Comet Technologies USA v. XP Power — Ninth Circuit Reverses $40M Trade Secret Verdict Over Flipped Burden of Proof

Background

Comet Technologies USA and its Swiss and German affiliates make radio-frequency (RF) power generators and impedance-matching components used in semiconductor chip fabrication. XP Power is a direct competitor. In February 2018, three senior Comet engineers defected to XP, taking with them thousands of confidential documents covering Comet’s product designs, R&D strategy, and underlying technologies. Within nine days of arrival, they delivered complete product designs and a development plan to XP — a feat one expert called “remarkable” and that a recorded recruiter call confirmed was the result of a deliberate offer to provide “turnkey” designs while still employed at Comet.

Comet sued under the federal Defend Trade Secrets Act (DTSA) and California’s Uniform Trade Secrets Act. After Comet voluntarily dismissed the state claims to streamline the case, a jury heard evidence on five specific trade secrets spanning RF generator control software, next-generation matching-network designs, and Comet’s proprietary manufacturing and pricing data. The jury found for Comet, awarding $20 million in compensatory damages and $20 million in punitive damages for willful and malicious misappropriation, plus a permanent injunction and more than $17 million in attorney fees.

XP Power appealed, arguing that the district court gave the jury an erroneous instruction that placed on XP the burden of proving that Comet’s alleged trade secrets were “readily ascertainable through proper means” — an element the DTSA assigns to the plaintiff to prove as part of the definition of a trade secret.

The Court’s Holding

A divided Ninth Circuit panel reversed the judgment and ordered a new trial. Judge Hamilton’s majority opinion held that the district court committed reversible error by instructing the jury that XP bore the burden of disproving ready ascertainability. Under the DTSA, a trade secret must “derive independent economic value… from not being generally known to, and not being readily ascertainable through proper means by” others. That is an element the plaintiff — here Comet — must establish, not an affirmative defense the defendant must refute.

The error was not invited by XP: the company made a timely and correct objection on burden of proof at trial. And the error was not harmless. Because evidence on readily-ascertainability was conflicting and damages calculations were intertwined with that contested element, the panel could not be confident the jury would have reached the same verdict under a correct instruction. The case was therefore remanded for a new trial on Comet’s DTSA claims.

Judge Hamilton also wrote separately to address the double-recovery issue XP raised — joining the Third and Seventh Circuits in holding that awarding both unjust-enrichment damages and injunctive relief under the DTSA does not create an impermissible double recovery. That holding clears the way for courts in the Ninth Circuit to grant both forms of relief on remand or retrial if the facts support it.

Judge Bumatay dissented. He agreed the jury instruction was erroneous but would have found the error harmless, because the jury’s independent finding that XP could not have replicated the trade secrets without the theft (evidenced by the $20 million compensatory award and the willful-malice finding supporting $20 million in punitives) made it highly probable the jury would have reached the same outcome under a corrected instruction.

Key Takeaways

• Plaintiffs bear the burden on ready ascertainability. Under the DTSA, the trade-secret owner must prove that its information was not readily ascertainable by proper means. A jury instruction shifting that burden to the defendant is reversible error — even where the defendant is clearly guilty of wholesale theft.
• Timely objection preserved the error. Because XP properly objected to the burden instruction at trial, it did not forfeit the issue. This underscores the importance of precise, contemporaneous objections to jury instructions in trade-secret trials.
• Unjust-enrichment damages + injunction = no double recovery (in the Ninth Circuit). Judge Hamilton’s concurrence resolves a circuit question: plaintiffs may obtain both avoided-cost compensatory damages and a permanent injunction under the DTSA without those remedies being treated as duplicative.
• A $57M award wiped out. The reversal vacated the entire judgment, including the $40 million damages award, the permanent injunction barring XP from using the stolen secrets, and the $17 million attorney-fee award. XP will get a new trial.

Why It Matters

The semiconductor supply chain depends on closely guarded RF and power technology, and cases like this one set the template for how companies protect their technical edge when engineers leave for competitors. The Ninth Circuit’s decision has two layers of significance. First, on the merits, it reinforces that in DTSA cases the plaintiff carries the full evidentiary burden on every element of the trade-secret definition — including ready ascertainability — and that even overwhelming proof of theft cannot cure an instructional error that flips that burden onto the defendant. Second, the double-recovery ruling aligns the Ninth Circuit with sister circuits and gives trade-secret owners a clearer path to seeking both money damages and injunctions simultaneously.

For businesses facing departing employees who might take confidential information, the case is a reminder that even a winning trade-secret lawsuit can be undone on appeal by a single erroneous jury instruction. Careful attention to jury instructions — and aggressive, specific objections at trial — is essential in high-stakes DTSA litigation.