Ninth Circuit Reverses $40 Million Trade Secret Verdict, Highlighting the Tension Between Federal and California Trade Secrets Law

In Comet Techs. USA, Inc. v. XP Power, LLC, the jury found XP had misappropriated three of Comet’s trade secrets after former Comet engineers took thousands of confidential files with them to XP and helped XP develop competing product designs in just nine days. The jury awarded $20 million in compensatory damages and $20 million in punitive damages, and the district court separately entered a permanent injunction and awarded Comet more than $17 million in attorney fees.

Comet’s victory was short-lived. On appeal, the Ninth Circuit reversed and remanded for a new trial, holding that the jury instruction on one key element — whether Comet’s trade secrets were “readily ascertainable by proper means” — erroneously placed the burden of proof on the wrong party, XP. The Ninth Circuit also held that the error was not harmless, in large part because of how Comet had decided to structure its damages case at trial. The author of the majority opinion also penned a separate concurring opinion addressing a recurring remedies question: whether awarding both damages and a permanent injunction under the DTSA amounts to impermissible double recovery.

DTSA vs. CUTSA: Who Bears the Burden on ‘Ready Ascertainability’?

The decision turns on a subtle but critical difference between federal and California trade secret law. Under the DTSA, the plaintiff must affirmatively prove, as part of its case, that the information at issue derives independent economic value from not being “readily ascertainable through proper means” by others. 18 U.S.C. § 1839(3)(B). Because lack of ready ascertainability is an element of the plaintiff’s claim under federal law, the plaintiff bears the burden. The CUTSA, however, treats the issue differently. Under the CUTSA, ready ascertainability is an affirmative defense, which the defendant must prove (consistent with California’s model jury instruction, CACI No. 4420).

As is common, Comet originally sued under both the DTSA and CUTSA, and one of the proposed jury instructions (Instruction 20) was drafted to fit both theories, placing the burden on XP to prove ready ascertainability, as the CUTSA requires. Several days into the trial, however, Comet voluntarily dismissed its CUTSA claims to streamline the case for the jury and proceeded solely under the DTSA. At that point, XP asked the district court to revise Instruction 20 to shift the burden to Comet, consistent with the DTSA. In response, Comet argued that the instruction and related verdict question should be eliminated altogether (contending that the DTSA does not permit the defense at all). The district court denied both requests without explanation, leaving the original CUTSA-style instruction in place and the burden on XP for a claim that, by that point, existed only under the DTSA.

The Ninth Circuit held that this was reversible error. It rejected Comet’s argument that XP had invited the error, finding that XP made a timely and correct objection, asking the court to shift the burden consistent with the DTSA. When that request was denied, XP had no choice but to proceed under the erroneous instruction and attempt to carry the burden improperly placed.

The Ninth Circuit also held that the error was not harmless. Despite the significant evidence against XP, the court reiterated that “lack of ready ascertainability does not depend on what the defendants actually did. Ready ascertainability or its absence, as here, depends on an evaluation of what another expert in the field could have learned by proper means.” Because the erroneous burden allocation went directly to disputed factual issues that a properly instructed jury needed to resolve, the court could not conclude the outcome would have been the same.

Simplified Damages Strategy Prevents Finding of Harmless Error

The manner in which Comet presented its damages case created an interesting wrinkle. Comet’s damages expert calculated a single, aggregate damages figure for each trade secret, based on Comet’s own internal research and development (R&D), and avoided cost accounting codes, effectively treating every piece of confidential information within a given trade secret as equally valuable to XP. Comet did not break down the damages figures by specific document, component, or category of information within each trade secret. Hindsight is 20/20.

Comet’s simplified damages approach created a problem for it on appeal. Because the jury may have improperly placed the burden of proving ready ascertainability on XP, some of the underlying information supporting damages awards for certain trade secrets may actually have been readily ascertainable — and therefore not protectable — while other information (for example, manufacturing variation, material properties, or the strategy behind particular design choices) plainly was not. But because Comet’s damages case was not broken down categorically — for example, “dimensions,” “configuration,” or “concepts” disclosed in patents, which could arguably be readily ascertainable — the Ninth Circuit had no way to determine how much of each damages award was attributable to protectable versus potentially non-protectable information. Comet’s own concession that the awards for two of the trade secrets were “intertwined and cannot fairly be reconsidered separately” further compounded its problem. In short, the record was not sufficiently detailed to allow the court to determine whether the error was harmless — i.e., whether the result would have been the same notwithstanding the erroneous instruction.

Judge Patrick J. Bumatay dissented. He agreed that the instruction was erroneous but would have found the error harmless, reasoning that the “overwhelming and undisputed” volume of highly technical documentation supporting Comet’s trade secrets, together with the jury’s own findings — including its finding of independent economic value and the size of the compensatory and punitive damages awards — were strong indications that the jury would have reached the same result under a correct instruction.

Damages Plus an Injunction: Double Recovery?

Judge David F. Hamilton, who authored the majority opinion, also wrote separately to provide guidance for the new trial on remand. His concurrence addressed XP’s argument that awarding Comet both unjust enrichment damages (based on XP’s avoided R&D costs) and a permanent injunction would amount to impermissible double recovery for the same harm.

The concurrence concluded there is no double recovery because the two remedies compensate for distinct harms occurring in different time periods: the avoided-cost damages award is retrospective (compensating Comet for the benefit XP already realized by misappropriating the trade secrets) while the permanent injunction is prospective (preventing future use and future competitive harm).¹ This reasoning — if the concurring opinion were precedential — would align the Ninth Circuit with the Third and the Seventh Circuits. The concurrence distinguished the Second Circuit’s contrary decision in Syntel Sterling Best Shores Mauritius Ltd. v. TriZetto Group, Inc., 68 F.4th 792, 806–07 (2d Cir. 2023), which vacated a similar combined award, as resting on unusual facts — i.e., modest actual profits and no competing product ever developed. The concurrence also distinguished the Fifth Circuit’s decision in Computer Sciences Corp. v. Tata Consultancy Services Ltd., 159 F.4th 429 (5th Cir. 2025), which found overlap only because the injunction there specifically barred use of a competing product built using the avoided-cost R&D. Judge Hamilton cautioned that adopting XP’s broader rule would create perverse incentives, effectively letting a misappropriator “buy a license” to stolen trade secrets simply by paying damages and then continuing to use them, undermining the deterrent purpose of the DTSA.

Practical Takeaways

This decision offers several practical lessons for those pursuing — or defending against — trade secret misappropriation claims.

• Be deliberate when dropping state law claims. Voluntarily narrowing a case to streamline it for the jury can shift evidentiary burdens between the parties and may require immediate, corresponding changes to jury instructions. It is necessary to be deliberate, evaluating downstream consequences before making the change, not after.

• Strike the balance and consider disaggregating damages by category or component. Presenting a single bottom-line damages figure per trade secret, rather than breaking damages down by specific document, component, or category of information, simplifies the issues for a jury but can also make it harder to defend a verdict on appeal if a reviewing court later determines that some of the underlying information may not have been protectable. It is critical to evaluate this trade off with counsel so that the best balance can be achieved.

• In the Ninth Circuit, damages and injunctive relief may coexist under the DTSA. Pursuing both retrospective damages (such as avoided costs) and a forward-looking injunction generally may be permissible so long as these remedies address different harms.

• Trade secret inventories help to distinguish protectable from public information. Maintain thorough documentation and be prepared to offer testimony that distinguishes protectable, non-ascertainable trade secret information from publicly available information, disclosed in patents or product literature, or independently discoverable through proper means.

[1] Judge Hamilton is a Circuit Judge from the Seventh Circuit, who was sitting by designation.