Comet Technologies USA Inc. v. XP Power LLC

Background

After a jury trial under the federal Defend Trade Secrets Act, the jury found that four alleged items were trade secrets. It found that XP Power misappropriated Trade Secrets D and E and that the misappropriation caused damage to Comet. For Trade Secret L, the jury found that XP used or acquired the information through improper means but that this conduct was not a substantial factor in causing damages. For Trade Secret S, the AMAT Matching Network, the jury found that XP did not use or acquire the information through improper means. The jury also found that the misappropriation was willful and malicious and awarded punitive damages.

Comet asked for a permanent injunction preventing XP from using the trade-secret information in developing products. Its proposed relief included prohibitions on sales, distribution, and disclosure; removal and quarantine of trade-secret information; and auditing procedures to check compliance.

Legal Standard

The Defend Trade Secrets Act authorizes federal courts to issue permanent injunctions to prevent actual or threatened trade-secret misappropriation. The court applied four factors: whether Comet suffered irreparable injury; whether money damages were inadequate; whether the balance of hardships supported an equitable remedy; and whether an injunction would serve the public interest.

Analysis

The court found irreparable injury for Trade Secrets D, E, and L based on the jury’s finding of willful and malicious misappropriation and evidence that XP used the information in developing future products. The court also found that the jury’s damages award addressed past harm but not ongoing or future harm, including future product development and loss of secrecy.

The court determined that the balance of hardships favored Comet. It noted that Comet faced potential loss of market share, reputational harm, and loss of customers, while the injunction did not prevent XP from conducting its own research and development. The court also found that oversight of XP was appropriate because the jury found willful and malicious misappropriation, and that the proposed audit would not unduly burden XP.

The court concluded that the public interest favored protecting Trade Secrets D, E, and L. It reached a different result for Trade Secret S because the jury found that XP had not acquired or used that information through improper means.

Disposition and Injunction Terms

The court granted the permanent injunction with respect to Trade Secrets D, E, and L and denied it with respect to Trade Secret S. The covered information was defined as confidential information copied or derived, in whole or in part, from those three trade secrets:

- Trade Secret D: Da Vinci RF Generator Control, Digital Measurement, and Software. - Trade Secret E: Next Generation RF Matching Network. - Trade Secret L: Kiyo Matching Network.

XP and its officers, agents, employees, distributors, resellers, attorneys, and others who received actual notice and acted in concert with them were permanently enjoined from possessing, accessing, reviewing, using, or disclosing the covered information anywhere in the world. They were also barred from making, offering to sell, selling, or distributing products derived from that information, and from advertising, promoting, offering to sell, selling, or providing services using or claiming the benefit of that information.

The order required XP to use an electronic-discovery vendor to identify, collect, remove, and quarantine covered information while preserving data needed for pending litigation. The vendor was required to inspect specified databases, document systems, email accounts, computers, storage media, and paper files associated with current litigation custodians and employees involved in designing, developing, researching, advertising, marketing, or selling radio-frequency power products. XP was required to complete the identification, collection, and quarantine within 60 days of the order, subject to seeking a modification or other relief from the court if it could not meet that deadline.

Comet was allowed to conduct compliance audits through an independent third party, subject to the protective order. Audits could occur no more than twice per calendar year during normal business hours, with at least five business days’ electronic or written notice. The court retained jurisdiction to enforce the injunction.