Injunction not Necessary when Damages Calculated under “Head-Start” Rule

Injunctive relief is normally awarded when the court finds there is no adequate remedy at law. In enforcement actions involving noncompetes, injunctions are usually sought since damages are often difficult, if not impossible, to caculate.

Damages for misappropriation of trade secrets, on the other hand, are often based on lost profits and in many cases can be sufficiently quantified to be awarded. A recent case illustrates that the Court of Chancery may look to novel damage theories to forego the necessity of an injunction.

Agilent Technologies brought suit against three former employees alleging the group had misappropriated its trade secrets. The parties competed in the business of producing high performance liquid chromatography columns used to separate and analyze complex mixtures of gasses, liquids and dissolved substances.

After finding the defendants had wrongfully used Agilent’s trade secrets, the Court of Chancery bypassed certain requested injunctive relief and found damages were sufficient to remedy the harm. The Court calculated these damages using the “head start rule.” The rule allows a monetary recovery for trade secret misappropriation for the period in which information is entitled to protection as a trade secret, plus the additional period, if any, in which a misappropriator retains an advantage over competitors because of the misappropriation.

In this case, the Court found that the defendants were given a three year head start by using Agilent’s trade secrets and awarded damages for unjust enrichment. The Court did not stop there, however, awarding additional damages to cover the customers and profits that the defendants will continue to accrue for the unlawful use of Agilent’s trade secrets. The total damages awarded were $ 4,530,017.75, including unjust enrichment and amounts attributable to Agilent’s lost profits.

By awarding past and prospective damages, the Court found it was unnecessary to issue an injunction prohibiting defendants from marketing their products, noting that such relief would essentially drive the defendants’ company out of business. In the Court’s view, the monetary award, including damages for unjust enrichment under the head start rule, more than adequately compensated Agilent.

Agilent Techs. v. Kirkland, 2010 Del. Ch. LEXIS 34 (Feb. 18, 2010)

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