StorageCraft Tech. Corp. v. Kirby

Even though Mr. Kirby did not personally profit from disclosure of a trade secret, under Utah trade secret law, damages for the use or disclosure of trade secret may be measured by the defendant’s unjust enrichment, actual loss suffered by the plaintiff, or a reasonable royalty based on the price that the parties would have agreed upon for a license.

Opinion (Gorsuch): James Kirby (“Kirby”) was a director of StorageCraft Technology Corporation (“StorageCraft”). When Kirby left StorageCraft on less than friendly terms, he stole StorageCraft’s computer source code. Kirby then shared that source code with a rival computer software development company based in Japan. StorageCraft sued Kirby for trade secret misappropriation and was awarded $ 2.92 million under the “reasonable royalty” theory of damages. Kirby appealed. Kirby argued that since he only disclosed the trade secret, but did not make commercial use of the trade secret, ‘reasonable royalty’ damages were not available to the plaintiff. Kirby argued that even if reasonable royalties were permissible, the $2.92 million in damages was too high. The Tenth Circuit held that under Utah’s trade secret statute “reasonable royalty” damages were equally available for the use or disclosure of a trade secret, and did not require commercial use. The panel explained that Kirby’s argument failed completely because the relevant law did not support Kirby’s position, and the evidence at trial clearly demonstrated Kirby’s disclosure. As to whether Kirby intended to profit from the trade secret or not, Circuit Judge Gorsuch wrote that “[t]he trouble is Utah law doesn't’t distinguish between a misappropriator’s venial motives.” The panel also held that $2.92 million in damages was not unreasonable as a matter of law based on the facts developed at trial. The judgment was AFFIRMED.