AMS-OSRAM v. Renesas, decided April 4, 2025

This Federal Circuit opinion details a long-standing legal battle between AMS-OSRAM and Renesas regarding misappropriated trade secrets for ambient-light sensor technology used in electronics. The court reviews appeals from both parties concerning monetary awards for trade secret misappropriation and breach of a confidentiality agreement. While the court adjusts the date when the trade secret was considered publicly accessible, it largely upholds the district court's rulings on damages, including disgorgement of profits and exemplary damages. However, the court identifies errors in the calculation of prejudgment interest and remands that specific issue for further consideration.

Case Name and Citation: AMS-OSRAM USA INC. v. RENESAS ELECTRONICS AMERICA, INC., 2022-2185, 2022-2186 (Fed. Cir. April 4, 2025)

Court: United States Court of Appeals for the Federal Circuit

Judge(s): TARANTO, SCHALL, and CHEN, Circuit Judges. Opinion by TARANTO, Circuit Judge.

Date of Decision: April 4, 2025

Keywords: Trade Secret Misappropriation, Breach of Confidentiality Agreement, Monetary Remedies, Disgorgement of Profits, Exemplary Damages, Reasonable Royalty, Prejudgment Interest, Head-Start Period, Proper Accessibility, California Law, Texas Law, Waiver.

I. Executive Summary:

This Federal Circuit decision reviews the monetary remedies awarded by the District Court for the Eastern District of Texas to AMS-OSRAM USA Inc. (TAOS) against Renesas Electronics America, Inc. (Intersil) for trade secret misappropriation and breach of a confidentiality agreement. The core dispute revolves around Intersil's use of TAOS's confidential information regarding ambient-light sensor technology after merger discussions failed. While Intersil's liability is no longer contested, both parties appealed the district court's rulings on monetary awards, including disgorgement of profits, exemplary damages, reasonable royalty, attorneys' fees, and prejudgment interest.

The Federal Circuit reversed in part the district court's finding on the date the trade secret became properly accessible, setting it earlier. However, it affirmed in part the district court's determination of the head-start period and the resulting disgorgement award. The court also affirmed the award of exemplary damages and the damages and attorneys' fees for the breach of contract claim. Finally, the court vacated in part the awards of prejudgment interest and remanded that issue for further consideration.

II. Background and Procedural History:

• 2004: TAOS and Intersil engaged in merger discussions under a confidentiality agreement. TAOS disclosed confidential information about its ambient-light sensor technology. Merger talks ended, and Intersil began using this information to develop competing products, including the ISL29003.

• Early 2005: TAOS publicly released a product incorporating previously secret information.

• September 2006 - March 2008: Intersil secured "design wins" with Apple for its ISL29003 product in the iPod Touch and iPhone 3G.

• November 2008: TAOS sued Intersil for patent infringement (no longer at issue), trade secret misappropriation, breach of contract, and tortious interference.

• 2015 Jury Verdict: The jury found for TAOS on all claims, awarding significant monetary relief, including disgorgement and exemplary damages for trade secret misappropriation and reasonable royalty for breach of contract.

• District Court Judgment (2015): The district court awarded money for trade secret misappropriation but deemed the contract breach award duplicative.

• Federal Circuit Appeal (2018) (TAOS 2018): The Federal Circuit affirmed Intersil's liability for trade secret misappropriation but on a narrower basis. It vacated the trade secret monetary award and remanded, stating disgorgement of profits should be decided by the judge. The court also vacated the denial of the contract breach award.

• Remand Proceedings: The case narrowed to trade secret and contract issues. A new jury trial (April 2021) provided an advisory verdict on disgorgement and awarded exemplary and reasonable royalty damages.

• District Court Rulings on Remand (2021-2022): The district court ruled on election of remedies, made findings on disgorgement (aligning with the advisory jury verdict), entered final judgment including disgorgement, exemplary damages (limited by Texas statute), and reasonable royalty awards, along with prejudgment interest and attorneys' fees for the contract claim.

• Current Appeal: Both parties appealed the monetary awards.

  
  

III. Main Themes and Important Ideas/Facts:

A. Trade Secret Misappropriation:

• Proper Accessibility Date: The Federal Circuit reversed the district court's finding that the trade secret became properly accessible to Intersil in January 2006 (when Intersil successfully reverse-engineered TAOS's product). The court held that "the relevant inquiry for proper accessibility is... what the misappropriator or other parties could have done." Citing Fifth Circuit precedent, the court stated, "Under Texas law, information that is generally known or readily available by independent investigation is not secret for purposes of trade secrecy." Because TAOS publicly released a product containing the trade secret by February 28, 2005, and reverse-engineering was a common practice achievable in roughly a week, the court determined February 28, 2005, was the correct accessibility date.

• Head-Start Period: The Federal Circuit affirmed the district court's finding of a 26-month head-start period. The court emphasized that this "practical inquiry" focuses on preventing the misappropriator from gaining an "unfair advantage in the competitive marketplace." The district court found Intersil provided no evidence of how long it would have taken them to realistically compete without TAOS's technology and that 26 months was supported by evidence showing Intersil's development timeline and initial lack of experience in the field.

• Disgorgement Award: Despite changing the accessibility date, the Federal Circuit affirmed the $8,546,000 disgorgement award. The head-start period, now calculated to end on April 28, 2007, still encompassed Intersil's September 2006 "design win" with Apple for the iPod Touch, which the district court correctly identified as a necessary precondition for the relevant sales. The court also upheld the district court's attribution of all profits from these sales to the misappropriation, noting the trade secret's "entire value proposition." The court rejected TAOS's cross-appeal to include profits from iPhone 3G sales, as the necessary "design win" occurred after the revised end of the head-start period.

• Exemplary Damages: The Federal Circuit affirmed the $17,092,000 exemplary damages award.

• The court held that Intersil waived its argument that Texas law prohibits exemplary damages when the only other monetary award is equitable disgorgement because Intersil could have raised this argument in the first appeal but did not.

• The court rejected Intersil's argument that the judge, not the jury, should have decided the amount of exemplary damages, stating that this conflates the underlying claim with the remedy of disgorgement and that exemplary damages are generally considered a legal remedy.

• The court also rejected Intersil's argument that the issues of liability and amount of exemplary damages were too intertwined to be decided by different juries, noting that Intersil itself sought vacatur of the first jury's amount determination while not challenging the finding of malice, fraud, or gross negligence.

  
  

B. Breach of Confidentiality Agreement:

• No Double Recovery: The Federal Circuit rejected Intersil's argument that awarding damages for both trade secret misappropriation and breach of contract constituted double recovery. The court affirmed the district court's finding that the recoveries were for "non-overlapping sets of units sold by Intersil"—ISL29003 sales for misappropriation and other product sales for breach.

• Proof of Harm: The court rejected Intersil's contention that TAOS failed to prove harm from the breach. Applying California law, the court found that the jury could reasonably conclude that TAOS had a "reasonable expectation" of compensation (in the form of a reasonable royalty) if Intersil used its confidential information in breach of the contract.

• Derivative Products in Royalty Award: The court rejected Intersil's challenge to the inclusion of Derivative Products (not directly incorporating the trade secret) in the royalty award. Applying California law, the court stated that recovery for breach of a confidentiality agreement extends beyond direct incorporation to include instances where the defendant "used the plaintiff’s confidential information in the development or implementation of its own products." Substantial evidence supported the jury's finding of such use.

• Duration of Hypothetical Negotiation: The court rejected Intersil's challenge to the 10-year duration of the hypothetical royalty agreement. The jury heard testimony supporting the reasonableness of a 10-year term, including the benefit of earlier market entry for Intersil and industry standards.

  
  

C. Attorneys' Fees:

• The Federal Circuit affirmed the award of attorneys' fees to TAOS for work on the contract claim. Interpreting the confidentiality agreement under California law, the court agreed with the district court that the indemnity clause, which included "reasonable attorneys' fees" for "any breach of the representations, warranties, and agreements set forth herein," encompassed direct liability claims between the parties.

  
  

D. Prejudgment Interest:

• The Federal Circuit vacated the district court's awards of prejudgment interest for both the trade secret and contract claims and remanded the issue. The court agreed with Intersil that awarding interest from the date the lawsuit was filed (November 25, 2008) for sales that occurred after that date was likely erroneous under both Texas and California law, which generally require the underlying loss-causing event to occur before interest can begin to accrue.

• The court acknowledged that interest was proper for pre-complaint sales from the filing date and for all sales from June 3, 2014 (when the hypothetical license would have expired), until the judgment date. However, for sales between November 25, 2008, and June 3, 2014, the district court needs to reconsider the starting date for interest, considering legal principles, the burden of proof on TAOS to provide a practical calculation method, and practical constraints in identifying the dates of individual sales.

  
  

IV. Key Quotes:

• On Proper Accessibility: "Under Texas law, information that is generally known or readily available by independent investigation is not secret for purposes of trade secrecy."

• On Head-Start Period: "The inquiry into a proper ‘head-start period’ is a practical inquiry focused on ensuring that one who prematurely used secret information gains no unfair advantage in the competitive marketplace..."

• On Waiver: "An issue that falls within the scope of the judgment appealed from but is not raised by the appellant in its opening brief on appeal is necessarily waived."

• On Scope of Confidentiality Breach: "...a plaintiff may recover for the defendant’s breach of a confidentiality agreement not only if the defendant wholly incorporated the plaintiff’s contractually protected information into its own products but also if the defendant used the plaintiff’s confidential information in the development or implementation of its own products."

• On Indemnity Clause and Attorneys' Fees: "That language indicates that it encompasses direct liability claims between the parties, so a harmed contract party—in this case, TAOS—may rely on it to recover fees."

• On Prejudgment Interest: "Relevant cases suggest that interest cannot accrue for a recovery-triggering event until the event has occurred."

  
  

V. Conclusion:

The Federal Circuit's decision provides significant clarity on several aspects of trade secret and contract law regarding monetary remedies. While modifying the date of proper accessibility, the court largely upheld the district court's damages awards, emphasizing the fact-specific nature of head-start periods and the broad scope of liability for breach of confidentiality agreements under California law. The ruling on waiver serves as a reminder of the importance of raising all relevant arguments in initial appeals. The remand on prejudgment interest highlights the need for a clear link between the accrual of interest and the occurrence of the underlying financial harm. This case demonstrates the complexities of litigating intellectual property and contract disputes across multiple appeals and remands.