A $57 Million Trade-Secret Victory Is Reversed

The Ninth Circuit provided a useful reminder to would-be Plaintiffs in trade secret cases: You've got the burden to prove your secrets are not readily ascertainable through proper means.

What Manufacturers Should Learn from Comet Technologies v. XP Power

Play the long game.

In Comet, the record included a recorded recruiting call. Thousands of confidential technical files. Complete competing-product designs delivered in nine days. The trial resulted in a $40 million jury verdict, a permanent injunction, and more than $17 million in attorneys’ fees.

This extensive record was not enough to save the judgment in Comet Technologies USA, Inc. v. XP Power, LLC. On July 14, 2026, the U.S. Court of Appeals for the Ninth Circuit reversed the judgment and ordered a new trial because the jury was instructed that the defendant had to prove the alleged secrets were readily ascertainable. Under the federal Defend Trade Secrets Act (DTSA), the court held, the plaintiff bears the burden of proving the opposite: that the information was not readily ascertainable through proper means.

For manufacturers and technology companies, the decision is a pointed reminder that proving wrongful acquisition and proving the existence of a trade secret are separate tasks. Strong evidence that employees took and used confidential information may establish misconduct. It does not necessarily establish that the information could not have been obtained lawfully.

What Happened in the Case

Comet and XP manufacture components used in semiconductor fabrication. According to the appellate opinion, three senior engineers left Comet to work for XP and took thousands of files concerning Comet’s products, research-and-development strategy, and underlying technologies.

One engineer, while still employed by Comet, offered XP a “turnkey” product design during a call that a recruiter recorded and sent to XP executives. XP later received complete designs for competing products within nine days.

Comet initially asserted 20 trade secrets and tried five under the DTSA. The jury found that XP had misappropriated three of them. It awarded Comet $20 million in compensatory damages based on XP’s avoided development costs and another $20 million in punitive damages for willful and malicious conduct. The district court subsequently entered a permanent injunction and awarded Comet more than $17 million in attorneys’ fees.

The problem arose after Comet dismissed its parallel California trade-secret claims during trial. California law treats ready ascertainability as a defense in certain circumstances. The DTSA, however, defines a trade secret to include information that is “not readily ascertainable through proper means” by another person who could obtain economic value from its disclosure or use.

The final jury instruction nevertheless placed the burden on XP to prove that Comet’s information was readily ascertainable. The Ninth Circuit held that the instruction improperly shifted the burden of disproving an essential element of Comet’s federal claim.

Why the Error Required a New Trial

The appellate court rejected the argument that the instructional error was harmless.

Comet argued that other portions of the jury instructions required it to prove that its information had economic value from not being generally known. But the Ninth Circuit explained that economic value and secrecy are related, yet distinct, statutory requirements. Information may be useful without being secret, or secret without being economically valuable.

The parties also presented conflicting evidence about what a skilled engineer could have learned from public patents, product bulletins, off-the-shelf components, physical inspection, and reverse engineering. Comet responded that important information was not publicly disclosed.

Those were factual disputes for a properly instructed jury.

The distinction between what XP actually did and what it could have done lawfully was critical. Ready ascertainability asks whether the information could have been obtained through proper means, not whether the accused party actually used those means. Evidence that XP repeatedly consulted Comet’s files therefore did not, by itself, answer the statutory question.

Judge Patrick Bumatay dissented from the decision to order a new trial. He agreed that the instruction was incorrect but concluded that the evidence was so strong that the error was harmless. The divided panel underscores both the apparent strength of Comet’s misconduct evidence and the majority’s insistence that the plaintiff still had to prove every element of its claim.

Five Practical Lessons for Trade-Secret Owners

1. Prove the secret, not merely the theft

Access logs, mass downloads, suspicious employee departures, recorded communications, and unusually rapid product development can provide compelling evidence of misappropriation.

But those facts do not replace proof that the claimed information was not generally known or readily ascertainable through lawful means. A claimant needs both categories of evidence.

2. Account for the public building blocks

Many industrial trade secrets incorporate public patents, commercially available components, standard engineering principles, and confidential know-how.

That does not necessarily prevent the resulting combination from qualifying as a trade secret. But the owner should be able to identify:

• Which elements are publicly known;

• Which elements remain confidential;

• Why the particular selection or combination is not readily ascertainable;

• What testing, experimentation, or failed approaches were required; and

• How much time, expense, or technical difficulty a competitor would encounter in independently recreating the information.

The protected value may lie in specifications, tolerances, test results, manufacturing techniques, integration decisions, or knowledge of what does and does not work.

3. Build expert proof around the statutory question

Technical experts should address more than whether the defendant appears to have used the plaintiff’s information.

They should also analyze what a qualified person could learn through product inspection, reverse engineering, published literature, patents, supplier materials, and ordinary industry knowledge. An opinion focused only on the defendant’s misconduct may leave a critical gap in the plaintiff’s proof.

4. Map the evidence to each asserted trade secret

Comet narrowed 20 alleged trade secrets to five for trial, and the jury treated those five differently.

Trade-secret owners should separately identify the evidence establishing the existence, secrecy, non-ascertainability, misappropriation, and value of each claimed secret. Damages also should be connected to the particular secrets allegedly used.

Treating an entire collection of information as one undifferentiated body of confidential material can make it harder to prove the claim and easier for a weakness in one asserted secret to affect the others.

5. Coordinate federal and state-law theories

Federal and state trade-secret claims may assign burdens differently. If claims are added, dismissed, or narrowed during litigation, the jury instructions and verdict form must be reviewed element by element.

The burden placed on XP may have been appropriate for the California claims that Comet dismissed. It was not appropriate for the remaining DTSA claims.

Protection Measures Remain Essential—but They Are Not Enough

The DTSA separately requires a trade-secret owner to take reasonable measures to keep its information secret. Confidentiality agreements, access controls, document marking, need-to-know restrictions, monitoring, and disciplined onboarding and offboarding practices remain foundational.

Those measures demonstrate that the company treated the information as secret and may make improper access easier to detect.

But Comet illustrates a separate proof obligation. A company may carefully restrict access to information and still need to show why a competitor could not obtain the substance of that information from public or otherwise lawful sources.

An effective trade-secret program therefore should document both sides of the equation:

• How the information is protected; and

• Why the information is not readily ascertainable through proper means.

Companies should consider addressing the second question when creating their trade-secret inventories—not for the first time after litigation begins.

An Additional Remedies Issue

Because the Ninth Circuit reversed based on the instructional error, the majority did not decide XP’s challenges to the relief awarded.

In a separate concurrence, Judge David Hamilton addressed XP’s argument that awarding avoided-development-cost damages while also prohibiting future use of the information amounted to double recovery. He reasoned that damages for past unjust enrichment and an injunction against future use generally address different harms.

That view did not become the panel’s holding, but it identifies an important issue to watch if Comet prevails again at the new trial.

The Bottom Line

Comet has not finally lost its trade-secret claims. The Ninth Circuit ordered a new trial, where Comet may present its evidence to another jury under the correct instructions.

Nor does the decision suggest that evidence of apparent theft is unimportant. It establishes something narrower and more consequential: under the DTSA, even compelling evidence of misconduct does not relieve a trade-secret owner of proving every element of its claim.

Companies evaluating a potential trade-secret case should therefore ask two independent questions:

1. What evidence shows that the defendant improperly acquired, disclosed, or used the information?

2. What evidence shows that a knowledgeable competitor could not have obtained the claimed information through proper means?

A strong trade-secret case requires persuasive answers to both.

Although the Ninth Circuit’s decision is not controlling in Michigan federal courts, its interpretation of the federal DTSA may be influential. Manufacturers and technology companies should treat the decision as a reason to test their trade-secret inventories and their potential litigation evidence against the ready-ascertainability requirement before a dispute reaches trial.