Tata Consultancy Services (TCS) has asked the Supreme Court to weigh in on an issue that could have a profound effect on trade secret damages. TCS is questioning the Fifth Circuit's affirmance of $56 million of unjust enrichment damages based on costs avoided by allegedly stealing another company's trade secrets. This is separate from any actual loss the trade secret holder suffered. 

In many circuits, the law permits the trade secret holder to claim both types of damages—actual lost profits and unjust enrichment damages in the form of costs avoided. TCS is arguing that there is a split among the appellate circuits on whether you can seek damages on avoided costs (unrelated to actual damage suffered by the trade secret holder).  

If TCS is correct, it would cut off one avenue of damages in trade secret cases. Unfortunately, the U.S. Supreme Court rarely addresses damages issues, so I doubt it will grant certiorari. However, how each regional circuit court will continue to analyze this trade secret damages issue will be very important because, as trade secret cases often lead to large damage awards, appellate courts are being asked to more closely scrutinize the bases and theories behind damages.

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According to its petition, the Fifth Circuit affirmed a $56 million unjust enrichment award and a $112 million punitive award in favor of Computer Sciences Corp. based on costs TCS avoided through its alleged trade secret theft, rather than proven loss — contradicting the Second Circuit's holding that unjust enrichment damages under the DTSA are unavailable when there is "no compensable harm beyond" lost profits or profit opportunities.

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