Trade Secret Litigation Finance: DTSA Claims and Damages

How funders evaluate misappropriation claims, the reasonable measures requirement, and damages theories.

Trade secret litigation finance supports claims for the misappropriation of confidential business information, a category that has grown substantially since the federal Defend Trade Secrets Act created a federal cause of action in 2016. Trade secret cases arise when an employee, competitor, or business partner wrongfully acquires, uses, or discloses confidential information, and they can involve substantial damages where the misappropriated information has significant commercial value. The combination of high stakes and litigation cost makes these cases candidates for funding.

The threshold requirement is that the information qualifies as a protectable trade secret, which demands that the owner took reasonable measures to keep it secret and that the information derives independent economic value from not being generally known. The reasonable measures requirement is frequently contested: a defendant will argue that the plaintiff failed to adequately protect the information, defeating trade secret status. Funders evaluate the strength of the plaintiff's secrecy measures, because a weak showing on this element can undermine an otherwise compelling case.

Proving misappropriation and causation presents further challenges. The plaintiff must show that the defendant acquired the trade secret by improper means or used or disclosed it without authorization, often relying on circumstantial evidence of access and subsequent use. The inevitable disclosure doctrine, accepted in some jurisdictions, allows an inference of misappropriation where a former employee's new role would inevitably draw on the trade secret, but its availability varies. Funders assess the strength of the misappropriation evidence and the applicable legal standards.

Damages in trade secret cases can be measured several ways, including the plaintiff's actual loss, the defendant's unjust enrichment, or a reasonable royalty, and the available measures and their proof requirements shape the recovery. Each theory presents distinct evidentiary challenges, and the choice affects the realistic range of damages. Funders scrutinize the damages methodology and the supporting expert analysis, since trade secret damages can be difficult to quantify and vulnerable to challenge.

Criterica Capital funds trade secret litigation, evaluating misappropriation claims, secrecy measures, and damages theories against outcome data drawn from 106M+ court records. This grounds our assessment of these fact-intensive matters in observed outcomes. Firms and companies pursuing trade secret claims can contact our institutional team to discuss funding.

Discuss your matter with our institutional team.