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Eastern District of Virginia Explores Damages Under DTSA and TUTSA

Article by Heath Coffman

In Steves & Sons, Inc. v. JELD-WEN, Inc., No. 3:16-CV-545, 2018 WL 2172502 (E.D. Va. May 10, 2018), the Eastern District of Virginia provides an in-depth look at unjust enrichment and reasonable royalty damages under both the Defend Trade Secrets Act (DTSA) and the Texas Uniform Trade Secrets Act (TUTSA). In Steves & Sons, plaintiff JELD-WEN alleged that defendant Steves used JELD-WEN’s trade secrets to assess the feasibility of developing a door skin manufacturing operation. Steves filed a motion for summary judgment on JELD-WEN’s on the following damage models: (1) Steves’ gains—through increased profitability per doorskin—that Steves would realize in the event that the doorskin manufacturing plant was built, (2) Steves’ benefits—through avoided expenditures—that Steves realized as a result of the misappropriation even if it never builds a plant, and (3) a reasonable royalty. Regarding models (1) and (2), the court noted the damages seemed speculative because they were based on multiple predictions—like the production capability of the plan and Steves’ operating profits. However, the court denied summary judgment because the models were based on a business model mostly replicated from JELD-WEN’s operations. Thus, a jury could rely on this evidence to conclude that Steves is reasonably likely to build a plant, and that it would save certain costs in running that plant because of JELD–WEN’s trade secrets.

Regarding the third model—the reasonable royalty—the court denied summary judgment on that as well. Among other things, the court noted that it was appropriate to incorporate Steves’ future earnings and JELD-WEN’s loss of revenue in the reasonable royalty factors.

Finally, the court rejected Steves’ argument that injunctive relief would preclude JELD-WEN from seeking damages that incorporate harm from Steves’ future uses of trade secrets. The court reasoned that this JELD-WEN’s damages compensated it for the misappropriation of the information, which has a present value based in part on future use, regardless of whether that use comes to fruition. Plus, JELD-WEN never intended its trade secrets to be licensed, sold, or used by a third party. Thus, injunctive relief was not duplicative of the damages sought.

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