53 F.4th 368
6th Cir.2022Background:
- Caudill Seed & Warehouse Co. developed and sold glucoraphanin-based ingredients (BroccoRaphanin) and activated glucoraphanin capsules (Vitalica), maintaining a body of R&D and testing overseen by Director of Research Kean Ashurst.
- Jarrow Formulas was a major Caudill customer for glucoraphanin powder but recruited Ashurst while he remained employed at Caudill; Ashurst transmitted confidential Caudill documents and later joined Jarrow as a consultant, providing curated research and manufacturing guidance.
- Using Ashurst’s contributions, Jarrow quickly developed an activated broccoli-seed product (BroccoMax) and earned substantial sales (~$7.5M from 2012–2019).
- Caudill sued under the Kentucky Uniform Trade Secrets Act (KUTSA) alleging misappropriation of multiple trade secrets (including a broad R&D/process “combination” trade secret, Trade Secret 1); after trial a jury found misappropriation and willful/malicious conduct.
- The jury awarded $2,023,000 in actual losses and $404,605 in unjust enrichment (total $2,427,605), plus $1,000,000 exemplary damages and $3,254,303.50 in attorney fees; the Sixth Circuit affirmed the district court’s denial of Jarrow’s motions for judgment as a matter of law and for a new trial.
Issues:
| Issue | Plaintiff's Argument (Caudill) | Defendant's Argument (Jarrow) | Held |
|---|---|---|---|
| Adequacy of Trade Secret Definition (Trade Secret 1) | Trade Secret 1 is a protectable combination of R&D, testing, and processes defined with reasonable particularity. | The definition was a "kitchen-sink" claim too vague/overbroad and shifted in testimony, failing the required particularity. | Court: Caudill sufficiently defined Trade Secret 1 as a combination secret; jury verdict supported by evidence. |
| Whether Jarrow acquired/used the combination secret in full | Caudill: liability may rest on use of a substantial portion; Ashurst delivered the core body of R&D to Jarrow. | Jarrow: plaintiff must show acquisition and use of every element of the combination; differences in processes show partial, not full, use. | Court: No requirement to prove acquisition/use of every atom; substantial/use of the combination suffices. |
| Compensatory damages attribution (R&D costs) | Caudill: R&D costs and saved R&D expenses to Jarrow traceably reflect harm/value and justify award. | Jarrow: Damages improperly attributed; expert relied on all six alleged secrets; cannot recover full R&D costs because secret not destroyed or fully disclosed. | Court: Jury instructions and evidence support award; flexible measures (including benefit to defendant / avoided costs) were appropriate under Kentucky law. |
| Unjust enrichment, exemplary damages, and fees (willfulness) | Caudill: Jarrow acted willfully/maliciously (solicited Ashurst, encouraged concealment), justifying exemplary damages and fees. | Jarrow: No evidence of malice—only competition; exemplary damages and fees improper or should be reduced if compensatory damages vacated. | Court: Sufficient evidence of willful/malicious misappropriation; exemplary damages and fees affirmed; no need to recalculate because compensatory award stands. |
Key Cases Cited
- K&T Enters., Inc. v. Zurich Ins. Co., 97 F.3d 171 (6th Cir. 1996) (preservation of objections to jury instructions and appellate review rules)
- City of St. Louis v. Praprotnik, 485 U.S. 112 (U.S. 1988) (appellate-preservation principles cited)
- Mike’s Train House, Inc. v. Lionel, L.L.C., 472 F.3d 398 (6th Cir. 2006) (combination trade secrets may be protectable)
- 3M v. Pribyl, 259 F.3d 587 (7th Cir. 2001) (plaintiff may prevail without identifying a single nonpublic element of a combination secret)
- Univ. Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 518 (5th Cir. 1974) (damage measures in trade-secret cases; benefit-to-defendant approach)
- Mangren Rsch. & Dev. Corp. v. Nat’l Chem. Co., 87 F.3d 937 (7th Cir. 1996) (liability for use of another’s secret even with modifications)
- Avery Dennison Corp. v. Four Pillars Enter. Co., [citation="45 F. App'x 479"] (6th Cir. 2002) (permitted damage measures: defendant profits, avoided costs, reasonable royalty)
- Mid-Michigan Computer Sys., Inc. v. Marc Glassman, Inc., 416 F.3d 505 (6th Cir. 2005) (trade-secret damages flexibility affirmed)
- Texas Advanced Optoelectronic Sols., Inc. v. Renesas Elecs. Am., Inc., 895 F.3d 1304 (Fed. Cir. 2018) (expert testimony that fails to apportion value among multiple asserted secrets can require vacatur of damages)
- O2 Micro Int’l Ltd. v. Monolithic Power Sys., Inc., 399 F. Supp. 2d 1064 (N.D. Cal. 2005) (damages must not be speculative where expert attributes all value to multiple secrets without apportionment)