California Civil Jury Instructions (CACI) (2017)

4409. Remedies for Misappropriation of Trade Secret

Download PDF
4409.Remedies for Misappropriation of Trade Secret
If [name of plaintiff] proves that [name of defendant] misappropriated
[his/her/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.]
New December 2007
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.
• “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
Secondary Sources
13 Witkin, Summary of California Law (10th ed. 2005) Equity, §§ 83, 89–90
1Milgrim on Trade Secrets, Ch. 15, Trial Considerations, § 15.02 (Matthew
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