Storagecraft Technology Corp. v. Kirby
744 F.3d 1183
| 10th Cir. | 2014Background
- Kirby, former StorageCraft officer, stole StorageCraft’s source code and disclosed it to NetJapan, a rival.
- StorageCraft sought damages using a reasonable royalty theory under Utah’s Uniform Trade Secrets Act, arguing disclosure suffices for royalty recovery.
- District court allowed reasonable royalty damages based on misappropriation by disclosure, not necessarily proven commercial use by NetJapan.
- Utah law permits a reasonable royalty as an alternative to unjust enrichment or actual loss, for misappropriation through disclosure or use.
- Court analyzes whether Utah’s statute allows royalty damages in disclosure cases, and whether the jury award was recoverable given the facts proven at trial.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is reasonable royalty damages available for misappropriation via disclosure. | Kirby argues royalty only if there is commercial use. | Kirby contends Utah requires use for royalty. | Yes, royalty damages available for disclosure under Utah statute. |
| Is the $2.92 million award reasonable given the use/disclosure facts. | Kirby argues damages inflated since no proven commercial use. | StorageCraft ties royalty to defendant’s use of the secret by sharing with NetJapan. | Award upheld given evidence of license implied by disclosure to competitor. |
| Did district court’s Daubert gatekeeping ensure reliability of expert damages testimony? | Kirby challenges expert methodology and cost assumptions. | Court adequately reviewed reliability and relevance. | Yes; any error was harmless given record support. |
Key Cases Cited
- Univ. Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 518 (5th Cir. 1974) (royalty for disclosure/use allowed; general option under UTSA)
- Hertz v. Luzenac Grp., 576 F.3d 1103 (10th Cir. 2009) (reasonable royalties in trade secrets cases; disclosure/use breadth)
- Ga.-Pac. Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970) (discusses multiple factors for determining royalties; use scope matters)
- Ga.-Pac. Corp. v. U.S. Plywood-Champion Papers, Inc., 446 F.2d 295 (2d Cir. 1971) (modification/clarification of royalty approach; use/disclosure emphasis)
- Telex Corp. v. Int’l Bus. Machines Corp., 510 F.2d 894 (10th Cir. 1975) (informs damages framework in trade secrets context)
- Goebel v. Denver & Rio Grande W.R.R. Co., 215 F.3d 1083 (10th Cir. 2000) (Daubert gatekeeping standards flexibility; focus on reliability factors)
- Kinser v. Gehl Co., 184 F.3d 1259 (10th Cir. 1999) (illustrates appellate review of expert testimony when admissibility questioned)
- United States v. Roach, 582 F.3d 1192 (10th Cir. 2009) (Daubert review and evidentiary admissibility on appeal)
- Avitia-Guillen v. United States, 680 F.3d 1253 (10th Cir. 2012) (evidentiary gatekeeping and record sufficiency for Daubert)