888 F.3d 1322
Fed. Cir.2018Background
- TAOS and Intersil negotiated a potential merger in mid-2004 under a Confidentiality Agreement; TAOS disclosed technical (TSL2560 interleaved 1:1 diode array) and financial information (including glass-packaging cost breakdown).
- Negotiations ended in August 2004; Intersil thereafter redesigned its products to an interleaved 1:1 photodiode array and later sold sensors to Apple and others; TAOS released its TSL2560 in 2005 and TAOS was reverse-engineered by Intersil by early 2006.
- TAOS sued (2008) for patent infringement (U.S. Patent No. 6,596,981), trade secret misappropriation (three asserted secrets: financials, glass-packaging roadmap, and 1:1 interleaved diode array), breach of contract, and tortious interference; a 2015 jury found liability on all counts and awarded various monetary damages and exemplary damages.
- District court limited patent damages pretrial (excluding 98.8% of sales as extraterritorial) but the jury awarded a reasonable royalty for patent infringement, disgorgement of profits and exemplary damages for trade-secret misappropriation, and awards on the state-law claims; post-trial orders denied an injunction and enhancements but entered final judgment.
- On appeal, the Federal Circuit: affirmed trade-secret liability but limited it to the photodiode-array secret; vacated the monetary disgorgement and exemplary awards for trade secrets (and the patent damages award) and remanded for further proceedings; affirmed infringement of apparatus claims but reversed method-claim infringement.
Issues
| Issue | Plaintiff's Argument (TAOS) | Defendant's Argument (Intersil) | Held |
|---|---|---|---|
| Trade-secret liability | TAOS: Intersil misappropriated three secrets (financials used in Build-vs-Buy, glass-packaging roadmap, 1:1 interleaved diode array) disclosed under the Confidentiality Agreement | Intersil: financial use was permitted by the agreement; packaging choice and array structure were known or independently available | Affirmed liability only as to the photodiode-array structure; packaging and Build-vs-Buy theories rejected (packaging known earlier; Build-vs-Buy use contractually permitted) |
| Monetary disgorgement for trade secrets | TAOS: disgorgement of Intersil profits tied to misappropriation; expert disgorgement covered many products and years | Intersil: award is excessive, includes sales after the secret was accessible (reverse-engineering), and jury lacked basis to award profits | Vacated disgorgement and exemplary damages; remand required to determine when secret became publicly accessible and appropriate head-start period |
| Seventh Amendment right to jury decide disgorgement | TAOS: jury may decide disgorgement as part of trial | Intersil: disgorgement is equitable; district court must decide disgorgement with Rule 52 findings | TAOS has no Seventh Amendment right to a jury decision on disgorgement here; disgorgement is equitable and must be decided by the court with findings; vacated for that reason as well |
| Patent infringement scope and overlap with trade-secret award | TAOS: asserted apparatus and method claims; sought royalty and injunction; damages separate from trade-secret award | Intersil: method-claim infringement not proved because accused products did not operate in alleged infringing mode; patent damages duplicate trade-secret disgorgement | Reversed infringement of method claims 43,45,46; affirmed infringement of apparatus claims 16–18; vacated patent damages as duplicative of trade-secret disgorgement (remand for appropriate non-duplicative relief); injunction denial vacated for further factfinding; enhanced damages remanded under Halo |
Key Cases Cited
- i4i Ltd. P'ship v. Microsoft Corp., 598 F.3d 831 (Fed. Cir. 2010) (standard of review for JMOL and sufficiency of evidence explained)
- Skilling v. United States, 561 U.S. 358 (2010) (harmless-error and jury-verdict analysis principles)
- Shinseki v. Sanders, 556 U.S. 396 (2009) (harmless-error framework and burden to show prejudice)
- eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) (four-factor test for permanent injunction in patent cases)
- Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S.Ct. 1923 (2016) (abrogated Seagate; governs enhanced damages for willful patent infringement)
- Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002) (distinguishing legal vs equitable restitution and framework for classifying disgorgement)
- Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S.Ct. 1962 (2014) (treating profits disgorgement in copyright context as equitable in that case)
- Hyde Corp. v. Huffines, 314 S.W.2d 763 (Tex. 1958) (Texas common-law definition of trade-secret misappropriation and duty not to use disclosed secrets)