Trade Secret Litigation Settlement Strategy.
TRADE SECRET LITIGATION – SETTLEMENT STRATEGY
I. UNDERSTANDING TRADE SECRETS (LEGAL FRAMEWORK)
What Qualifies as a Trade Secret
A trade secret generally includes:
Confidential business information
Independent economic value from secrecy
Reasonable measures taken to maintain secrecy
Protected under:
Uniform Trade Secrets Act (UTSA)
Defend Trade Secrets Act (DTSA)
Common law confidentiality principles
II. WHY SETTLEMENT IS CENTRAL IN TRADE SECRET LITIGATION
Trade secret disputes are uniquely suited for settlement because:
Public litigation risks disclosure
Proof depends on confidential evidence
Damages are speculative
Business relationships often continue
Injunctions can destroy businesses
III. TRADE SECRET LITIGATION SETTLEMENT STRATEGY
(STEP-BY-STEP)
1. PRE-LITIGATION SETTLEMENT POSITIONING
a. Trade Secret Audit
Identify specific secrets
Categorize technical vs business secrets
Assess secrecy controls
b. Forensic Readiness
Device imaging
Access logs
Data exfiltration proof
c. Early Cease-and-Desist
Often designed to prompt settlement
Signals strength without full disclosure
2. STRATEGIC USE OF INJUNCTIONS
Temporary restraining orders pressure defendants
Even threatened injunctions increase settlement value
Narrow injunction requests improve settlement credibility
3. DISCOVERY-BASED SETTLEMENT LEVERAGE
Focused discovery on:
Download logs
Email forwarding
USB usage
Avoid broad disclosures to protect secrecy
4. DAMAGES MODELING FOR SETTLEMENT
Reasonable royalty
Avoided development costs
Unjust enrichment
Lost profits
5. CONFIDENTIAL SETTLEMENT STRUCTURES
Licensing arrangements
Technology carve-outs
Non-use and destruction certifications
Employee mobility clauses
IV. DETAILED CASE LAWS WITH SETTLEMENT INSIGHTS
1. Waymo LLC v. Uber Technologies, Inc.
Facts:
Former Waymo engineer Anthony Levandowski joined Uber
Allegedly downloaded thousands of confidential files
Uber launched competing autonomous vehicle technology
Legal Issues:
Trade secret misappropriation
Corporate liability for employee theft
Injunctive relief
Litigation & Settlement:
Waymo sought injunction and damages
Trial revealed substantial evidence of downloading
Uber settled by transferring equity worth approximately $245 million
Settlement Lessons:
Employee onboarding diligence matters
Early forensic proof drives high-value settlement
Equity settlements can resolve existential risks
2. DuPont v. Kolon Industries
Facts:
Kolon recruited former DuPont employees
Acquired Kevlar manufacturing secrets
Competing product launched
Legal Issues:
Trade secret theft
Conspiracy
Corporate espionage
Outcome:
Jury awarded substantial damages
Criminal convictions followed
Civil settlement exceeded $275 million
Settlement Lessons:
Criminal exposure amplifies settlement pressure
Pattern evidence strengthens bargaining position
Long-term injunctive relief often traded for monetary settlement
3. Epic Systems Corp. v. Tata Consultancy Services
Facts:
TCS accessed Epic’s healthcare software
Used login credentials from former employee
Copied proprietary code and documentation
Legal Issues:
Unauthorized access
Trade secret misappropriation
Computer fraud
Outcome:
Jury awarded $940 million (later reduced)
Parties eventually settled
Settlement Lessons:
Access logs are powerful settlement tools
Excessive jury verdicts incentivize post-verdict settlement
Settlements often include technology access bans
4. E.I. du Pont de Nemours v. Christopher (Trade Secret Surveillance Case)
Facts:
Defendants photographed DuPont plant under construction
No physical trespass occurred
Legal Issues:
Improper means of acquiring trade secrets
Definition of misappropriation
Court Holding:
Surveillance constituted improper means
Trade secrets protected even without trespass
Settlement Lessons:
“Improper means” broadly construed
Early injunctions justified
Encourages pre-trial settlement
5. PepsiCo, Inc. v. Redmond (Inevitable Disclosure Doctrine)
Facts:
Executive left PepsiCo to join Quaker Oats (Gatorade)
Possessed strategic pricing and marketing plans
Legal Issues:
Whether inevitable disclosure applies
Injunction without actual misappropriation
Court Holding:
Injunction granted
High risk of inevitable disclosure
Settlement Lessons:
Injunction threats can force settlement
Employment restrictions often negotiated
Cooling-off periods are common settlement terms
6. Silvaco Data Systems v. Intel Corp.
Facts:
Intel unknowingly used software containing stolen code
Plaintiff sued for misappropriation
Legal Issues:
Liability without knowledge
Definition of “use” of trade secrets
Court Holding:
No misappropriation without knowledge
Innocent use limits damages
Settlement Lessons:
Knowledge threshold affects leverage
Due diligence can mitigate exposure
Settlement discounts often apply for innocent defendants
7. Whyte v. Schlage Lock Co.
Facts:
Former executive joined competitor
Employer alleged inevitable disclosure
Court Holding:
California rejected inevitable disclosure
Employee mobility favored
Settlement Lessons:
Jurisdiction strongly influences strategy
Weak injunction prospects push early settlement
Emphasis shifts to monetary compensation
V. KEY SETTLEMENT CLAUSES IN TRADE SECRET CASES
Non-use and non-disclosure
Technology destruction certification
Audit rights
Employee non-solicitation
No admission of liability
Confidentiality of settlement
Liquidated damages for breach
VI. COMMON SETTLEMENT PITFALLS
Overbroad non-compete provisions
Inadequate verification mechanisms
Failure to address derivative works
No monitoring rights
Public filings revealing secrets
VII. CONCLUSION
Trade secret litigation settlement is driven by risk management rather than pure legal merit. Courts:
Strongly protect confidential business information
Grant early injunctive relief where risk exists
Encourage settlement to avoid disclosure
Effective settlement strategy requires:
Early forensic dominance
Narrow, defensible trade secret identification
Jurisdiction-aware injunction tactics
Creative business resolutions
Strong compliance and monitoring terms
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