Supreme Court Allows Circuit Split to Persist, Leaving Intact Avoided-Cost Damages Theory under Defend Trade Secrets Act

At a Glance

• On June 15, 2026, the US Supreme Court declined to review Tata Consultancy Services Ltd.’s challenge to a $168 million trade secret judgment, consisting of $56 million in unjust enrichment damages and $112 million in exemplary damages.
• The denial leaves intact a Fifth Circuit decision upholding the application of avoided-cost damages as a method of calculating unjust enrichment under the Defend Trade Secrets Act (DTSA).

Summary

The Supreme Court’s certiorari denial reinforces that trade secret plaintiffs in the Fifth Circuit may recover avoided-cost damages even without some compensable harm to the plaintiff and exemplary damages for willful and malicious misappropriation under the DTSA’s statutory framework. Tata Consultancy Services Ltd. had urged the Court to address what it characterized as a conflict among circuit courts on both issues, arguing that the Fifth and Seventh Circuits required proof that a plaintiff had suffered harm beyond the defendant’s unjust gains. The justices declined to hear the issue, leaving in place the Fifth Circuit’s decision.

Faegre Drinker attorneys have covered the Second and Seventh Circuit’s decisions in prior alerts:

Second Circuit

• Federal Court Approves Flexible Damages Approach in $70 Million Trade-Secret Verdict
• Under New York Law, Trade Secret Damages Must Reflect Plaintiff’s Actual Loss, Not Just Defendant’s Wrongful Gain

Seventh Circuit

• Seventh Circuit Confirms Extraterritorial Reach of the Defend Trade Secrets Act
• Trade Secret Remedies After Motorola Solutions, Inc. v. Hytera Communications Corp. Ltd.
• Hytera Petitions Supreme Court to End DTSA’s Extraterritorial Reach

Takeaways

The Supreme Court’s decision not to grant certiorari leaves the Fifth Circuit’s decision undisturbed and carries several practical implications for trade-secret plaintiffs and defendants.

1. Avoided-cost damages remain a viable measure of unjust enrichment under the DTSA.

   The Fifth Circuit rejected that a plaintiff needed to demonstrate harm beyond the defendant’s unjust gains to recover a defendant’s avoided research-and-development costs. This decision provides a potentially powerful damages theory, particularly where lost profits are difficult to prove.

2. Exemplary damages at the statutory maximum remain available.

   The DTSA permits courts to award exemplary damages up to twice the compensatory award for willful and malicious misappropriation. The Fifth Circuit’s decision confirms that large exemplary damages awards within the statutory cap can withstand due-process scrutiny, even when the underlying compensatory award is substantial.

3. The circuit split remains unresolved.

   While the denial of certiorari carries no precedential weight, it means the conflict between the Fifth, Second, and Seventh Circuits on the scope of DTSA unjust enrichment damages remains.

   Both the Second and Seventh Circuits indicated a trade-secret plaintiff needed to suffer a compensable harm before the plaintiff may recover avoided-cost damages.

   The Fifth Circuit has declined to read this requirement into the DTSA and permitted a trade-secret plaintiff to recover avoided-cost damages based solely on a defendant’s unjust gains.

   Companies operating across jurisdictions should be aware that the availability and measure of avoided-cost damages may vary by circuit.