68 F.4th 792
2d Cir.2023Background
- TriZetto developed Facets®, a complex healthcare-insurance software platform and proprietary implementation tools, manuals, and scripts; it subcontracted some services to Syntel under a Master Services Agreement (MSA).
- The parties amended the MSA in 2012 to delete a non‑compete so Syntel could compete for Facets services, but confidentiality provisions remained in the MSA.
- After Cognizant acquired TriZetto, the relationship deteriorated; forensic discovery showed Syntel had created a repository of TriZetto materials and destroyed evidence, prompting a district-court preclusion order requiring the jury to find misappropriation of two specific items.
- At trial the jury found Syntel misappropriated 104 TriZetto trade secrets (DTSA and New York law) and awarded $284,855,192 in avoided development‑cost damages under the DTSA (and a smaller reasonable‑royalty award under New York law); punitive damages were later remitted to match compensatory damages.
- Syntel appealed, arguing (1) TriZetto failed to identify trade secrets with sufficient specificity, (2) the Amended MSA authorized Syntel’s use of 102 of the 104 items, and (3) avoided‑cost damages were not recoverable under the DTSA on these facts.
- The Second Circuit affirmed liability (trade‑secret identification and misappropriation), vacated the DTSA compensatory award based on avoided costs, and remanded for further proceedings consistent with its opinion.
Issues
| Issue | Plaintiff's Argument (Syntel) | Defendant's Argument (TriZetto) | Held |
|---|---|---|---|
| 1. Were the 104 asserted trade secrets identified with sufficient specificity? | TriZetto failed to identify secrets with the detail required as a matter of law. | TriZetto presented detailed witness testimony, demonstratives, and exhibits tying each item to documents/source code. | Affirmed: sufficiency was a fact question; evidence supported the jury. |
| 2. Did the 2012 Amended MSA authorize Syntel to use TriZetto’s trade secrets when competing? | Deleting the non‑compete effectively allowed Syntel to use TriZetto materials to compete (either by expanding “Services” or deleting confidentiality clauses). | The Amendment removed non‑compete language only; confidentiality provisions remained and still barred use of TriZetto Data for competing services. | Affirmed: Amended MSA did not authorize use; jury reasonably rejected Syntel’s extrinsic‑evidence theory. |
| 3. Were avoided‑costs damages (approx. $285M) recoverable as unjust enrichment under the DTSA on these facts? | Avoided costs are a form of unjust enrichment recoverable under the DTSA; jury award proper. | Avoided costs would overcompensate where the owner retained the secret’s value and a permanent injunction prevents further misuse; here TriZetto’s actual loss was modest. | Vacated: under these facts avoided costs were not available; unjust enrichment was fully addressed by lost profits and injunctive relief. |
| 4. What next for other monetary awards (New York reasonable royalty and copyright award)? | If avoided costs vacated, remand should adjust punitive damages and consider reasonable‑royalty awards. | TriZetto argued it at minimum merits the reasonable‑royalty award if DTSA award vacated. | Remanded: court vacated DTSA award and remanded for proceedings on the reasonable‑royalty (New York) and copyright awards; the court did not instruct to relitigate lost profits. |
Key Cases Cited
- Triolo v. Nassau Cnty., 24 F.4th 98 (2d Cir.) (standard for reviewing Rule 50(b) denial)
- Ashley v. City of New York, 992 F.3d 128 (2d Cir.) (sufficiency standard; absence of evidence requirement)
- InteliClear, LLC v. ETC Glob. Holdings, Inc., 978 F.3d 653 (9th Cir.) (DTSA specificity principles)
- Oakwood Labs. LLC v. Thanoo, 999 F.3d 892 (3d Cir.) (trade‑secret specificity is fact‑specific)
- IDX Sys. Corp. v. Epic Sys. Corp., 285 F.3d 581 (7th Cir.) (need to separate trade secrets from other software material)
- Banos v. Rhea, 25 N.Y.3d 266 (N.Y.) (contract ambiguity is a question of law; extrinsic evidence only if ambiguous)
- GlobeRanger Corp. v. Software AG U.S. of Am., Inc., 836 F.3d 477 (5th Cir.) (avoided costs as unjust enrichment where defendant used secret to develop competing product)
- Salsbury Labs., Inc. v. Merieux Labs., Inc., 908 F.2d 706 (11th Cir.) (avoided costs where defendant’s use destroyed claimant’s trade‑secret value)
- Epic Sys. Corp. v. Tata Consultancy Servs., Ltd., 980 F.3d 1117 (7th Cir.) (upheld large avoided‑cost award under state UTSA; discussed here and distinguished)
- Kaye v. Grossman, 202 F.3d 611 (2d Cir.) (principles on unjust enrichment and damages computation)