Reported / Citable
Background
Comet Technologies USA and its Swiss and German affiliates make specialized radio-frequency (RF) generators and impedance matching networks — precision components used to control plasma in semiconductor manufacturing, the process that carves patterns into silicon wafers to make chips. In early 2018, three senior engineers left Comet to join XP Power, LLC, a California LLC that was Comet’s direct competitor, and they brought thousands of confidential Comet documents with them. A recruiting call recorded by the headhunter captured one of those engineers — still employed at Comet — offering to provide a competitor a “turnkey” (i.e., already completed) product design for XP’s new product lines. XP had new designs delivered in just nine days.
Comet sued in the Northern District of California under both the federal Defend Trade Secrets Act (DTSA), 18 U.S.C. §1836, and California’s own Uniform Trade Secrets Act (UTSA), Cal. Civ. Code §3426. The case was narrowed at trial to five alleged trade secrets relating to RF generator and matching network designs and manufacturing data. Midway through trial, Comet voluntarily dropped its California UTSA claims to simplify the verdict form — a strategic choice that, as the Ninth Circuit explained, carried hidden legal consequences for the jury instructions.
The jury found in Comet’s favor on three of the five remaining trade secrets and awarded $20 million in compensatory damages, plus $20 million in punitive damages for willful and malicious misappropriation, along with a permanent injunction and over $17 million in attorney fees. XP appealed.
The Court’s Holding
The Ninth Circuit reversed and remanded for a new trial. The pivotal issue was Jury Instruction 20, which told the jury that XP bore the burden of proving its alleged “affirmative defense” that the trade secrets were “readily ascertainable by proper means” — meaning available through legitimate research, reverse engineering, or publicly accessible sources without significant difficulty. This was correct under California’s UTSA, which treats ready ascertainability as a defendant’s affirmative defense. But after Comet dropped its California claims, only the federal DTSA remained — and the DTSA defines “trade secret” to exclude information that is readily ascertainable, making lack of ready ascertainability an element of the plaintiff’s claim rather than a defense for the defendant to prove. The instruction thus flipped the burden of proof on a material issue.
The court rejected Comet’s arguments that XP waived the objection by “inviting” the error. XP had in fact objected correctly and promptly when Comet dropped its state claims, specifically pointing out that the instruction would need to be amended to shift the burden. The district court refused without explanation. At the final charging conference, XP was not silent either — it reminded the court of its prior objection. That is the opposite of invited error. The court also rejected Comet’s harmlessness argument: conflicting evidence at trial on ready ascertainability and significant jury discretion on damages meant the panel could not say the error did not affect the outcome.
Key Takeaways
- Under the federal Defend Trade Secrets Act, the plaintiff bears the burden of proving that its alleged trade secrets were not readily ascertainable by proper means — the opposite of California’s own UTSA, which treats ready ascertainability as a defendant’s affirmative defense.
- When a plaintiff abandons state trade secret claims mid-trial and proceeds on DTSA only, the jury instructions must be revised to reflect the federal burden-of-proof rule; failing to do so is reversible error that cannot be rescued by a generic instruction that “Comet has the burden of proof.”
- A defendant that correctly objects to a jury instruction when the issue first arises — even if it later accepts the instruction at a subsequent conference — does not “invite” the error and preserves the objection for appeal.
- Trade secret litigants and their counsel should carefully analyze whether claims are DTSA-only, state-law-only, or parallel before proposing or challenging jury instructions; the burden allocation differs, and dropping one set of claims mid-trial can scramble instructions that were originally correct.
- Judge Hamilton’s concurrence (for the Ninth Circuit, joined by no other circuit judge on this point) takes a position that awarding both unjust-enrichment damages and a permanent injunction under the DTSA does not constitute an impermissible double recovery — a question on which circuits have differed.
Why It Matters
This decision is essential reading for any California lawyer or in-house counsel handling trade secret cases that implicate both the federal DTSA and California’s UTSA. The two statutes share much of the same substantive framework but differ critically on which party bears the burden of proving or disproving ready ascertainability. The case illustrates how a mid-trial tactical choice — dropping state claims to streamline the case for the jury — can inadvertently change the burden of proof on a core element of the remaining claims, with consequences large enough to vacate a $40 million verdict. Given that Silicon Valley and the broader California tech sector are prime venues for DTSA litigation over semiconductor, AI, and software secrets, trade secret practitioners need to master these distinctions before any jury instructions conference.
The case also reaches the semiconductor supply chain at a time of acute geopolitical attention to chip technology. Three engineers walked out with the designs for RF power components used in chip fabrication and delivered a working product plan in nine days. The vacated verdict does not mean Comet will lose on retrial — it means a properly instructed jury must now decide whether the alleged secrets were truly secret. For tech companies concerned about employees leaving to competitors, the opinion is a reminder that even a near-perfect evidentiary record can be undone by a flawed jury instruction, and that careful attention to the correct legal standard at the charging conference is as important as the underlying case on the merits.