competition claim, an issue
upon which this Court has not yet ruled. Once a method for calculating
damages has been established, the final question is whether LinkCo has
offered sufficient proof from which a reasonable jury can determine the
amount of damages.
Damages in unfair competition cases are typically determined by
plaintiff's lost profits resulting from defendant's improper conduct. See
American Safety Table Co. v. Schreiber, 415 F.2d 373, 380 (2d Cir.
1969). The losses must be directly attributable to the unfair acts of
defendant. See American Electric, Inc. v. Neptune Meter Co.,
290 N.Y.S.2d 333, 335 (1st Dep't 1968) ("The basic rule of damage in a
case of unfair competition is the amount plaintiff would have made except
for defendant's wrong."). In addition, the evidence of such losses must
not be speculative. See American Safety, 415 F.2d at 381 (finding
recovery for lost profits not justified where proof of profits would be
In trade secret misappropriation cases, however, the courts have
diverged from a straight lost profits analysis in cases where plaintiff's
losses and defendant's actual gain cannot be easily computed. See Vermont
Microsystems, Inc. v. Autodesk, Inc., 88 F.3d 142, 151 (2d Cir. 1996)
(finding "reasonable royalty" method appropriate where there is
insufficient evidence of lost profits or unjust enrichment). A reasonable
royalty award attempts to measure, as of the time of the
misappropriation, a hypothetically agreed value of the property defendant
wrongfully obtained. Id. (citing Georgia-Pacific Corp. v. United States
Plywood-Champion Papers, Inc., 446 F.2d 295, 296-97 (2d Cir. 1971).
I have already held that a reasonable royalty would have been the best
method for calculating damages for Fujitsu's alleged misappropriation of
a trade secret because lost profits would be difficult to establish given
that: (1) LinkCo ceased operations not long after the alleged
misappropriation, and (2) Fujitsu made no significant profits from such
misappropriation. See 9/4/02 Tr. at 4. A similar method should be used
with respect to the lost profits element of damages in an unfair
competition claim because the same difficulties exist with respect to
calculating potential profits.
Moreover, it is well established that if there is a claim, there must
be a remedy. Cf. Commercial Union Assurance, 17 F.3d at 612 (affirming
dismissal of action because plaintiffs could not prove the "most
fundamental of legal elements necessary to support a viable cause of
action - any demonstrable damages") As noted earlier, New York courts
have recognized that unfair competition is broadly construed to include
misappropriation of a competitor's property, even if such property does
not qualify as a trade secret. While none of the cases cited in Part
III.C.2, supra, discussed damages, the absence of profits cannot nullify
the claim any more than it would in the context of misappropriation of a
trade secret. As discussed, the courts have fashioned a method for
calculating damages for misappropriation of trade secrets in the absence
of profits. The same method can be applied in the context of
misappropriation of information. See Flexitized, Inc. v. National
Flexitized Corp., 214 F. Supp. 664, 675 (S.D.N.Y. 1963) ("The law of
unfair competition, however, must be applied flexibly, and whether relief
should be granted in a given instance must be determined by an appraisal
of the particular circumstances of the case."), rev'd on other grounds,
335 F.2d 774 (2d Cir. 1964).
The following factors should be considered when assessing damages on an
unfair competition claim based on the misappropriation of information:
(1) the time spent
developing the information, (2) the money invested,
(3) the labor invested, and (4) a reasonable portion of the expected
profitability of the final product that incorporates the misappropriated
information, measured at the time of a hypothetical negotiation for the
sale or licensing of the property created by plaintiff's labor, skill and
expenditures. In determining the "reasonable portion of the expected
profitability," the jury must evaluate how much of the final product was
based on plaintiff's information. Because plaintiff's work does not rise
to the level of a trade secret, plaintiff is not entitled to the full
reasonable royalty that would be paid for the use of a trade secret.
Trade secret law places a premium on the value of secrecy, and creates
exclusive rights in the holder of the secret. Misappropriation of
information cannot be used as an end-run around the secrecy requirement.
The absence of evidence of any of these factors is not dispositive. For
example, the inability to find profits does not preclude a damage award.
A jury may choose to award damages solely for the amount of money or time
plaintiff invested in developing the information.
LinkCo has presented many documents and hours of testimony concerning
its damages. Although much of the evidence is circumstantial, the Court
may not weigh the credibility of witnesses or consider the weight of the
evidence. See Reeves, 530 U.S. at 150. Instead, the Court must review all
of the evidence in the light most favorable to plaintiff. See
Galdieri-Ambrosini, 136 F.3d at 289. Based on a careful and extensive
review of the evidence, and the measure of damages articulated above, I
conclude that LinkCo has produced sufficient evidence for a rational jury
to compute damages, if Fujitsu is found liable. Should the jury award
damages to LinkCo, Fujitsu will have an opportunity to challenge that
award if it believes that any portion of it is speculative or against the
weight of the credible evidence.
For the reasons set forth above, LinkCo's claims for tortious
interference with contract and misappropriation of trade secret are
dismissed. Fujitsu's motion to dismiss LinkCo's claim of unfair
competition is denied.