In Texas Advanced Optoelectronic Solutions Inc. v. Renesas Electronics America Inc, f/k/a Intersil Corporation, the Federal Court of Appeals recently overturned the trial court’s economic damages award based on an impermissible double recovery across the multiple causes of action involved.
Texas Advanced Optoelectronic Solutions, Inc., (“TAOS”) and Intersil Corporation (“Intersil”) each develop and sell ambient light sensors, which are used in electronic devices to adjust screen brightness. The parties had confidentially shared technical and financial information during negotiations for a merger that did not ultimately occur. Intersil later released new sensors including the design TAOS had disclosed in the confidential negotiations. TAOS sued Intersil in federal court for patent infringement, trade secret misappropriation, breach of contract, and tortious interference with prospective business relations under Texas state law.
The trial resulted in a jury verdict for TAOS on all claims, awarding
- $74,000 as a reasonable royalty for patent infringement
- $49 million in disgorgement of Intersil’s profits and $10 million in exemplary damages for trade secret misappropriation
- $12 million as a reasonable royalty for breach of contract
- $8 million in lost profits and $10 million in exemplary damages for tortious interference
Intersil argued that the jury awards were duplicative, and that TAOS should be awarded relief on only one. The established precedent in disallowing double recovery as impermissible is demonstrated in prior cases, including:
- Aero Products vs. Intex Recreation (05-1283 ((Fed Cir 2006))
- Junker vs. Eddings (396 F.3d 1359 (Fed Cir 2005))
- Bowers vs. Baystate Techs (320 F.3d 1317 (Fed Cir 2003))
- Catalina Lighting vs. Lamps Plus (295 F.3d 1277 (Fed Cir 2002))
- Celeritas Techs vs. Rockwell International (150 F 3d 1354, 1362 (Fed Cir 1998))
- CPG Products vs. Pegasus Luggage (776 F.2d 1007, 1007, 1004 n.4 (Fed Cir 1985))
The Trial Court concluded that the damages awarded for breach of contract and for tortious interference were duplicative of the monetary award for trade secret misappropriation, but found no duplication in the patent infringement and trade secret misappropriation awards.
Both parties appealed multiple elements of the findings and award. Intersil argued, inter alia, that the district court erred in concluding that the award for patent infringement was not duplicative of the award for trade secret misappropriation.
The Appeal Court agreed with Intersil that duplication still remained, finding that Intersil’s use of TAOS’s particular intellectual property was the basis of Intersil’s liability for both trade secret misappropriation and patent infringement. As the patent infringement damages were based on sales of four products, while the trade secret misappropriation award was based on sales of those four products and more than a dozen others, the patent award represented an impermissible double recovery in overlapping periods of time.
The Court noted that TAOS itself characterized its disgorgement calculation as representing all of Intersil’s related profits, without qualification as to that figure’s relationship to any other measure. TAOS’ proposed jury instruction stated: “If you find that Intersil misappropriated one or more of TAOS’ trade secrets, you may award TAOS up to all of Intersil’s profits gained as a result of that misappropriation under the `disgorgement’ remedy.”
The Court highlighted how the double recovery was clear from the expert witness’ damage calculations. TAOS’ economic damages expert calculated a disgorgement award for the trade secret misappropriation in which all profits made from sales of the infringing products (plus those from convoyed sales) would go to TAOS. The damages expert also calculated a reasonable royalty for the patent infringement based on a fraction of the total profits for those infringing products. The jury chose to award the full amount ($49 million) of the expert’s proposed disgorgement award for the trade secret misappropriation and a partial amount ($74,000) of the expert’s proposed royalty for the patent infringement ($105,000).
Generally, the proper measure of damages is to put the plaintiff in the position he would have been in if not for defendant’s conduct. The notable exceptions to this are:
- The collateral source rule, under which a plaintiff may recover damages in litigation even though the plaintiff has received money or services from another source — the collateral source rule is most commonly applied to insurance proceeds, employment benefits, and gifts.
- Punitive damages, which have as their purpose the punishment of unlawful conduct and deterring its repetition.
When the law provides multiple methods of calculating monetary remedies, the plaintiff generally has an election of remedies to prevent a windfall from occurring. The Court acknowledged that damages could be calculated on different causes of action, so long as an adjustment is made to the damage calculations to prevent double recovery.