Fifth Circuit Provides Guidance on Damages and Injunctive Relief Under the DTSA in $168 Million Trade Secret Case

At a Glance

• The Fifth Circuit reinforced the need to avoid duplicative recovery when awarding both damages and injunctive relief under the Defend Trade Secrets Act (DTSA).
• Unjust enrichment damages based on avoided development costs are permissible where the defendant gains a benefit from misappropriation.
• Exemplary (punitive) damages up to two times the compensatory award are available for willful and malicious trade secret misappropriation.
• Permanent injunctions must be carefully tailored to avoid overlap with monetary awards.

Summary

The plaintiff, Computer Sciences Corporation (CSC), licensed its proprietary insurance software to a major financial services company under agreements restricting use to the licensee’s benefit. Tata Consultancy Services Limited (TCS), a global IT consulting firm, accessed CSC’s confidential software information and used it to develop its own competing platform and to support its bid for a significant contract with the financial services company. CSC sued TCS under the Defend Trade Secrets Act (DTSA), claiming misappropriation of trade secrets.

After trial, the jury found TCS liable and awarded CSC $56 million in compensatory damages based on TCS’s avoided development costs — those costs TCS would have incurred but for its use of CSC’s trade secrets. The district court also awarded $112 million in exemplary damages for TCS’s willful and malicious conduct and entered a permanent injunction restricting TCS’s use of the misappropriated materials and related products.

Appellate Court’s Analysis on Damages

Unjust Enrichment

The Fifth Circuit affirmed that unjust enrichment damages are appropriate where a defendant has avoided development costs by misappropriating trade secrets. The court rejected the Second Circuit’s conclusion in Syntel Sterling Best Shores Mauritius Ltd. v. The TriZetto Grp., Inc., 68 F.4th 792 (2d Cir. 2023) that the recovery of unjust enrichment damages requires harm to the trade secret plaintiff beyond the actual losses. Instead, the Fifth Circuit noted that “requir[ing] proof of some quantifiable impact on the secret holder that goes beyond proof of the misappropriator’s unjust enrichment…is divorced from the text of the DTSA and from traditional understandings of the ‘unjust enrichment’ remedy.” Id. at *13. The decision creates a circuit split.

Exemplary Damages

The court approved exemplary damages equal to twice the compensatory award, finding TCS’s conduct met the “willful and malicious” standard under the DTSA. The evidence demonstrated repeated, intentional misuse of confidential materials, supporting the enhanced damages.

Injunctive Relief and Remedy Overlap

The Fifth Circuit scrutinized the permanent injunction, emphasizing that remedies must not overlap, but the facts related to the overlap are heavily case dependent. Because the damages award compensated CSC for TCS’s past unjust enrichment, the injunction needed to be narrowed to avoid barring TCS from future use of certain materials for which it had already paid damages. The court remanded for modification of the injunction.

Key Takeaways for Future Cases

• In the Fifth Circuit, a trade secret plaintiff may recover unjust enrichment damages based on avoided development costs where defendants derive a benefit from misappropriation even absent harm to the plaintiff beyond actual losses.
• Courts will closely scrutinize the relationship between injunctive relief and monetary awards to avoid duplicative recovery.