Category: Trade Secrets
When a defendant avoids the cost of developing its own technology by stealing proprietary information, can that defendant be required to re-pay the cost it saved as compensatory damages? Not under New York trade secret or unfair competition law. In E.J. Brooks Co. v. Cambridge Security Seals, a divided New York Court of Appeals announced – over a lively dissent – that compensatory damages for misappropriation of trade secrets and unfair competition are limited to the plaintiff’s own losses, and may not include the development costs avoided by defendants. The Court further held that an accompanying claim for unjust enrichment does not provide a basis to expand the recovery beyond the plaintiff’s own losses.
New York recognizes conversion claims based on intangible property, such as electronically stored information or trade secrets. But does a conversion claim exist when the theft of the intangible property does not deprive the rightful owner of unfettered access to the property (i.e., when the owner retains an original or accurate duplicate of the information)? This was the question presented to the Commercial Division recently in MLB Advanced Media, L.P. v. Big League Analysis, LLC. In that case, Justice Shirley Werner Kornreich held that a conversion claim is not available unless the plaintiff’s use of or access to the property is disturbed.