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WPI 351.01 Trade Secrets—Burden of Proof

6A WAPRAC WPI 351.01Washington Practice Series TMWashington Pattern Jury Instructions--Civil

6A Wash. Prac., Wash. Pattern Jury Instr. Civ. WPI 351.01 (7th ed.)
Washington Practice Series TM
Washington Pattern Jury Instructions--Civil
April 2022 Update
Washington State Supreme Court Committee on Jury Instructions
Part XVIII. Commercial Litigation
Chapter 351. Trade Secrets
WPI 351.01 Trade Secrets—Burden of Proof
On the claim of misappropriated trade secrets,(name of plaintiff)has the burden of proving each of the following propositions:
(1) That(name of plaintiff)had a trade secret;
(2) That(name of defendant)misappropriated(name of plaintiff)'s trade secret; and
[(3) That(name of defendant)'s misappropriation was a proximate cause of damages to(name of plaintiff)]
[(3) That, as a result of the misappropriation,(name of defendant)received money or benefits that in justice and fairness belong to(name of plaintiff)].
If you find from your consideration of all the evidence that each of these propositions has been proved, then your verdict should be for(name of plaintiff)[on this claim]. On the other hand, if you find that any of these propositions has not been proved, your verdict should be for(name of defendant)[on this claim].
Use this instruction in a trade secrets case not involving any affirmative defenses. For trade secrets cases having an affirmative defense, set forth the affirmative defense using WPI 21.05 (Burden of Proof on the Issues—Affirmative Defenses Other than Contributory Negligence/Assumption of Risk).
This instruction includes alternative versions of the third element. Choose from between these two alternatives depending on whether the plaintiff claims actual damages or unjust enrichment. For a discussion of the alternative version for unjust enrichment, see the Comment below. If a plaintiff claims both damages and unjust enrichment, then the instruction will need to be modified in accordance with the discussion in the Comment below.
For a discussion of punitive damages or other damages instructions, see the Comment below.
Use this instruction with WPI 351.02 (Trade Secret—Definition), WPI 351.03 (Misappropriation—Definition), and WPI 21.01 (Meaning of Burden of Proof—Preponderance of the Evidence).
When vicarious liability is an issue, this instruction may be used with the appropriate instruction from WPI Chapter 50 (Agency and Partnership). For further discussion, see the Comment.
If needed, a “summary of claims” instruction may be drafted using WPI Chapter 20 (Issues in the Case), as modified to fit a trade secrets case.
Background. Washington adopted the Uniform Trade Secrets Act in 1981, with some variations from the Uniform Act. Washington has not adopted the 1985 amendments to the Uniform Act. The Act is codified as RCW Chapter 19.108. For an extended discussion of the Uniform Act and its general principles, see Boeing Co. v. Sierracin Corp., 108 Wn.2d 38, 46–61, 738 P.2d 665 (1987).
“In the absence of legislative intent to the contrary, prior common law which is not contradicted by the Uniform Trade Secrets Act should continue to guide courts in the interpretation of the Act.” Ed Nowogroski Ins., Inc. v. Rucker, 137 Wn.2d 427, 444–45, 971 P.2d 936 (1999). Nevertheless, courts should also construe the Washington statute with the objective of national uniformity when possible. Thola v. Henschell, 140 Wn.App. 70, 78, 164 P.3d 524 (2007).
Existence of trade secret. A plaintiff seeking damages for the misappropriation of a trade secret has the burden of proving that a legally protectable trade secret exists. Ed Nowogroski Ins., 137 Wn.2d at 439; Boeing, 108 Wn.2d at 49.
Multiple forms of damages. Under the Act, plaintiffs may recover actual damages, restitution for unjust enrichment, and punitive damages, with limitations noted below. RCW 19.108.030. The 1985 amendments to the Uniform Act added explicit provision for recovery of royalties, but Washington has not adopted that change.
Under the Act, a jury's verdict may combine recoveries for actual damages and unjust enrichment in a single case, but only to the extent that the award for unjust enrichment does not duplicate the recovery of actual damages. See RCW 19.108.030(1) (“A complainant also may recover for the unjust enrichment caused by misappropriation that is not taken into account in computing damages for actual loss.”). If both forms of damages are being presented to the jury, the instruction will need to be modified to clearly express this limitation. For example: “The law does not permit a plaintiff to recover twice for the same damages. Thus, you may include as damages both plaintiff's lost profits and defendant's gain only if and to the extent that they do not overlap in this way.” Nelson & Fisher, Am. Bar Ass'n Section of Litigation, Model Jury Instructions: Business Torts Litigation § 8.6.2 (4th ed. 2005).
Unjust enrichment. Washington courts have described the doctrine of unjust enrichment as the:
[g]eneral principle that one person should not be permitted unjustly to enrich himself at expense of another, but should be required to make restitution of or for property or benefits received, retained or appropriated, where it is just and equitable that such restitution be made, and where such action involves no violation or frustration of law or opposition to public policy, either directly or indirectly. Unjust enrichment of a person occurs when he has and retains money or benefits which in justice and equity belong to another.
Bailie Commc'ns, Ltd. v. Trend Bus. Sys., Inc., 61 Wn.App. 151, 159, 810 P.2d 12, amended by 814 P.2d 699 (1991) (quoting Black's Law Dictionary (6th ed. 1990)) (citations omitted). WPI 351.01 follows this approach but uses the word “fairness” instead of “equity” for better juror comprehension.
Under this unjust enrichment alternative, the Court of Appeals has held that, once the plaintiff proves sales attributable to the use of a trade secret, the burden shifts to the defendant to establish “any portion of the sales not attributable to the trade secret and any expenses to be deducted in determining net profits.” Petters v. Williamson & Assocs., Inc., 151 Wn.App. 154, 165, 210 P.3d 1048 (2009) (quoting Restatement (Third) of Unfair Competition § 45 cmt. f (1995)). See also the Comment to WPI 301A.02 (Quasi Contract). The phrase “attributable to the use of a trade secret” is required in the damages jury instructions to ensure the plaintiff satisfies its burden of proof with sales related to the use of a trade secret, and not with gross sales data. Ada Motors, Inc. v. Butler, 7 Wn.App.2d 53, 63, 432 P.3d 445 (2018), review denied 193 Wn.2d 1013 (2019).
Punitive damages. The Act allows for the imposition of punitive damages. Under the Act, “[i]f willful and malicious misappropriation exists, the court may award exemplary damages in an amount not exceeding twice any award [for actual damages and unjust enrichment].” RCW 19.108.030(2).
Pursuant to this statute, the amount of any punitive damages is determined by the judge, not the jury, after a threshold finding has been made as to willful and malicious misappropriation. Thola, 140 Wn.App. at 89 (trial court determines exemplary damages and fees in its discretion); see Unif. Trade Secrets Act with 1985 Amendments, § 3 comment, 14 U.L.A. (2005) (clarifying that “the court” in this context means the judge); Nelson & Fisher, Am. Bar Ass'n Section of Litigation, Model Jury Instructions: Business Torts Litigation § 8.7 (4th ed. 2005).
The statute, however, is unclear as to whether the threshold finding of willful and malicious misappropriation in a jury case is to be made by the judge or the jury. Several Washington cases highlight this ambiguity, although in none of the cases was this issue directly addressed in the opinion. In three cases, the trial judges submitted the threshold factual finding to the jury and used that finding in deciding whether to impose punitive damages. Ada Motors, 7 Wn.App.2d at 58; Eagle Grp., Inc. v. Pullen, 114 Wn.App. 409, 422, 58 P.3d 292 (2002); Thola, 140 Wn.App. 70 (award of exemplary damages reversed on appeal for other reasons). In another case, the parties agreed that the trial judge should decide both the threshold factual issue and the ensuing issue of the amount of any punitive damages. Boeing, 108 Wn.2d at 61–62.
Because this issue remains unsettled, the instructions for a particular case will depend on who the judge determines should make the threshold finding. If the judge rules that “willful and malicious misappropriation” is to be determined by the jury rather than the judge, then the jurors should be given the following special interrogatory: “If you find that (name of defendant) misappropriated a trade secret, was this misappropriation willful and malicious?” If, however, the threshold issue is to be determined by the judge, then the jurors need not be instructed on punitive damages at all.
Separate damages instruction. A separate damages instruction will need to be drafted, using one of the instructions from WPI Chapter 30 (Personal and Property Damages) as a model, setting forth in greater detail the methods for calculating actual damages and unjust enrichment. The contents of this instruction will necessarily vary depending on the facts of each case.
Actual damages are generally calculated by measuring the plaintiff's lost profits, while unjust enrichment awards are generally calculated by measuring the defendant's ill-gotten profits. See Rosenhouse, Annotation, Proper Measure and Elements of Damages for Misappropriation of Trade Secret, 11 A.L.R.4th 12, § 2[a] (1982); Nelson & Fisher, Am. Bar Ass'n Section of Litigation, Model Jury Instructions: Business Torts Litigation § 8.6 (4th ed. 2005). Actual damages include both past and future lost profits, as well as related expenses. Eagle Grp., 114 Wn.App. at 420–21 (also setting forth a damages instruction addressing actual damages).
In an unjust enrichment trade case, the damages instruction should include this provision: “The plaintiff has the initial burden of proving sales attributable to the trade secret. Then the burden shifts to the defendant to establish any portion of the sales not attributable to the trade secret and any expenses to be deducted in determining net profits.” Ada Motors, 7 Wn.App.2d at 63.
Pre-emption issues. The Act does not displace other statutory or common law claims for misappropriation of intellectual property except to the extent that these remedies conflict with those provided by the Act. Boeing, 108 Wn.2d at 48. The issue in Boeing was whether the plaintiff's claims for breach of a confidential relationship, breach of contract, and the misappropriation of trade should have been consolidated into one claim under the Uniform Trade Secrets Act. The Supreme Court affirmed verdicts under all three claims. The Court did not consider whether the claims were based on the same underlying facts. See SEIU Healthcare Nw. Training P'ship v. Evergreen Freedom Found., 5 Wn.App.2d 496, 508, 427 P.3d 688 (2018), review denied 192 Wn.2d 1025 (2019).
Division II of the Court of Appeals took a “factual preemption” approach in Thola v. Henschell, 140 Wn.App. 70, 82, 85, 164 P.3d 524 (2007). In holding that the trial court erroneously failed to instruct the jury that evidence of misappropriation of trade secrets could not be used to support common law claims, and without citing Boeing, the appellate court stated the Act is the exclusive remedy for the misappropriation of trade secrets. According to the Thola court, claims seeking recovery based on tort, restitution, or other legal theories must be supported by evidence of conduct other than the misappropriation of trade secrets. Thola, 140 Wn.App. at 82, 85.
Division I of the Court of Appeals, relying on the Washington Supreme Court's Boeing decision, has declined to follow Thola. The court held that common law confidentiality claims are not preempted by trade secrets claims under the Act, regardless of whether they are based on the same facts. Modumetal, Inc. v. Xtalic Corp., 4 Wn.App.2d 810, 829–31, 425 P.3d 871 (2018) (“Until or unless the Washington Supreme Court overrules Boeing and adopts the Thola analysis, Boeing controls.”).
Citing Modumetal, and again disavowing Thola, Division I recently held the Act does not displace a statutory replevin claim. The court noted the replevin statute, RCW 7.64.010, expressly provides that its remedies “are in addition to any other remedy available to the plaintiff,” and that language was added nine years after enactment of the Uniform Trade Secrets Act. SEIU Healthcare, 5 Wn.App.2d at 503.
Vicarious liability. In some cases, vicarious liability may be an issue. See Thola, 140 Wn.App. at 78–79 (vicarious liability is a general civil liability principle that is consistent with Uniform Trade Secrets Act).
Cross-reference. An extended discussion of the Uniform Trade Secrets Act can be found in another volume of Washington Practice. See DeWolf & Allen, 16A Washington Practice, Tort Law and Practice § 23:9 (4th ed.). The pre-emption issue is discussed in DeWolf & Allen, 16A Washington Practice, Tort Law and Practice § 23:10 (5th ed.).
[Current as of February 2021.]
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