Investigation Expenses

Abstract

Misappropriating trade secrets is usually done in secret. After all, those taking another’s trade secret in violation of state and federal law rarely openly tout their misdeeds. As a result, trade secret owners do not always immediately realize that their trade secret has been misappropriated and must spend significant resources investigating whether misappropriation has occurred and, if so, by whom and to what extent.An important question frequently arising over the last several years but overlooked in the scholarly literature is whether a trade secret owner’s investigation expenses are recoverable as “actual loss” under state and federal trade secret laws. This article provides the first comprehensive analysis of the cases addressing this issue and shows that courts have diverged. Some courts permit trade secret owners to recover investigation expenses, while others have denied or significantly limited recovery of investigation expenses.This article argues that the best interpretation of the statutes permits recovery of investigation expenses. However, to guard against the risks of awarding these expenses, courts should emphasize and enforce the causation requirement and limit recovery to reasonable investigation expenses. This approach is consistent with the principles underlying the myriad theoretical foundations of trade secrecy and furthers important policy considerations benefitting trade secret owners and misappropriators