AirFacts, Inc. v. Amezaga
Filing
126
MEMORANDUM OPINION. Signed by Judge Deborah K. Chasanow on 12/12/2022. (sat, Chambers)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
AIRFACTS, INC.
:
v.
:
Civil Action No. DKC 15-1489
:
DIEGO DE AMEZAGA
MEMORANDUM OPINION
This action is again before the court to adjudicate the claims
of Plaintiff AirFacts, Inc., against Defendant Diego de Amezaga
for breach of contract and trade secret misappropriation.
This
court previously entered judgment for Plaintiff on its breach of
contract claim and awarded nominal damages, but denied Plaintiff’s
request for royalty damages on the trade secret misappropriation
claim.
(ECF Nos. 113, 114).
On appeal, the United States Court
of Appeals for the Fourth Circuit affirmed in part, reversed in
part, and vacated in part.
to
decide:
(1)
whether
The case was remanded to this court
Defendant
“material[ly]”
breached
his
employment contract and “if so, what (if anything) [Plaintiff] is
owed” in damages for that breach, and (2) “what (if anything)
[Plaintiff] deserves in reasonable royalty damages” on its trade
secret misappropriation claim. AirFacts, Inc. v. Amezaga, 30 F.4th
359, 367, 369 (4th Cir. 2022).
Currently pending is Plaintiff’s Motion for Other Relief (ECF
No. 122).
The issues have been briefed, and the court now rules,
no additional hearing being necessary.
Local Rule 105.6.
On
Plaintiff’s breach of contract claim, the court will enter judgment
for Plaintiff and award nominal damages because Defendant did
breach the contract, but not in a material way.
On Plaintiff’s
trade secret misappropriation claim, the court will enter judgment
for Defendant because Plaintiff has not met its burden to prove
damages in the form of a fair licensing price for the Defendant’s
use of the misappropriated trade secrets.
The following findings
of fact and conclusions of law are issued pursuant to Fed.R.Civ.P.
52(a). 1
I.
Background
This section contains only a brief summary of the facts and
procedural history relevant to this opinion.
A more extensive
recitation of the background can be found in prior opinions.
(ECF
Nos. 78, 113); AirFacts, Inc. v. de Amezaga, No. 15-cv-1489-DKC,
Under Rule 52(a), “[i]n an action tried on the facts without
a jury . . . , the court must find the facts specially and state
its conclusions of law separately. The findings and conclusions
. . . may appear in an opinion or a memorandum of decision filed
by the court.” To comply with this rule, the court “‘need only
make brief, definite, pertinent findings and conclusions upon the
contested matters,’ as there is no need for ‘over-elaboration of
detail or particularization of facts.’” Wooten v. Lightburn, 579
F.Supp.2d 769, 772 (W.D.Va. 2008) (quoting Fed.R.Civ.P. 52(a)
advisory committee’s note to 1946 amendment). Rule 52(a) “does
not require the court to make findings on all facts presented or
to make detailed evidentiary findings; if the findings are
sufficient to support the ultimate conclusion of the court[,] they
are sufficient.” Darter v. Greenville Cmty. Hotel Corp., 301 F.2d
70, 75 (4th Cir. 1962) (quoting Carr v. Yokohama Specie Bank, Ltd.,
200 F.2d 251, 255 (9th Cir. 1952)).
1
2
2017 WL 3592440 (D.Md. Aug. 21, 2017); AirFacts, Inc. v. de
Amezaga, 502 F.Supp.3d 1027 (D.Md. 2020).
A.
Factual Background
AirFacts develops and licenses revenue accounting software
for airlines.
(ECF No. 61, at 30:8-13).
Its primary product is
TicketGuard, a software that audits travel agencies’ plane ticket
sales by comparing the price at which a travel agency sells an
airline’s tickets to the airline’s required price, as determined
by commissions, taxes, and industry rules.
(ECF No. 61, at 29:12-
15, 30:8-13, 31:3-23. 32:1-11).
Defendant Diego de Amezaga began working at AirFacts in June
2008.
(ECF No. 61, at 87:3-4).
Around that time, the parties
executed an “Employment Agreement,” which required Mr. de Amezaga
to indemnify AirFacts for “material” breaches of the agreement.
(PTX 35). 2
While at AirFacts, Mr. de Amezaga worked to develop
and pitch a new “proration” software.
115:5-6).
(ECF No. 61, at 72:5-11,
The software would help airlines ensure they receive
the appropriate share of a multi-airline ticket sale.
61, at 46:16-23).
(ECF No.
In a prior opinion, the court found that:
Plaintiff has also attempted to develop a
proration software product to assist airlines
in receiving revenue that accurately reflects
industry standards and negotiated rates, which
“PTX” refers to exhibits offered by Plaintiff at trial, and
“DTX” refers to exhibits offered by Defendant. References to trial
testimony are designated by the ECF docket entry of the official
transcript and page number where available.
2
3
are recorded in special prorate agreements
(“SPAs”), when two or more airlines share
ticket revenues in a single transaction.
Plaintiff
first
began
working
“intermittently” and “sporadically” on a
proration product in 2012 (ECF No. 61, at
70:25-71:9, 71:18-23), and entered into a
contract with Alaska Airlines to develop a
proration product on June 1, 2015 (PTX 172).
Although
[AirFacts’
CEO
April
Pearson]
testified that Plaintiff had “a complete and
finished product” that Plaintiff’s airline
client was evaluating at the time of the
January 2017 trial, Plaintiff did not yet have
a proration product in use. (See ECF No. 66,
at 128:5-15).
(ECF No. 78, at 2-3).
More specifically, the court found:
The proration product is [at the time of
the 2017 trial] under development for Alaska
Airlines pursuant to a contract Plaintiff
entered into on June 1, 2015. (PTX 172).
Alaska Airlines first approached Plaintiff
about developing a proration product in 2012,
and Plaintiff had worked on it “sporadically”
and “intermittently” since that time. (ECF No.
61, at 71:1-5, 20-23). Ms. Pearson testified
that
Plaintiff’s
proration
product
development “really started in earnest in
2014,” and that Defendant spent approximately
half of his time working on the product
between October 2014 and his resignation in
February 2015. (Id. at 71:20-72:11). Defendant
testified
that,
at
the
time
of
his
resignation, Plaintiff was in the midst of
working out a contract with Alaska Airlines
for a proration product, and that he alone had
been working on material pieces of the
potential product. Although Plaintiff did not
enter into a contract for the development of
the proration product until after Defendant’s
resignation, the court concludes that the
proration product was anticipated at that
4
time,
and
that
Defendant
had
material
knowledge of the anticipated product.
(ECF No. 78, at 16-17).
Mr. de Amezaga resigned from AirFacts in February 2015.
No. 61, at 110:13-14).
(ECF
On his last day, he sent documents related
to the new proration software to his personal email account because
his superiors told him they may reach out with questions about his
work.
(ECF No. 71, at 12:18-25, 13:1); (ECF No. 94, at 34:11-25).
In an earlier opinion, this court found:
Defendant testified that he sent these
[proration] documents to his personal email
account because had been asked to be available
to answer questions after he left and he
wanted to be able to answer any questions that
arose. Defendant believed that Plaintiff was
close to signing a contract with Alaska
Airlines, and testified that he felt a
responsibility to the client.
Although Ms.
Pearson testified that she had not instructed
Defendant to take copies of the documents, she
had told Defendant that she and other
employees would contact him if they had
questions about his work. (ECF No. 71, at
24:19-25:3). As noted, this project had made
up approximately half of Defendant’s workload
in the four months before his resignation.
(ECF No. 61, at 71:24-72:11). Mr. Laser also
asked Defendant if he would be available to
answer questions after having left AirFacts
because, based on his industry experience,
“when somebody leaves . . . there is a grace
period of being able to ask questions once
they leave if there is anything that is
outstanding
or
products
that
are
incomplete[.]” (ECF No. 72, at 85:12-20). Mr.
Laser did contact Defendant with questions
after his departure (id. at 85:21-24), as did
Ms. Ying (ECF No. 64, at 137:13-21).
5
The court finds Defendant’s testimony to
be
credible.
The
forensic
analysis
of
Defendant’s
personal
email
account
and
computer show that he did not access the
documents after the end of his employment.
(See DTX 7). Use or disclosure of a trade
secret
is
not
required
to
prove
misappropriation, but this evidence lends
credibility to Defendant’s testimony that he
took copies of the documents only in case he
needed
them
to
answer
questions
from
Plaintiff’s employees, which he ultimately did
not.
(ECF No. 78 at 32-34).
About one month after he left, he applied for a job with
Fareportal, a travel agency. (PTX 8). Fareportal is not AirFacts’
competitor or customer, but TicketGuard is used to audit tickets
sold by Fareportal. (ECF No. 72, at 18:2-9).
As part of that
application, Mr. de Amezaga emailed to Fareportal two flowcharts
which he had created for AirFacts.
flowcharts
from
an
online
(PTX 6-7).
document-storage
AirFacts employee credentials.
He downloaded the
service
using
(ECF No. 71, at 45:10-16).
his
Mr. de
Amezaga says he only sent Fareportal the flowcharts to help them
understand the work he did for AirFacts.
18).
(ECF No. 94, at 23:11-
Fareportal did not hire Mr. de Amezaga.
26:25, 27:1).
(ECF No. 94, at
On May 11, 2015, he began working at American
Airlines as a senior manager in the Refunds department.
94, at 44:11-13).
6
(ECF No.
B.
Procedural Background
On May 22, 2015, AirFacts sued Mr. de Amezaga, raising claims
for breach of contract, misappropriation of trade secrets under
the Maryland Uniform Trade Secrets Act (“MUTSA”), and conversion.
(ECF No. 1).
About one month later, Mr. de Amezaga gave the
forensic investigator for AirFacts access to all his personal
devices.
By the end of June 2015—about one month after this suit
was filed—AirFacts had collected, identified, and deleted all
company documents that Mr. de Amezaga had retained after leaving
the job.
(ECF No. 64, at 71:9-17, 101:19-24).
The company also
found that Mr. de Amezaga had not accessed those documents since
leaving AirFacts, except to send the flowcharts to Fareportal for
his job application. (DTX 7); (PTX 10); (ECF No. 64, at 84:1-2).
After a bench trial, this court entered judgment in favor of
Mr. de Amezaga on all counts.
(ECF No. 79).
AirFacts appealed,
and in AirFacts I, the United States Court of Appeals for the
Fourth Circuit affirmed in part and vacated in part.
Inc. v. de Amezaga, 909 F.3d 84 (4th Cir. 2018).
AirFacts,
It remanded for
this court to consider whether Mr. de Amezaga had breached several
clauses
in
the
Employment
Agreement
related
to
confidential
information and to decide whether Mr. de Amezaga had violated MUTSA
by sending the flowcharts to Fareportal, which the Fourth Circuit
held were trade secrets.
Id. at 93, 97.
7
On remand, this court held that Mr. de Amezaga did breach his
employment contract by sending the flowcharts to Fareportal and by
retaining certain sales and commission documents after leaving
AirFacts, but that these breaches were “de minimis.”
(ECF No.
113, at 33). And because the employment contract limited AirFacts’
right to recover damages, fees, and costs to those caused by
“material” breaches, the court awarded only nominal damages.
No. 113, at 34).
(ECF
The court also found that Mr. de Amezaga did not
breach the contract by emailing the proration documents to his
personal account.
(ECF No. 113, at 16).
As for the MUTSA claim,
this court found that Mr. de Amezaga misappropriated trade secrets—
the flowcharts—because he improperly acquired and disclosed the
documents without consent.
(ECF No. 113, at 22).
But the court
denied AirFacts’ requested royalty damages, relying in part on
case law which stated that royalty damages are appropriate only
when a defendant puts a trade secret to “commercial use.”
(ECF
No. 113, at 24-28) (quoting University Computing Co. v. LykesYoungstown Corp., 504 F.2d 518, 536-39 (5th Cir. 1974)).
AirFacts again appealed, and in AirFacts II, the Fourth
Circuit affirmed in part, reversed in part, and vacated in part.
AirFacts, Inc. v. Amezaga, 30 F.4th 359 (4th Cir. 2022).
affirmed
this
court’s
holding
that
Mr.
de
Amezaga
did
It
not
materially breach the contract by emailing the flowcharts to
Fareportal
and
retaining
the
sales
8
and
commission
documents,
reasoning that there is “no evidence” these actions “harmed or
prejudiced AirFacts.”
Id. at 364.
But it reversed this court’s
holding that Mr. de Amezaga did not breach the contract by emailing
the proration documents to himself; it held that this act was a
breach of contract, and it remanded to this court to determine
“whether this breach was material and, if so, what (if anything)
AirFacts is owed under the agreement’s indemnification clause.”
Id. at 367.
It also vacated this court’s ruling in favor of Mr.
de Amezaga on the MUTSA claim because it held that MUTSA does not
require a plaintiff to prove that a defendant put trade secrets to
commercial use.
Id.
The Fourth Circuit thus remanded for this
court to “decide what (if anything) AirFacts deserves in reasonable
royalty damages” on its MUTSA claim.
Id.
Motion
122),
for
Other
Relief,
(ECF
No.
AirFacts then filed a
and
Mr.
de
Amezaga
responded, (ECF No. 125).
II.
Findings of Fact and Conclusions of Law
In its Motion for Other Relief, AirFacts requests: (1) $85,752
in breach of contract damages based on Mr. de Amezaga’s retention
of the proration documents after he left AirFacts, and (2) $50,000
in reasonable royalty damages under the Maryland Uniform Trade
Secrets Act.
(ECF No. 122, at 27).
A.
Breach of Contract Damages
Mr.
de
Amezaga’s
employment
Both requests will be denied.
agreement
requires
him
indemnify AirFacts only for a “material” contract breach.
9
to
(PTX
35).
A breach is “material” if it “affects the purpose of the
contract in an important or vital way.”
119 Md.App. 276, 283 (1998).
Sachs v. Regal Sav. Bank,
A breach is not material if it
“causes no damages or prejudice” to the non-breaching party.
AirFacts, Inc. v. Amezaga (AirFacts II), 30 F.4th 359, 364 (4th
Cir. 2022) (quoting 23 Williston on Contracts, § 63:3 (4th ed.
2021)).
At earlier stages in this litigation, AirFacts claimed that
Mr. de Amezaga materially breached the employment agreement in
several ways, including by sending flowcharts to Fareportal, by
keeping
certain
commission
and
sales
documents
after
his
employment ended, and by emailing proration documents to his
personal email address on his last day at AirFacts.
Most of those
claims have now failed. Earlier this year, the Fourth Circuit
affirmed this court’s holding that Mr. de Amezaga breached the
contract by disclosing the flowcharts and keeping the commission
and sales documents but that these breaches were not material
“because there’s no evidence [these actions] harmed or prejudiced
AirFacts.”
Id.
Thus, the only contract claim that now remains is the one
related
to
Mr.
de
Amezaga’s
decision
documents to his personal account.
to
email
the
proration
The Fourth Circuit held that
Mr. de Amezaga breached the contract “by retaining the proration
documents after he left AirFacts.”
10
Id. at 367.
The Fourth
Circuit’s holding, however, went “no further.”
Id.
Instead, it
remanded so that this court could “determine . . . whether this
breach was material and, if so, what (if anything) AirFacts is
owed.”
Id.
Having reviewed the record in light of the Fourth Circuit’s
holding, the court finds that Mr. de Amezaga did not materially
breach the contract by emailing the proration documents to himself
and retaining them because AirFacts has not proven that this act
caused it any “harm[] or prejudice[].”
Id. at 364.
AirFacts
raises two theories to explain why the retention of the proration
documents was a material breach.
First, it argues that the
documents included confidential information about Alaska Airlines—
a
customer
who
had
proration software.
signed
a
contract
(PTX 172).
to
purchase
AirFacts’
According to AirFacts, when the
Airline learned that Mr. de Amezaga had emailed this information
to his personal account, it “required AirFacts, as a condition to
sale, to redevelop and modify the Proration software to overcome
the data breach” and “did not move forward with the purchase, even
though the product is ready to go.”
(ECF No. 122, at 10).
Thus,
AirFacts argues, Mr. de Amezaga should compensate AirFacts for its
“redevelopment” expenses.
(ECF No. 122, at 10).
Second, AirFacts
argues that the breach was material because it forced AirFacts to
hire lawyers and fund a “forensic investigation” to recover the
documents Mr. de Amezaga improperly retained.
11
(ECF No. 122, at
12).
Under either theory, AirFacts fails to meet its burden to
prove a material breach.
First, the record does not support AirFacts’ assertion that
Alaska Airlines “required AirFacts, as a condition to sale, to
redevelop and modify the Proration software to overcome [Mr. de
Amezaga’s] data breach.”
(ECF No. 122, at 10).
Indeed, AirFacts
presented no evidence at trial that the Airline ordered—or even
asked—AirFacts
to
redevelop
its
proration
software.
When
AirFacts’ CEO, April Pearson, was asked at trial to explain how
Mr. de Amezaga’s data breach impacted AirFacts’ relationship with
the
Airline,
she
explained
that
the
breach
created
“an
uncomfortable situation” and that the Airline asked AirFacts “to
sign an additional NDA to reassure them and cover the things that
were taken.”
(ECF No. 71, at 11:14-25, 12:1).
But she never said
that the Airline ordered AirFacts to redevelop its proration
software as “a condition” to finalizing the sale, as AirFacts now
claims. 3
And however “uncomfortable” the Airline may have been with
the data breach, the record suggests that the breach did little to
hinder the companies’ sales relationship.
Indeed, AirFacts and
(See also ECF No. 66, at 29:18-25, 30:1-9) (when asked to
clarify “any other way” in which the Airline reacted to the data
breach besides asking AirFacts to sign an NDA, Ms. Pearson said
only that the breach “made it awkward” to interact with the Airline
and once again said nothing about the Airline mandating or
requesting redevelopment).
3
12
Alaska Airlines consummated a sales contract in June 2015—one month
after AirFacts sued—and held a “Proration System Kickoff Meeting”
in August 2015—two months after AirFacts had recovered and deleted
the documents Mr. de Amezaga emailed to himself.
(PTX 172); (DTX
AirFacts presented no evidence that the Airline required it
9). 4
do anything to cure Mr. de Amezaga’s data breach besides signing
an “additional NDA.”
(ECF No. 71, at 11:24-25).
While Ms. Pearson did testify that AirFacts chose to redevelop
its proration software after Mr. de Amezaga left, the record shows
that this was an independent business decision that was neither
mandated by a customer nor caused by Mr. de Amezaga’s temporary
retention of the proration documents.
Indeed, AirFacts began
redevelopment in late 2015, (see ECF No. 66, at 27:16-20) (Ms.
Pearson explained that the redevelopment occurred over “three to
fourth months,” starting in December 2015 and ending in February
2016)—nearly six months after AirFacts recovered and deleted the
documents Mr. de Amezaga emailed to himself, and after a forensic
investigation confirmed that he had not accessed those documents
since sending that email.
(DTX 7).
At that point, AirFacts had
Soon after AirFacts sued, Mr. de Amezaga gave the forensic
investigator for AirFacts access to all his personal devices. That
investigator testified at trial that by June 2015, AirFacts had
“collected,” “identified,” and “deleted” all proration documents
that Mr. de Amezaga improperly retained. (ECF No. 64, at 71:917, 101:19-24). The investigator likewise found that since leaving
AirFacts, Mr. de Amezaga had not once accessed those documents.
(DTX 7; PTX 10); (ECF No. 64, at 84:1-2).
4
13
no reason to believe that Mr. de Amezaga had any confidential
client information in documentary form, let alone that he had given
that information to his new employer.
Yet AirFacts chose to redevelop its proration software anyway
in part because Ms. Pearson wanted to ensure that the software was
“truly unique” and that it did not share the “same structure” as
anything Mr. de Amezaga might create in his new job.
at
28:2-8).
Based
on
that
testimony,
it
(ECF No. 66,
seems
that
the
redevelopment was spurred more by Mr. de Amezaga’s decision to
take a job at a company in the airline industry—an act that “did
not breach” his employment contract, see AirFacts, Inc. v. de
Amezaga (AirFacts I), 909 F.3d 84, 94 (4th Cir. 2018)—than by his
temporary retention of a few since-deleted documents.
Thus,
whatever harm the redevelopment process caused AirFacts, that harm
cannot reasonably be attributed to the action that constituted the
breach of contract—that is, Mr. de Amezaga’s decision to email the
documents to his personal account and retain them briefly.
What is more, it is unlikely that Alaska Airlines would seek
redevelopment
as
a
solution
to
the
data
breach
because
redevelopment would do nothing to protect the breached data.
Mr.
de Amezaga’s retention of the proration documents concerned the
Airline
because
those
documents
contained
“active,
bilateral
contracts,” the details of which the Airline preferred not to be
disseminated.
(ECF No. 66, at 28:18-25, 29:1-7).
14
But AirFacts’
redevelopment
“framework,”
contained.
involved
not
“redo[ing]”
changing
the
the
proration
information
(ECF No. 66, at 30:21-25).
software’s
that
framework
Even after redevelopment,
AirFacts’ proration software contained the same “active, bilateral
contracts” that the Airline sought to protect, and redeveloping
the software did nothing to change the fact that Mr. de Amezaga
had
(briefly)
information.
retained
documents
containing
the
contract
Redevelopment would thus do little to quell the
Airline’s security concerns.
That fact bolsters the conclusion
that redevelopment was likely spurred not by a customer’s mandate
to remedy a data breach, but rather by an independent choice to
change the software’s “structure” so that it remained “unique”
after an important employee lawfully took his skills elsewhere.
(ECF No. 66, at 28:2-8). 5
Nor does the record support AirFacts’ assertion that the data
breach caused Alaska Airlines to choose “not [to] move forward
with the purchase” of the proration software.
10).
In
fact,
Plaintiff’s
argument
interpretation of the timeline.
is
(ECF No. 122, at
based
on
a
confused
The Airline contracted to buy
Ms. Pearson also conceded on cross examination that “the
development schedule” for the Alaska Airlines proration project
“started in August 2015”—nearly three months after Mr. de Amezaga
left AirFacts. (ECF No. 66, at 129:6-14). Thus, the work AirFacts
did on the proration software after Mr. de Amezaga went to American
Airlines could more accurately be called “development” rather than
“redevelopment.”
5
15
that software in June 2015—four months after Mr. de Amezaga had
emailed the documents to himself, one month after he started
working at American Airlines, and just a few weeks before AirFacts
had assured itself that Mr. de Amezaga had done nothing with the
documents he briefly retained.
Nothing in the record suggests
that the Airline reneged on this agreement, much less that it did
so because of Mr. de Amezaga.
Indeed, to support its assertion,
AirFacts relies mainly on Ms. Pearson’s testimony that AirFacts’
proration software was-at the time of trial in 2017-“ready to go
and waiting on implementation by Alaska Airlines.”
at 77:22-23).
that
the
(ECF No. 61,
But in her very next answer, Ms. Pearson clarified
implementation
was
delayed
because
the
Airline
was
involved in a “merger,” and thus was “preoccupied with other things
at the moment”—Mr. de Amezaga had nothing to do with it.
61, at 78:1-2).
(ECF No.
The record does not support AirFacts’ sweeping
claims about the damage that Mr. de Amezaga purportedly caused to
the company’s sales relationship with Alaska Airlines.
It has not
shown that the breach of retaining proration documents was material
based on any redevelopment costs.
Second,
AirFacts
argues
that
Mr.
de
Amezaga
materially
breached the contract because the company hired lawyers and funded
a forensic investigation to track down the documents he improperly
retained.
(ECF No. 122, at 12).
But AirFacts already raised the
same argument on appeal, and the Fourth Circuit rejected it.
16
This
argument, the Fourth Circuit reasoned, “is circular.”
II, 30 F.4th at 365.
AirFacts
“It can’t be that to recover fees and costs,
the breach must be material, and that the breach is material
because AirFacts incurred fees and costs.”
Id.
Indeed, if “legal
fees and forensic costs incurred in . . . litigation” were enough
to make a breach material, then a party could “transform any
immaterial breach into a material one simply by resorting to
litigation,”
requirement.
be
effectively
nullifying
the
material
breach
See id. (holding that the employment contract cannot
interpreted
in
a
way
that
“render[s]
the
material-breach
requirement superfluous”); cf. Owens-Illinois, Inc. v. Cook, 386
Md. 468, 497 (2005) (explaining that Maryland courts construe
contracts to “giv[e] effect to every clause and phrase, so as not
to omit an important part of the agreement”). 6
B.
MUTSA Royalty Damages
Under the Maryland Uniform Trade Secrets Act (“MUTSA”), a
plaintiff may obtain damages as a “statutory remed[y]” for the
defendant’s “misappropriation of a trade secret.”
Acceptors, Inc., 381 Md. 288, 301, 304 (2004).
LeJeune v. Coin
Here, AirFacts has
proven that Mr. de Amezaga misappropriated a trade secret—the
AirFacts also requests a hearing to develop more evidence
regarding its “attorney’s fees and forensic expenses.” (ECF No.
122, at 16). Because no amount of added evidence related to these
costs can “transform [Mr. de Amezaga’s] immaterial breach into a
material one,” see AirFacts II, F.4th at 365, that request will be
denied.
6
17
flowcharts “are trade secrets,” and “by disclosing the flowcharts
to
Fareportal,
secrets.”
omitted).
[Mr.
de
AirFacts
II,
Amezaga]
30
F.4th
misappropriated
at
368
those
(internal
trade
citations
But to obtain MUTSA damages, a plaintiff must also
provide evidence of “damages caused by misappropriation.”
Code Com. Law § 11-1203(a)-(c).
Md.
MUTSA permits a plaintiff to
obtain damages in one of three ways: (1) by proving an “actual
loss,” (2) by proving “unjust enrichment,” or (3) by establishing
“a reasonable royalty for [the defendant’s] unauthorized . . .
use.”
Id.
Here,
AirFacts
seeks
only
“reasonable
royalty”
damages.
“Case law addressing royalty damages for misappropriating trade
secrets is sparse.”
AirFacts II, 30 F.4th at 367.
The “leading
case,” see id., is University Computing Co. v. Lykes-Youngstown
Corp., 504 F.2d 518 (5th Cir. 1974).
There, the United States
Court of Appeals for the Fifth Circuit held that a reasonable
royalty damage should reflect “a fair price for licensing the
defendant to put the trade secret to the use the defendant intended
at the time the misappropriation took place.”
Id. at 539.
To
determine that fair price, a court must conceive a “hypothetical
royalty negotiation” between the plaintiff and the defendant and
then “estimate the [license] fee” to which the parties would have
agreed after negotiating.
StorageCraft Tech. Corp. v. Kirby, 744
F.3d 1183, 1187-88 (10th Cir. 2014).
18
And because “in any licensing
negotiation . . . many considerations can come into play when
setting a price,” a number of factors are relevant when calculating
royalty damages.
In
Id. at 1189.
particular,
consider:
(1)
“the
University
resulting
Computing
and
instructs
foreseeable
courts
changes
in
to
the
parties’ competitive posture,” (2) “th[e] prices past purchasers
or licensees may have paid,” (3) “the total value of the secret to
the plaintiff, including the plaintiff’s development costs and the
importance of the secret to the plaintiff’s business,” (4) “the
nature and extent of the use the defendant intended for the
secret,” and (5) “other unique factors in the particular case which
might have affected the parties’ agreement.”
504 F.2d at 539.
This analysis “requires a flexible and imaginative approach,” id.
at 538—indeed, “some of these factors aren’t relevant to every
case,” so a court must “identify[] the ones that are most pertinent
in the particular circumstances at hand.”
StorageCraft, 744 F.3d
at 1189.
Because AirFacts bears the “burden of proving damages,” see
University Computing, 504 F.2d at 545, it can only obtain damages
if it provided at trial “proof . . . sufficient to establish a
reasonable royalty,” see Check ’n Go of Va., Inc. v. Laserre, No.
Civ.A.6:04 CV 00050, 2005 WL 1926609, at *2 (W.D.Va. Aug. 9, 2005)—
that is, if it established a fair licensing price for the act of
sending the flowcharts to Fareportal.
19
In its opinion remanding
this case, the Fourth Circuit instructed this court to consider
the
University
Computing
factors
to
“determine
what
licensing price for the flowcharts would have been.”
30 F.4th at 369 (cleaned up).
a
fair
AirFacts II,
Following that approach, this court
finds that AirFacts has not proven that there is any fair licensing
price for Mr. de Amezaga’s disclosure of the flowcharts.
An
analysis of each University Computing factor follows.
1.
Changes in Competitive Posture
The first University Computing factor is “the resulting and
foreseeable changes in the parties’ competitive posture.”
F.2d
at
539.
This
factor
favors
royalty
damages
504
when
a
misappropriated trade secret gives the plaintiff’s “competitor
. . .
a
commercial
advantage”
“competitive disadvantage.”
or
puts
See id. at 542.
the
plaintiff
at
a
By contrast, royalty
damages may be inappropriate where the defendant discloses a secret
to a party that “didn’t [or] couldn’t make use of [it] and who
therefore couldn’t do serious damage” to the plaintiff’s market
position.
See Storagecraft, 744 F.3d at 1189.
Here, this factor weighs against royalty damages because
AirFacts has not shown that disclosure of the flowcharts changed
AirFacts’ competitive posture.
It has been more than seven years
since Mr. de Amezaga sent flowcharts to Fareportal as part of a
job application.
And yet, AirFacts has not shown that Fareportal
used the flowcharts at all in those seven years.
20
It did not prove,
for example, that Fareportal created its own ticket auditing
software to compete with TicketGuard.
Rather, AirFacts remains a
unique company filling a unique role within the airline industry,
and Fareportal remains a different company serving a different
role.
(ECF No. 61, at 28: 13-14) (AirFacts audits third party
ticket sales); (ECF No. 71, at 37:6-8) (FarePortal is a travel
agency). The two companies did not compete before Mr. de Amezaga’s
disclosure, and they do not compete now.
(ECF No. 122, at 22)
(“Fareportal [i]s not an existing competitor . . . of AirFacts.”).
Nothing has changed.
Indeed, this case differs from other cases in which federal
courts
awarded
royalty
competitive posture.
damages
based
in
part
on
changes
in
For instance, the United States Court of
Appeals for the Sixth Circuit found that royalty damages were
appropriate where the plaintiff’s competitor used trade secrets
“to create a panoply of new products, save significantly on time
and
resources
devoted
manufacturing processes.”
to
research,
and
streamline
[its]
Avery Dennison Corp. v. Four Pillars
Enter. Co., 45 Fed.App’x. 479, 486 (6th Cir. 2002).
Another
district court in this circuit awarded royalty damages where the
plaintiff’s competitor used proprietary information to enter the
market at an “unusually swift speed,” thus decreasing the “volume
and profitability” of the plaintiff’s products.
Sonoco Products
Co. v. Guven, No. 4:12–cv–00790–BHH, 2015 WL 127990, at *9 (D.S.C.
21
Jan. 8, 2015). 7
In those cases, the plaintiff’s competitive
posture changed because a competitor actually did something with
the plaintiff’s trade secrets, like recreating the plaintiff's
product, creating a competing product, or bringing a competing
product to the market faster.
But here, AirFacts has not shown
that Fareportal did anything with the flowcharts. 8
As the Fourth Circuit noted earlier this year, “there’s no
evidence” that Mr. de Amezaga’s disclosure of the flowcharts
“harmed or prejudiced AirFacts.”
AirFacts II, 30 F.4th at 364.
The Fourth Circuit relied on that finding in evaluating a breach
of contract issue, but it applies with similar force to the first
University Computing factor.
If disclosure of the flowcharts had
negatively impacted AirFacts’ competitive posture, then it would
no doubt have “harmed or prejudiced AirFacts.”
Id.
But this court
already found—and the Fourth Circuit affirmed—that no such harm
occurred.
Seemingly acknowledging that disclosure of the flowcharts has
not yet “result[ed]” in any changes to its competitive posture,
See also Mid-Michigan Comput. Sys., Inc. v. Marc Glassman,
Inc., 416 F.3d 505, 510–12 (6th Cir. 2005) (holding that royalty
damages were appropriate because plaintiff’s competitor used trade
secrets to “reconstruct [plaintiff’s] protected source code” and
thus “save research and manufacturing resources”).
7
(See ECF no. 72, at 20:11-16) (when asked whether AirFacts
had any evidence that “Fareportal or anyone else used [the
flowcharts],” Ms. Pearson answered, “I don’t know what Fareportal
did with them. I don’t have any evidence, no.”).
8
22
see University Computing, 504 F.2d at 539, AirFacts instead posits
several ways in which Fareportal could use the flow charts to
“undermine AirFacts’ market position” in the future.
122, at 22).
(ECF No.
First, AirFacts argues that Fareportal could “become
a competitor,” presumably by using the flowcharts to create a
product that competes with TicketGuard.
(ECF No. 122, at 22).
That argument is unpersuasive for a few reasons.
To start, the
Court of Appeals of Maryland has held that courts applying MUTSA
generally should not “infer” that a party “will use or disclose
[a] trade secret[]” simply because it has been “expos[ed]” to that
secret.
LeJeune v. Coin Acceptors, Inc., 381 Md. 288, 316, 322,
(2004). 9
And even if such an inference is proper when a secret is
disclosed to a competitor, it is far less so when a secret is
disclosed to a non-competitor.
(reasoning
that
royalties
See Storagecraft, 744 F.3d at 1189
are
appropriate
where
secrets
are
In LeJeune, a MUTSA plaintiff sought an injunction rather
than royalty damages. 381 Md. at 299. But the Court of Appeals’
reasoning applies with similar force to MUTSA damages claims. The
court explained that MUTSA “provides the statutory remedies for a
business alleging misappropriation of a trade secret” and that
such remedies include both “damages and injunctive relief.” Id.
at 301, 304. The court then held that a MUTSA remedy should not
rest on the “inference” that a party will use trade secrets merely
because it has been “expos[ed]” to them. Id. at 322. That improper
inference, the court reasoned, violates Maryland’s “policy in
favor of employee mobility.” Id. AirFacts’ damages theory—that
it should receive a greater royalty because Fareportal has been
“expos[ed]” to the flow charts and will thus competitively use
them—rests on the same improper inference and implicates similar
policy concerns.
9
23
disclosed to “an able competitor,” thus encouraging “commercial
exploitation by [a] rival,” but may be inappropriate where secrets
were instead disclosed to a party that “didn’t . . . make use of
the[m]”).
What is more, even if Fareportal wanted to create a product
that competes with TicketGuard, AirFacts has not shown that the
flowcharts would offer much help in that endeavor.
Indeed, the
flowcharts
TicketGuard
software.
themselves
are
not
even
part
of
the
Rather, as AirFacts’ director of technical development
testified, they merely show a “very small piece” of the ticket
auditing process.
(ECF No. 64, at 142: 23-35).
And the flowcharts
themselves were meant in part to help AirFacts conduct its “Fare
by Rule audits . . . in an automated way,” (see ECF No. 72, at
72:15-25, 73:1-8)—something that AirFacts still cannot do.
(ECF
No. 122, at 21) (acknowledging that AirFacts’ Fare by Rule process
has still “not been automated”).
If AirFacts itself has been
unable to use the flow charts to accomplish the very thing for
which they were created, Fareportal likely could not use them for
much more.
competitive
All told, this factor is concerned with “foreseeable”
changes—not
with
any
imaginable
University Computing, 504 F.2d at 539.
future
outcome.
And AirFacts has provided
no evidence that the flowcharts by themselves could foreseeably
spur Fareportal to create software it has never made so that it
can enter a market in which it has never competed.
24
Second, AirFacts argues that Fareportal was a “potential
customer”
of
AirFacts—that
is,
Fareportal
might
have
bought
AirFacts’ auditing services itself, but now it can presumably use
the flowcharts instead and thus “save the cost of using AirFacts’
services.”
(ECF No. 122, at 22-23).
support in the record.
That argument finds no
To start, the flowcharts themselves do not
replace AirFacts’ services—they are “basic logic diagrams” that
show how an auditor would handle incorrectly entered passenger
information.
(ECF No. 94, at 23:19-25, 24:1-8).
What is more,
the assertion that Fareportal could be a “potential customer,”
(ECF No. 122, at 23), seems to get AirFacts’ business model
backwards.
As
Ms.
Pearson
testified,
AirFacts
is
“hired
by
airlines” to ensure that travel agencies sell plane tickets “for
the right price.”
Thus,
airlines
(ECF No. 61, at 28: 13-14) (emphasis added).
hire
the
company
to
audit
travel
agencies.
Fareportal is a travel agency, not an airline, so it would not be
an AirFacts customer.
Third, AirFacts argues that Fareportal is “regularly subject
to [AirFacts’] audits,” so it could use the flowcharts to evade
those audits and reduce the audits’ value to AirFacts’ customers.
(ECF No. 122, at 23).
But AirFacts has not proven that the
flowcharts would help Fareportal do anything like that.
AirFacts’
audits are meant to identify situations in which travel agencies
charge the wrong prices for an airlines’ tickets.
25
(ECF No. 61, at
28: 13-14, and 29:12-15).
So to evade an audit, a travel agency
would need to “have access to the airline’s actual fares” and
“modify those . . . in some way.”
flowcharts
do
not
do
that;
(ECF No. 94, at 25:16-20).
they
merely
show
the
process
The
an
AirFacts’ auditor would follow when auditing a ticket involving
incorrectly entered passenger information.
25, 24:1-8).
(ECF No. 94, at 23:19-
AirFacts has not explained how Fareportal could use
that knowledge to undermine or evade an audit in any way.
2.
Past Licenses
The second University Computing factor is “th[e] prices past
purchasers or licensees may have paid.”
504 F.2d at 539.
In
weighing this factor, a “district court must consider licenses
that are commensurate with what the defendant has appropriated.”
Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1316 (Fed.
Cir. 2011) (internal quotations omitted).
Otherwise, a plaintiff
could “inflate” the royalty by “conveniently select[ing]” highvalue licenses “without an economic or other link to the technology
in question.”
ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 872
(Fed. Cir. 2010).
A plaintiff thus cannot meet its burden to prove
a reasonable royalty by providing evidence only of past licenses
that were “directed to a vastly different situation than the
hypothetical licensing scenario of the present case.”
26
Lucent
Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir.
2009). 10
AirFacts fails to meet its burden under this factor because
it has not presented licenses that are “commensurate with” the
trade secret that was misappropriated—that is, the flowcharts Mr.
de Amezaga sent to Fareportal.
Uniloc, 632 F.3d at 1316.
Indeed,
AirFacts has never licensed the flowcharts or any product like the
flowcharts, so there is no way to know “the prices past purchasers
or licensees may have paid” for them.
University Computing, 504
F.2d at 539.
Instead, AirFacts asserts that it charges about $3.2 million
for a three-year license on its flagship ticket auditing software,
TicketGuard.
value,
(ECF No. 122, at 18).
AirFacts’
expert,
Michelle
Working backwards from that
Riley,
conducted
nested
In calculating royalty damages for patent infringement
cases, the Federal Circuit applies a multi-factor “hypothetical
negotiation” approach, in which the court “attempts to ascertain
the royalty upon which the parties would have agreed had they
successfully negotiated an agreement just before infringement
began.”
Lucent, 580 F.3d at 1324.
The approach is based on
Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F.Supp. 1116,
(S.D.N.Y. 1970), rather than University Computing, but many of the
Georgia-Pacific
factors
are
effectively
identical
to
the
University Computing factors. For instance, the second GeorgiaPacific factor, “[t]he rates paid” for other licenses, see 318
F.Supp. at 1120, is effectively the same as the second University
Computing factor—the “prices past purchasers or licensees may have
paid.” Thus, this court treats the Federal Circuit’s analysis of
the second Georgia-Pacific factor as persuasive here. See also
StorageCraft, 744 F.3d at 1189 (explaining that University
Computing and Georgia-Pacific identified “overlapping” factors).
10
27
calculations to try to estimate the value of the flowcharts by
themselves.
She noted that the flowcharts show some of the logic
involved in the Fare by Rule auditing process, that 27.1% of the
tickets audited by TicketGaurd go through a Fare by Rule audit,
and that the Fare by Rule process is part of TicketGuard’s “back
end” “automated auditing function,” which AirFacts argues is worth
50% of TicketGuard’s value.
(ECF No. 122, at 18).
Thus, Ms. Riley
estimated that a three-year license for the flowcharts would be
worth about $440,067, a figure which represents 27.1% of 50% of
TicketGuard’s $3.2 million license price.
As
this
court
noted
in
a
prior
undermines” Ms. Riley’s calculation. 11
(ECF No. 122, at 18).
opinion,
“the
evidence
But even if the calculation
See AirFacts, Inc. v. de Amezaga, 502 F.Supp.3d 1027, 1044
(D.Md. 2020) (noting that Ms. Riley erroneously assumed that Mr.
de Amezaga used the flowcharts solely to “undermine AirFacts’
market position” and finding that, contrary to Ms. Riley’s
assumptions, “the flowcharts were of little value to AirFacts”
because they were meant “to help AirFacts automate its processing
of Fare by Rule tickets . . . [and] AirFacts [i]s still unable to
automate the Fare by Rule ticket processing”) (internal citations
omitted). Ms. Riley’s calculation is also flawed in other ways.
For instance, she assumes that TicketGuard’s automated auditing
function is independently worth 50% of the software’s value. But
there is no support for that assumption in the record—AirFacts
presented no evidence at trial to show the independent value of
different parts of its software. What is more, AirFacts has never
provided its customers with automated Fare by Rule auditing
services, (see ECF No. 122, at 22), so it makes little sense to
assert that flowcharts showing Fare by Rule auditing logic could
be worth any percentage of TicketGuard’s “automated auditing
functions,” let alone the 27.1% value that Ms. Riley claims. She
also failed to consider any factor that would not favor a high
royalty calculation. (ECF No. 113, at 29-31). Given these ample
shortcomings, the court will not rely on Ms. Riley’s opinions here.
11
28
were not so flawed, TicketGuard’s license value is not relevant
here because this factor is concerned with licenses for products
“commensurate with” the trade secret, see Uniloc, 632 F.3d at 1316,
and TicketGuard is not “commensurate with” the flowcharts.
The
flowcharts are simply not part of TicketGuard—as AirFacts itself
admits,
“[w]hen
an
AirFacts
customer
signs
a
license
to
use
[TicketGuard],” it “do[es] not [gain] access to . . . the Flow
Charts.”
(See ECF No. 122, at 23).
Indeed,
flowcharts
it
would
comprise
a
not
even
be
accurate
subset-of-a-subset
to
of
say
the
that
the
TicketGuard
product, as AirFacts’ nested calculations seem to suggest. Rather,
the flowcharts merely show the steps an auditor should take when
auditing a ticket missing a certain kind of data.
23:19-25, 24:1-8).
(ECF No. 94, at
AirFacts originally created the flowcharts in
order to use them to develop an automated Fare by Rule auditing
process, which it then hoped to incorporate into its services.
(ECF No. 72, at 72:15-25).
But AirFacts never succeeded in that
endeavor—it still has not automated its Fare by Rule auditing
function.
(ECF No. 122, at 21).
Far from representing a component
of TicketGuard, the flowcharts are the first step in a development
process for a service that AirFacts hopes later to provide.
Thus,
even if AirFacts could reliably splice up the value of TicketGuard
as it seeks to do, the flowcharts themselves comprise no part of
the $3.2 million value on which AirFacts relies.
29
In
its
opinion
remanding
this
case,
the
Fourth
Circuit
instructed this court to “determine which [University Computing]
factors are relevant here.”
AirFacts, 30 F.4th at 369.
Heeding
that instruction, this court finds that the past licenses factor
is not relevant because AirFacts has provided no evidence of a
past license comparable to Mr. de Amezaga’s use of the flowcharts.
3.
Plaintiff’s Valuation of the Trade Secret
The third University Computing factor is “the total value of
the secret to the plaintiff, including the plaintiff’s development
costs
and
the
business.”
importance
of
504 F.2d at 539.
the
secret
to
the
plaintiff’s
AirFacts argues that TicketGuard is
“absolutely critical” to its business, that its Fare by Rule
services are a “major component” of TicketGuard, and that the
disclosed flow charts reflect some of the Fare by Rule process.
(ECF No. 122, at 20).
AirFacts also claims that TicketGuard cost
millions of dollars to develop, although it does not provide a
specific
development
themselves.
value
for
the
disclosed
flowcharts
(ECF No. 122, at 20).
But regardless of the precise value AirFacts places on the
flowcharts,
irrelevant
University
here.
Computing
While
renders
University
AirFacts’
Computing
noted
valuation
that
a
plaintiff’s valuation of a trade secret may sometimes be considered
in assessing damages, it also clarified that “normally the value
of the secret to the plaintiff is an appropriate measure of damages
30
only when the defendant has in some way destroyed the value of the
secret.”
504 F.2d at 535.
publishes
misappropriated
For instance, when a defendant
information
such
that
“no
secret
remains,” it makes sense for damages to be based in part on the
plaintiff’s valuation of the secret it has now lost.
“where
the
secret
has
not
been
destroyed,”
the
Id.
But
plaintiff’s
valuation is “an inappropriate measure” for damages because the
plaintiff “retains . . . use of the secret” despite the defendant’s
misappropriation.
Id. at 535-36.
Applying that reasoning, the
University Computing court found it would be “inappropriate” to
consider a plaintiff’s valuation in deciding trade secret damages
where the defendant had disclosed the secret only to a party who
kept the secret “in confidence” and thus did not “destroy[] the
value of the secret to the plaintiff.”
Here,
AirFacts’
valuation
inappropriate
measure”
disclosure
Fareportal
to
for
of
damages
did
not
Id. at 535 n.27. 12
the
flowcharts
because
“destroy
Mr.
the
de
is
“an
Amezaga’s
value”
of
the
See also Softel, Inc. v. Dragon Med. and Scientific
Commc’ns, Inc., 118 F.3d 955, 969 (2d Cir. 1997) (rejecting a
damage calculation based in part on plaintiff’s valuation of its
trade secret because the defendant “did not publish” plaintiff’s
secret, and under University Computing, “such a measure usually
[i]s appropriate only where the defendant ha[s] destroyed the value
of the secret”); cf. Software Pricing Partners, LLC v. Geisman,
3:19-cv-00195-RJC-DCK, 2022 WL 3971292, at *10 (W.D.N.C. Aug. 31,
2022) (reducing royalty damages in part because the defendant “did
not destroy any . . . trade secrets[,] which remain a significantly
valuable asset [to the plaintiff]”).
12
31
flowcharts
or
of
TicketGuard
“retains use of” both items.
more
broadly—rather,
Id. at 535-36.
AirFacts
AirFacts concedes
that TicketGuard remains an “absolutely critical” part of its
business.
(ECF No. 122, at 20-21).
And Ms. Pearson testified
that even after Mr. de Amezaga sent the flowcharts to Fareportal,
AirFacts continued to use them to make its team “more efficient”
and to “save[] time.”
(ECF No. 71, at 41:19-21).
So even if the
flowcharts really are as valuable as AirFacts seems to claim, that
valuation matters little in deciding damages because AirFacts has
not been deprived of the value the flowcharts provide. 13
At an earlier stage of this case, the Fourth Circuit found
that the flowcharts are “trade secrets” under MUTSA because they
have “independent economic value.” AirFacts I, 909 F.3d at 97.
But the fact that a trade secret has independent value does not
mean that its owner is always entitled to royalty damages. Under
MUTSA, a trade secret must have “independent economic value,” and
that value can be based on “potential” uses of the trade secret by
parties who improperly acquire it.
Md. Code Com. Law § 111201(e)(1). Royalty damages, on the other hand, must be based on
the actual “use of [the] trade secret,” not a potential use. Md.
Code Com. Law § 11-1203(c).
Thus, a MUTSA plaintiff can prove
that certain information is a trade secret by showing that a
competitor could “potential[ly]” use it in some harmful way. Motor
City Bagel, L.L.C. v. American Bagel Co., 50 F.Supp.2d 460, 479
(D.Md. 1999). But to be entitled to royalty damages, a “potential”
use is not enough—the plaintiff must prove that the defendant’s
misappropriation actually “result[ed]” in an unauthorized use that
affected the plaintiff. See id. Here, the Fourth Circuit found
that the flowcharts have independent economic value in part because
if the flowcharts became “ascertainable to outsiders,” then those
outsiders could use the flowcharts such that AirFacts could no
longer leverage them “to its advantage in the marketplace.”
AirFacts I, 909 F.3d at 96, 97 n.8. That potential use gave the
flowcharts independent economic value and made them a trade secret,
but because no competitors actually used the flowcharts that way,
13
32
4.
Defendant’s Intended Use
The fourth University Computing factor is “the nature and
extent of the use the defendant intended for the secret.”
F.2d at 539.
504
Federal courts have found that this factor favors
royalty damages where a defendant misappropriated a trade secret
with the “inten[t] to sell” the secret, see University Computing,
504 F.2d at 541, the intent to get “revenge” on the plaintiff, or
the intent to help a competitor “compete with” the plaintiff, see
StorageCraft, 744 F.3d at 1190.
When a defendant discloses a
secret for any of these reasons, royalties are appropriate because
the defendant sought to “put the trade secret to . . . use in ways
harmful to the secret’s owner.”
Id.
at 1186.
By contrast, this
factor may weigh against royalty damages where a defendant intended
to disclose the secret only to “someone who . . . couldn’t make
use of the secret and who therefore couldn’t do serious damage to
the trade secret or its rightful holder.”
Id. at 1189.
Here, this factor weighs against royalty damages because Mr.
de Amezaga did not intend to use the flowcharts in any way that
was “harmful to” AirFacts.
Id.
Rather, he sought to use the
flowcharts only to demonstrate a sample of his work product to a
prospective employer.
(ECF No. 94, at 23:11-18).
He did not
believe he was disclosing trade secrets, nor did he believe that
the Fourth Circuit’s independent economic value finding does not
impact the reasonable royalty calculation.
33
Fareportal could or would use the flowcharts to harm AirFacts.
(ECF No. 94, at 25:13-20).
He likewise did not intend to “sell”
the flowcharts, see University Computing, 504 F.2d at 541, to get
“revenge”
on
AirFacts,
or
to
help
Fareportal
“compete
with”
AirFacts, see StorageCraft, 744 F.3d at 1190.
Conceding
that
Mr.
de
Amezaga
did
not
believe
he
was
disclosing trade secrets, AirFacts argues that “the motive of the
defendant” is irrelevant—rather, all that matters is whether the
defendant disclosed a secret to a party that had “the potential to
do damage” to the plaintiff.
(ECF No. 122, at 24).
argues,
might
because
Fareportal
use
the
Thus, AirFacts
flowcharts
AirFacts, royalty damages are appropriate here.
to
harm
As has already
been discussed, the record does not support AirFacts’ claim that
Fareportal could use the flowcharts to harm AirFacts.
But beyond
that, AirFacts is also mistaken to assert that “the motive of the
defendant” is irrelevant.
To the contrary, University Computing
itself held that the defendant’s motive matters—it explained that
the fourth royalty factor is concerned with “the use the defendant
intended.”
504 F.2d at 539 (emphasis added).
Applying that rule,
the University Computing court approved royalty damages based in
part on the jury’s finding that the defendant “intended to sell
the system it had misappropriated.”
Id. at 541 (emphasis added).
Resisting that reasoning, AirFacts argues that this case is
more like StorageCraft Tech. Corp. v. Kirby, a case in which the
34
United States Court of Appeals for the Tenth Circuit upheld a
jury’s royalty damage award.
24).
744 F.3d at 1183; (ECF No. 122, at
But StorageCraft actually undercuts AirFacts’ argument.
In
that case, the defendant sought “revenge” against the plaintiff,
and “in a fit of retaliatory pique,” he “intentionally disclosed”
the plaintiff’s trade secret to “an able competitor,” “aware that
[the competitor] could well use the secret to compete with [the
plaintiff].”
Id. at 1186, 1189.
The Tenth Circuit found that a
jury could reasonably award royalty damages based on “[t]hat set
of facts—that particular kind of use.”
Id. at 1190.
than
a
rejecting
StorageCraft
consideration
expressly
approved
of
royalty
Thus, rather
defendant’s
damages
motives,
based
on
the
defendant’s “retaliatory” intent and his “aware[ness]” that his
disclosure would likely harm the plaintiff.
90.
And the “particular kind of use” at issue in StorageCraft is
nothing like Mr. de Amezaga’s actions here.
from
Id. at 1186, 1189-
achieving
“revenge”
by
disclosing
Id. at 1190.
secrets
to
an
Far
“able
competitor” with the “aware[ness]” that the disclosure could cause
harm, see id. at 1189, Mr. de Amezaga innocuously shared documents
with a non-competitor, believing that the disclosure would not
harm AirFacts.
5.
Other Unique Factors
Finally, University Computing instructs courts to consider
“other unique factors in the particular case which might have
35
affected the parties’ agreement.”
504 F.2d at 539.
Mr. de Amezaga
does not ask the court to consider any unique factors beyond the
four discussed above.
AirFacts asks this court to consider one
added factor: Mr. de Amezaga’s “inten[t] to remain in the airline
ticket industry” after leaving his job at AirFacts.
at 26).
(ECF No. 122
AirFacts argues that if Mr. de Amezaga had “disclosed he
was leaving Airfacts to work in the same industry,” the company
“would have required a [more] substantial royalty.”
(ECF No. 122,
at 26-27).
The court will not consider Mr. de Amezaga’s intent to remain
in the airline industry in calculating royalty damages.
To start,
royalty damages are meant to reflect a “fair price for licensing
the defendant to [use] the trade secret” in the way that he did,
see
University
Computing,
504
F.2d
at
539,
not
to
punish
a
defendant for other conduct unrelated to his misappropriation.
Mr. de Amezaga’s mere decision to remain in the airline industry—
detached from any intent to use the flowcharts in his new job—
neither made the disclosure more valuable to Fareportal nor made
it more harmful to AirFacts.
Thus, a “fair licensing price” for
the flowcharts ought not reflect that decision.
Id.
Rather,
imposing such damages would only punish Mr. de Amezaga for taking
a job with one of AirFacts’ customers—an act that was neither
illegal nor a violation of his employment contract.
36
See AirFacts
I, 909 F.3d at 94 (“Mr. de Amezaga did not breach [his employment
contract] by working at American [Airlines].”)
What is more, the Court of Appeals of Maryland has instructed
that courts ought not impose MUTSA remedies that effectively punish
“a departing employee” for “working for the employer of his or her
choice.”
LeJeune,
381
Md.
at
317,
321
(internal
quotations
omitted).
Such remedies, the court reasoned, “distort the terms
of the employment relationship” by allowing an employer-plaintiff
to use a MUTSA claim to restrict a departing employee’s future job
prospects
in
ways
beyond
those
allowed
previously negotiated noncompete agreement.
under
the
parties’
Id. at 321 (quoting
EarthWeb, Inc. v. Schlack, 71 F.Supp.2d 299, 311 (S.D.N.Y. 1999)).
Simply put, a MUTSA remedy “should not act as an ex post facto
covenant not to compete.”
Id. at 322 (quoting Int’l Bus. Mach.
Corp. v. Seagate Tech., Inc., 941 F.Supp. 98, 101 (D.Minn. 1992)).
Thus, MUTSA remedies based on a defendant’s mere decision to
“work[] for a competitor” are disfavored because they undercut
Maryland’s “policy in favor of employee mobility” and unfairly
impose
on
the
employee-defendant
a
court-created
noncompete
penalty that he or she had “no opportunity to negotiate.”
Id. at
316, 321-22 (internal quotations omitted).
AirFacts appears to be requesting precisely the kind of anticompetitive
remedy
that
the
Maryland
high
court
discourages.
Indeed, heightened MUTSA damages based solely on Mr. de Amezaga’s
37
decision
“to
remain
in
the
airline
ticket
industry”
would
effectively punish him for “working for the employer of his . . .
choice” and function as a court-created noncompete penalty that he
had “no opportunity to negotiate.”
quotations omitted).
Id. at 317, 321-22 (internal
The court thus declines AirFacts’ request to
consider this factor in assessing royalty damages.
Evaluation of the University Computing factors compels the
conclusion that AirFacts has not proven there is any fair licensing
price for Mr. de Amezaga’s disclosure of the flowcharts.
Thus,
judgment will be granted for Mr. de Amezaga on AirFacts’ MUTSA
claim. 14
In other contexts, courts grant judgment for—and award
nominal damages to—a plaintiff who proves the merits of a claim
but fails to prove actual damages. But MUTSA’s unique text and
structure require a court to grant judgment for the defendant where
the plaintiff fails to prove statutory damages, even if it
successfully proves misappropriation of a trade secret. Like the
trade secret laws in most other states, MUTSA is a near-verbatim
adoption of the Uniform Trade Secrets Act, a model statute drafted
by the Uniform Law Commission. LeJeune, 381 Md. at 305. And like
the Act after which it is modeled, MUTSA “specifically provides”
three ways—and only three ways—that a plaintiff seeking damages
for misappropriation may succeed: (1) by proving actual loss, (2)
by proving unjust enrichment, or (3) by establishing a reasonable
royalty. See Alphamed Pharm. Corp. v. Arriva Pharm., Inc., 432
F.Supp.2d 1319, 1336 (S.D.Fla. 2006) (interpreting Florida’s
version of the Uniform Trade Secrets Act). The “statutory language
[does not] authoriz[e]” any other path to damages—including an
award of “nominal damages” to a plaintiff who proved mere
misappropriation without more. Id. In line with that logic, two
prior opinions in this district have granted judgment for the
defendant solely because a MUTSA plaintiff failed to prove damages.
See 3PD, Inc. v. U.S. Transport. Corp., No. 13–cv-2438-GJH, 2015
WL 4249408, at *3-4 (D.Md. July 9, 2015); Brightview Group, LP v.
14
38
III. Conclusion
Because
materially
Plaintiff
breached
the
has
not
proven
employment
that
agreement
Mr.
by
de
Amezaga
emailing
the
proration documents to his personal account and briefly retaining
them, judgment will be entered in favor of AirFacts for $1.00 on
the breach of contract claim.
And because AirFacts has not met
its burden to prove a fair licensing price for Mr. de Amezaga’s
use of the flowcharts, judgment will be entered in favor of Mr. de
Amezaga on the MUTSA claim.
A separate order will follow.
/s/
DEBORAH K. CHASANOW
United States District Judge
Teeters, No. 19-cv-2774-SAG, 2021 WL 1238501, at *16-17, *19 (D.Md.
March 29, 2021).
Many other federal courts have reached the same conclusion
when interpreting other uniform trade secret laws that are nearly
identical to MUTSA. See Alphamed Pharm. Corp., 432 F.Supp.2d at
1335-1338 (S.D.Fla. 2006) (collecting cases); see also Check ‘n
Go, 2005 WL 1926609, at *3; C Plus Northwest, Inc. v. DeGroot, 534
F.Supp.2d 937, 947 (S.D.Iowa. 2008) (noting that when a jury finds
that “the Defendants misappropriated trade secrets,” but “d[oes]
not believe that Plaintiffs suffered any harm as a result,” “[s]uch
a conclusion mandates a verdict in favor of Defendants”); Mfg.
Automation and Software Sys., Inc. v. Hughes, 833 Fed.App’x 147,
(holding that a district court properly
148 (9th Cir. 2021)
“enter[ed] judgment for defendants” where a plaintiff raising a
misappropriation claim failed to prove actual loss, unjust
enrichment, or a reasonable royalty). Thus, AirFacts’ failure to
establish a reasonable royalty compels judgment for Mr. de Amezaga,
rather than judgment for AirFacts coupled with nominal damages.
39
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