by Dennis Crouch
The Federal Circuit issued a significant trade secret remedies decision AMS-OSRAM USA Inc. v. Renesas Electronics America, Inc., Nos. 2022-2185, 2022-2186 (Fed. Cir. Apr. 4, 2025). The court made a number of holdings (applying Texas trade secrecy law), most notably:
- A trade secret becomes “properly accessible” when it could have been reverse-engineered rather than when it actually was reverse-engineered – limiting the appropriate “head-start period” for calculating damages; and
- But, disgorgement of profits is proper for all sales arising from a misappropriation-based “design win” that occurred during the head-start period, even if actual sales occurred later;
- A plaintiff may recover damages for both trade secret misappropriation and breach of contract when the damages are based on different sales or injuries.
This case began in 2008 when Texas Advanced Optoelectronic Solutions, Inc. (TAOS, now known as ams-OSRAM USA Inc.) sued Intersil Corporation (now Renesas) for trade secret misappropriation, breach of contract, and patent infringement related to ambient light sensor technology used in many devices, including smart phones.
Before that, the companies had engaged in confidential merger discussions, during which TAOS disclosed its photodiode array structure configured to filter-out infrared light without using expensive filters. When merger talks collapsed in August 2004, Intersil began using TAOS’s confidential information to redesign its competing products, including the ISL29003.
In the first appeal decided in 2018, the Federal Circuit affirmed Intersil’s liability for trade secret misappropriation, but narrowed the basis to just one of TAOS’s asserted trade secrets—the photodiode array structure. Texas Advanced Optoelectronic Solutions, Inc. v. Renesas Electronics America, Inc., 895 F.3d 1304 (Fed. Cir. 2018). The court required further proceedings to determine: (1) when the trade secret became “properly accessible” to Intersil, and (2) the appropriate “head-start period” during which Intersil’s profits should be disgorged. The court also held that the equitable doctrine of profit disgorgement should be decided by a judge rather than a jury. On remand, the district court decided these issues and they all returned to the Federal Circuit:
1. Proper Accessibility Date
The Federal Circuit reversed the district court’s determination that the trade secret became “properly accessible” to Intersil in January 2006 (when Intersil successfully reverse-engineered TAOS’s product). The court instead ruled that the proper date was February 28, 2005, when TAOS’s product containing the trade secret was released to the public. This date is important because trade secret protection and the corresponding ability to claim damages for misappropriation cease when the secret becomes publicly known or readily ascertainable through proper means.
The court explained that a trade secret becomes accessible when it “could have” been reverse-engineered, not when it actually was reverse-engineered. Applying Texas law, the court emphasized: “Information cannot be the subject of a trade secret if it is readily ascertainable without engaging in tortious behavior.” Carson Products Co. v. Califano, 594 F.2d 453 (5th Cir. 1979). The court found that Intersil “through proper and straightforward means, could have accessed TAOS’s trade secret by the end of February 2005” through reverse engineering, a “common, pervasive industry practice” that could have been done in “roughly a week.”
2. Head-Start Period
IP economists often talk about the first-mover advantage, which describes benefits a company can accrue by being the first to introduce a new product or technology to market. Typically, the first entrant has a period of higher market share and customer base, and often establishes itself as the innovative market leader. Courts have permitted damages when trade secret misappropriation reduces or eliminates the innovator’s head start period. Rather than achieving market leadership through legitimate innovation and competition, the misappropriator unlawfully uses a competitor’s secrets to gain an earlier entry or a more advantageous position in the market.
In this case, the Federal Circuit affirmed the district court’s finding that the appropriate head-start period was 26 months. This period represents the time it would have taken Intersil, after properly discovering the photodiode structure, “to recreate that structure in its own products.” The court emphasized that the head-start inquiry is a “practical inquiry focused on ensuring that one who prematurely used secret information gains no unfair advantage in the competitive marketplace—no ‘head start’ on the competition.'”
The court rejected Intersil’s argument for a shorter 7-month period, noting that the district court had relied upon sufficient “substantial” evidence that Intersil “lacked . . . relative experience in [ambient light sensor] design and development at the time of misappropriation” and “lagged far behind the competition.”
3. Disgorgement Award
The district court had awarded $8,546,000 in profit disgorgement from Intersil’s sales of ISL29003 units to Apple for the iPod Touch – remember those? Although these sales extended past the end of the head-start period, the court allowed the full damages because the crucial agreement was receiving vendor approval from Apple in 2006 – during the 26-month head start period. Importantly, the appellate panel agreed that all profits from sales that grew out of this “design win” were properly included in the disgorgement award, even if the actual sales occurred after the head-start period ended.
4. Exemplary Damages
The court upheld the exemplary damages (i.e., punitive damages) award of $17,092,000 (twice the disgorgement amount), rejecting Intersil’s argument that Texas law prohibits exemplary damages where the only other monetary award is disgorgement. The court held that Intersil waived this argument by not raising it in the 2018 appeal.
5. Contract Damages – not Double Recovery
The appellate panel also affirmed separate damages for breach of contract. Intersil had argued this constituted double recovery – since both the trade secret misappropriation claim and the breach of contract claim arose from the same underlying conduct – Intersil’s improper use of TAOS’s confidential information. Essentially, Intersil was focusing on the wrongful conduct (the improper use of confidential information) and arguing that it should not be twice punished for the same conduct.
Of course, the appellate panel rejected that argument because a claim does not simply arise from bad conduct, but also from the resulting harm. Here, the trade secrecy claims focused on a different non-overlapping set of products as those in the contract claim. “[TAOS]’s misappropriation damages for ISL29003 sales are separate wrongs from [TAOS]’s breach damages for other product sales.” The appellate panel affirmed that the two claims were “separate and distinct injuries.”
The court also affirmed attorney fees for the contract claim – based upon the agreement’s indemnity clause that expressly included “reasonable attorneys’ fees.”