trade secrets.”
The court discusses multiple ways to measure damages for trade secret theft leaving the door open for Plaintiff’s to be creative in developing their damages models. However, in reading the opinion one gets the impression that the Plaintiff may have been a little too creative and would have been better off taking more of a rifle rather than a shotgun approach to proving up damages. For example, the court finds that the Plaintiff’s expert provided no basis for valuing certain elements of the damages claimed and overstated other damages calculations. The result is that at the end of the day the court remands the case to the trial court for a new trial.
Lessons learned from this case are that Texas courts may take a liberal view on damages in trade secret theft cases. Even so, plaintiffs must meet the technical requirements in offering probative expert testimony to support damages. Otherwise, plaintiffs may find themselves retrying their cases after years of hard work, or, even worse, being completely reversed on appeal.