Silverthorne v. Sterling Seismic, 125 F.4th 593

Background

Silverthorne Seismic, L.L.C. licensed seismic data to Casillas Petroleum, which arranged for Sterling Seismic Services, Ltd. to process the data.
Silverthorne alleges Sterling provided Casillas with unlicensed data, which Casillas used in investor relations, prompting Silverthorne to sue Sterling for trade secret misappropriation under the Defend Trade Secrets Act (DTSA).
The district court, just before trial, ruled on how "reasonable royalty" damages could be proven under the DTSA and adopted a standard based on University Computing Co. v. Lykes-Youngstown Corp.
On Silverthorne's motion, the district court certified an interlocutory appeal under 28 U.S.C. § 1292(b) regarding the proper standard for calculating a reasonable royalty, and stayed the case.
The Fifth Circuit initially granted the request but, sitting en banc, vacated that order and dismissed the appeal for want of jurisdiction, holding the certified question was not yet controlling because liability had not been established.
A dissent argued the certified damages issue was ripe and central, contending the DTSA allows for reasonable royalties in cases of disclosure as well as use, and that the court should have answered the legal question.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Is a pre-trial order on the "reasonable royalty" standard for DTSA damages a controlling question of law suitable for interlocutory appeal under § 1292(b)?	Yes: The district court’s interpretation precludes proving damages, so this threshold legal issue controls the case.	No: Damages are not yet at issue, liability is unproven, and the question is not yet controlling.	No: Not controlling until liability established; appeal dismissed for lack of jurisdiction.
Can reasonable royalty damages under the DTSA be measured by reference to hypothetical willing buyers beyond the parties (i.e., third parties)?	Yes: DTSA allows royalties for disclosure or use, so third-party benchmarks are valid and necessary for remedying disclosure.	No: The only valid benchmark is what the actual parties (Silverthorne and Sterling) would have negotiated, per precedent.	No decision on merits; vacatur of appeal, leaving district court standard unresolved.
Should the case proceed or remain stayed while the appellate court answers the certified damages question?	Yes: Resolving this now would prevent a trial on a potentially insurmountable damages theory.	No: Parties will proceed to trial either way; appeal only delays resolution.	Trial should proceed; appeal delays proceedings with no immediate effect.
Is University Computing’s measure of reasonable royalty outdated for DTSA cases involving disclosure (not just use)?	Yes: The DTSA's plain text and statutory scheme expand available remedies beyond University Computing.	No: University Computing is still controlling circuit precedent for trade secrets damages.	No merits ruling; issue left for district court and potential future appeal.

Key Cases Cited

University Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 518 (5th Cir. 1974) (defining "reasonable royalty" damages under common law trade secrets)
Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368 (1981) (final judgment rule for appellate jurisdiction)
Yamaha Motor Corp., U.S.A. v. Calhoun, 516 U.S. 199 (1996) (scope of interlocutory appeal for damages issues)
Vaughn v. Anderson Regional Medical Center, 849 F.3d 588 (5th Cir. 2017) (interlocutory appeal on dispositive damages issues under § 1292(b))
Garner v. Wolfinbarger, 430 F.2d 1093 (5th Cir. 1970) (controlling questions of law in privilege/discovery context for interlocutory appeal)