895 F.3d 1304
Fed. Cir.2018Background
- TAOS developed ambient light sensors (TSL2550, TSL2560) using a patented photodiode architecture (dual shielded/exposed diodes; later a 1:1 interleaved array) and disclosed technical and financial details to Intersil during 2004 merger discussions under a Confidentiality Agreement.
- Negotiations ended in August 2004; Intersil soon redesigned its sensors to incorporate an interleaved 1:1 photodiode structure and later sold products (ISL29001/02/03/04) to customers including Apple.
- TAOS sued in 2008 in the Eastern District of Texas asserting: patent infringement (U.S. Patent No. 6,596,981), trade secret misappropriation (three asserted secrets: 1:1 interleaved diode structure, glass-packaging cost roadmap, and detailed financials used in a Build-vs-Buy analysis), breach of contract, and tortious interference.
- A 2015 jury found liability on all claims, awarding: a reasonable royalty for patent infringement; disgorgement of profits and exemplary damages for trade-secret misappropriation; damages for breach of contract; and lost profits and exemplary damages for tortious interference; willfulness on infringement was found by the jury.
- On appeal, the Federal Circuit: affirmed trade-secret liability but limited it to the photodiode array structure; vacated the monetary awards for trade-secret disgorgement and exemplary damages (procedural and temporal issues); reversed infringement of certain method claims but affirmed infringement of apparatus claims; vacated patent damages as duplicative of trade-secret award; vacated denial of injunctive and enhanced damages and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Trade-secret liability — which asserted secrets support misappropriation? | TAOS: three secrets (1:1 interleaved diode structure; glass-packaging roadmap; detailed financials used in Build-vs-Buy) were misappropriated and used to compete. | Intersil: packaging and Build-vs-Buy uses were not misappropriation (packaging info known earlier; Build-vs-Buy was a permitted use under the NDA). | Affirmed misappropriation only as to the interleaved 1:1 photodiode structure; packaging and Build-vs-Buy theories rejected. |
| Monetary disgorgement for trade-secret misappropriation — jury vs. court and scope/duration | TAOS: sought disgorgement of Intersil’s profits based on broad sales period (Apr 2006–Mar 2014). | Intersil: disgorgement is equitable (judge, not jury), award overbroad because secret lost status over time and expert did not apportion among claimed secrets. | Vacated disgorgement award (and exemplary damages); disgorgement must be readdressed by the court with findings and limited to a proper head-start period and apportioned scope. |
| Patent infringement — method vs. apparatus claims; domestic sales for damages | TAOS: accused devices infringe both method and apparatus claims; damages based on domestic sales. | Intersil: no evidence products operated in infringing method Mode 3; most accused sales were extraterritorial. | Reversed infringement of method claims (43,45,46) for lack of proof of use; affirmed apparatus claims (16–18); affirmed summary judgment excluding 98.8% of sales as extraterritorial. Patent damages vacated as duplicative of trade-secret disgorgement. |
| Injunctive & enhanced damages relief | TAOS: seeks permanent injunction and enhanced damages for willfulness. | Intersil: monetary remedies may be adequate; earlier Seagate standard applied below. | Vacated denial of injunction (remanded for proper eBay analysis); vacated denial of enhanced damages because Halo abrogated Seagate — remand to consider under current standard. |
Key Cases Cited
- i4i Ltd. P’ship v. Microsoft Corp., 598 F.3d 831 (Fed. Cir. 2010) (JNOV/JMOL standard and jury-sufficiency review)
- Shinseki v. Sanders, 556 U.S. 396 (U.S. 2009) (harmless-error and prejudice standard on appeal)
- Skilling v. United States, 561 U.S. 358 (U.S. 2010) (harmless-error analysis where multiple theories presented to jury)
- Markman v. Westview Instruments, Inc., 517 U.S. 370 (U.S. 1996) (historical inquiry for Seventh Amendment jury-trial right)
- Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923 (U.S. 2016) (abrogating Seagate and governing enhanced damages for willfulness)
- Kokesh v. SEC, 137 S. Ct. 1635 (U.S. 2017) (disgorgement characterized in remedies context)
- Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (U.S. 2002) (distinguishing legal vs equitable restitution)
- Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962 (U.S. 2014) (disgorgement of profits in IP context treated as equitable)
- E.I. duPont deNemours & Co. v. Christopher, 431 F.2d 1012 (5th Cir. 1970) (reverse-engineering bars trade-secret protection)
- Rodriguez v. Riddell Sports, Inc., 242 F.3d 567 (5th Cir. 2001) (multiple-theory jury verdicts and harmless-error principles)