Not So Readily Ascertainable: The Hidden Cost of Dropping a Trade Secret Claim

A recent U.S. Court of Appeals for the Ninth Circuit decision serves as a cautionary tale about jury instructions in trade secret litigation. In Comet Technologies USA, Inc. v. XP Power, LLC, Nos. 23-15601, 23-15709, 25-745 (9th Cir. July 14, 2026), the court reversed a $40 million verdict, vacated a permanent injunction and an award of over $17 million in attorney fees, and remanded for a new trial – all because a single jury instruction assigned the burden of proof to the wrong party. The instruction followed California law, which requires the defendant to prove that a trade secret was "readily ascertainable." Under the federal Defend Trade Secrets Act (DTSA), however, that burden falls on the plaintiff to establish that the trade secret is not readily ascertainable.

The decision underscores a critical divergence between federal and California trade secret law, and a concurrence offers useful guidance on whether plaintiffs may recover both avoided-cost damages and injunctive relief without a double-recovery problem.

Case Background

Comet Technologies manufactures components used in semiconductor fabrication. In 2018, three senior engineers left Comet for competitor XP Power, allegedly taking thousands of confidential files and delivering complete product designs within nine days. The evidence included what the Ninth Circuit called a "proverbial smoking gun": a recorded call in which one engineer – while still at Comet – offered a "crew" to deliver a "turnkey" design. The recruiter then, in what the court described as a "remarkable" move, forwarded to XP's executives.

Comet sued under both the federal DTSA and California's trade secret statute, but voluntarily dismissed the California claims to simplify the case for the jury – a decision the Ninth Circuit said "led to the reversible instructional error" at issue. The jury found misappropriation and awarded $40 million ($20 million compensatory, $20 million punitive), and the district court entered a permanent injunction and awarded $17 million in attorney fees.

The Core Issue: Burden of Proof on "Ready Ascertainability"

The appeal turned on which party must prove that the alleged trade secrets were "readily ascertainable through proper means." Under the DTSA, lack of ready ascertainability is baked into the definition of "trade secret" itself, meaning the plaintiff must prove it. 18 U.S.C. Section 1839(3)(B). California takes the opposite approach: Ready ascertainability is an affirmative defense that the defendant must prove. See Cal. Civ. Code Section 3426 et seq.; ABBA Rubber Co. v. Seaquist, 235 Cal. App. 3d 1, 21 n.9 (1991).

The district court's instruction told the jury that XP was not liable if XP proved the trade secrets were readily ascertainable – tracking California law. Once Comet dismissed its California claim, the instruction was never corrected. XP objected and asked to shift the burden to Comet, with Comet moving to strike the instruction entirely. The court denied both requests.

The Ninth Circuit's Analysis

The Ninth Circuit held the instruction was clearly erroneous and not harmless: Conflicting expert testimony on reverse engineering and intertwined damages across multiple trade secrets made it impossible to know how a properly instructed jury would have ruled. Judge Bumatay dissented, arguing the jury's clear verdict showed the burden allocation was not outcome-determinative. The court reversed and remanded the case for a new trial as to all the jury's findings.

Judge Hamilton wrote separately in concurrence to address an issue that will arise on remand and has generated a circuit split¹: whether awarding both avoided-cost unjust enrichment damages and a permanent injunction constitutes impermissible "double recovery." XP argued Comet should elect between damages and injunctive relief because the injunction would destroy any "head start" XP gained. The concurrence rejected this, reasoning that the two remedies address different harms: Avoided-cost damages are retrospective (disgorging past benefit), while the injunction is prospective (preventing future use). Allowing defendants to "buy a license" by paying avoided research and development costs, the concurrence warned, would reward bad actors and undermine the DTSA's deterrent purpose. Though not binding precedent, the concurrence provides a citable framework aligned with the Third and Seventh Circuits.

Conclusion

Comet is a reminder that California's burden of proof standard for "ready ascertainability" differs from the federal DTSA's and that dismissing one claim mid-trial can shift the burden in ways that upend a verdict. Other states might have similar distinctions that could be determinative at trial. Additionally, the concurrence, though not binding, offers useful insight into how the Ninth Circuit might resolve the circuit split on whether avoided-cost damages and injunctive relief constitute double recovery.

Notes

¹ The Third Circuit (PPG Industries Inc. v. Jiangsu Tie Mao Glass Co., 47 F.4th 156, 163-64 (3d Cir. 2022)) and the Seventh Circuit (Minnesota Mining & Mfg. Co. v. Pribyl, 259 F.3d 587, 607-08 (7th Cir. 2001)) have permitted avoided-cost damages alongside injunctive relief without finding double recovery. The Second Circuit reached the opposite conclusion in Syntel Sterling Best Shores Mauritius Ltd. v. TriZetto Group, Inc., 68 F.4th 792 (2d Cir. 2023). The Comet concurrence aligned with the Third and Seventh Circuits and distinguished Syntel on its facts – no destruction of the trade secret's value and no competing product ever developed.