[author: Peter C. Vilmos]
Sometimes it makes perfect sense to seek a bifurcated trial. An initial trial on liability can often resolve your case, limit your damages, or set the stage for a negotiated compromise. On the other hand, a formal finding of liability can often hamper your ability to have a jury limit your damages. This is true even in circumstances when it is clear the jury does not necessarily agree that damages are due.
You can see an example of this in a recent Florida trade secret misappropriation case where an initial finding of liability greatly hampered a defendant’s ability to limit damages in the subsequent damages trial. In July 2012, a Florida appellate court upheld a jury verdict in a Florida Uniform Trade Secrets case, rejecting the defendant’s arguments that the law required a limiting jury instruction. In Premier Lab Supply, Inc. v. Chemplex Industries, Inc. (Fla. 4th DCA 2012), the defendants argued that the trial court wrongfully refused to allow a jury instruction that would have reduced the term from which trade secret damages could flow. In essence, the trial judge determined that the result of the initial liability trial limited the defendant’s ability to seek a damage-limiting instruction. The appellate court agreed that the trial judge acted within their discretion.
The trial proceeded as follows: At the liability trial a jury found that the “spooling machine and its design were trade secrets” initially misappropriated in 1999. Prior to the damages trial, the court determined that the defendants could introduce evidence in the damages phase showing that machines “comparable to [the] spooling machine” were commonly available in the marketplace. However, the judge also ruled that this evidence would only apply to limit the timeframe for damages awarded on the trade secret violations. The judge allowed for separate damages based on both “actual monetary loss” and on unjust enrichment. Any limitations on damages, the judge ruled, were allowed only from the period of 1999 forward.
Under Florida law, damages in an action for misappropriation of a trade secret “can include both the actual loss caused by misappropriation and the unjust enrichment caused by misappropriation that is not taken into account in computing actual loss.” Sec. 688.004(1) Fla. Stat. (2007). The defendants attempted to limit the damages, arguing that the “head-start period” (the theoretical amount of time necessary for defendant to develop on its own the trade secret wrongfully misappropriated) was non-existent because the technology was commonly available. When the second jury inquired as to the damages computation for unjust enrichment, while taking into account the evidence of common availability in the marketplace during the entire period of alleged misappropriation, the trial judge instructed that the issue of liability was no longer at issue and required a calculation beginning in 1999.
The appellate court affirmed the trial court’s verdict in its entirety, finding that “a plaintiff’s actual losses in a misappropriation of trade secrets case need only be ‘caused by’ the misappropriation. § 688.004, Fla. Stat.” As a result, the appellate court concluded that the trial judge was within their discretion to deny the instruction limiting damages and to alert the second jury that a finding of liability was beyond their purview.
So be careful out there. Even when you introduce evidence that commonly available technology made your misappropriation inconsequential, a prior finding of liability can result in significant damages. Keep in mind the differences between actual losses and unjust enrichment. Also, remember that once a jury determines liability for misappropriation of trade secrets, there is a steep hill to climb in order to limit damages based on a theory of common availability.
