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The Metes and Bounds of Federal Trade Secret Protections: Deriving Cohesive Damages Principles Under the Defend Trade Secrets Act
Full text linkThe Defend Trade Secrets Act launched trade secret law, which formerly only reached federal courts in diversity cases or cases involving espionage, into the national spotlight. As these cases begin to progress to trial, courts face new questions about how to appropriately measure monetary damages for trade secret claims. Because many courts take a “flexible and imaginative” approach to trade secret damages generally and most state trade secret statutes do not require damages as a part of a successful trade secret liability case, most courts that have considered damages methodology challenges to DTSA claims have failed to employ gatekeeping to ensure that a proposed methodology is appropriately tied to the specific injury alleged by the trade secret owner—a requirement for just about any form of monetary relief under federal law. And sound damages principles are necessary given the inherent proof problems in trade secret law, as unlike other forms of intellectual property, there is no formal declaration of what the “metes and bounds” of the proprietary information is.
This Article offers a novel framework to guide trade secret damages in the absence of a cohesive framework that takes the trade secret owner’s actual injury into account. After surveying the current damages landscape, I turn to both patent law and state doctrinal developments to justify a few methodological requirements to guide trade secret damages inquiries. First, a trade secret owner must determine the type of injury alleged under the DTSA—acquisition, disclosure, or use. In cases where a trade secret was merely acquired or internally disclosed without reaching the public, a trade secret owner may not receive monetary relief. When a misappropriator uses the trade secret internally, such as to aid in research and development of a product, a trade secret owner may recover the misappropriator’s avoided costs under an unjust enrichment theory. Finally, a trade secret owner may pursue any damages theory if the misappropriator has publicly disclosed or used the alleged trade secret. In addition to these requirements, I also suggest that trade secret owners must take care to apportion the alleged damages to the trade secret information itself and that the hypothetical negotiation framework used to determine an appropriate damages figure be adjusted to account for the realities of a trade secret injury
Allerville Arms Owners Corp v. Gjelil
No full textThe court denied the former tenant\u27s motion to vacate a judgment for use and occupancy. The pro se tenant, a former superintendent, had a trial and lost, then moved out. After retaining counsel, he sought to renew/reargue the $3, 500/month U&O award. The court treated the motion as an untimely request to set aside a judgment under CPLR 4404(b). It found the tenant offered no good cause for his two-month delay and failed to provide sufficient evidence to challenge the U&O amount. The tenant\u27s claims of poor conditions and improper termination were deemed to belong in a separate court
Beverly Holdings N.Y., LLC v. Blackwood
No full textIn this nonpayment proceeding, the court affirmed the dismissal of the petition, granting the tenant\u27s motion for summary judgment. The tenant successfully used Multiple Dwelling Law § 302-a as an affirmative defense, proving that the landlord failed to correct rent-impairing violations in the building\u27s public areas for over six months. The court rejected the landlord\u27s argument of lack of access, as the violations were not within the tenant\u27s apartment. It also dismissed the landlord\u27s claim that the tenant failed to certify the uncorrected violations, noting that the landlord\u27s own failure to file a certification of compliance established a prima facie case
Jerome Enters. LLC v. Javed
No full textThe court granted the tenant\u27s motion to dismiss the landlord\u27s nonpayment case because the building lacked a valid Certificate of Occupancy, which prohibits the collection of rent. The court also held the landlord in civil contempt for failing to comply with a prior so-ordered stipulation to make repairs, which prejudiced the tenant\u27s ability to secure a Section 8 voucher. The landlord\u27s petition was dismissed, but the case was restored to the calendar for a pre-trial conference to address the tenant\u27s counterclaims and determine damages for the contempt finding
756 LIBERTY REALTY LLC v. GARCIA
No full textThe court dismissed the landlord\u27s nonpayment petition with prejudice, finding that the landlord failed to prove the apartment was lawfully deregulated. The landlord claimed deregulation based on a high-rent vacancy and Individual Apartment Increases (IAIs), but could not provide any documentary evidence of the alleged renovations. The court found the landlord\u27s testimony and the DHCR rent registrations unreliable due to numerous inconsistencies and errors. The court concluded that the landlord failed to meet its burden of proof to establish a valid rent increase, affirming that the apartment remains rent-stabilized and directing the landlord to offer the tenant a proper rent-regulated lease
Joseph v. Smith
No full textThe court dismissed the landlord\u27s holdover petition because both the petition and the predicate notice were defective. The court found that the documents failed to comply with RPAPL §Â§ 741(2) and (4) by not clearly stating the respondent\u27s interest in the premises or the factual basis for the eviction. The pleadings contained contradictory information and were so vague that the court could not determine the relationship between the parties or the legal grounds for the proceeding. The dismissal was without prejudice, allowing the landlord to file a new, properly pleaded petition
JUSTO-APONTE v. ESHCOL
No full textThe court held the landlord in contempt for failing to restore the tenant to possession after an illegal lockout, awarding the tenant a money judgment for damages and attorney fees. The landlord had destroyed the apartment, rendering it uninhabitable and violating a prior stipulation to make repairs. The court found that the landlord\u27s failure to comply with the so-ordered stipulation was a clear and unequivocal violation. It awarded the tenant 3,000 judgment for attorney fees, and imposed a continuing daily fine of $195 until the landlord restores the tenant to possession of a habitable apartment
Dunbar Apt. Holdings LLC v. Johnson
No full textThe court granted the tenant\u27s motion to amend her answer and for discovery related to a rent overcharge counterclaim. The tenant\u27s counsel argued that a large increase in the registered rent, following a period of purported temporary exemption, was unreliable under the amended Rent Stabilization Code. The court agreed, citing a recent First Department decision and noting that the 2014 amendment to the Rent Stabilization Code bars a landlord from charging a first rent after a temporary exemption. The decision allows the tenant to proceed with discovery to determine the reliability of the rent history