Investigation Expenses

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