Northern District Notes That Trade Secret Law Allows Recovery of Saved Development Costs

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In a non-trade secrets intellectual property case, The Northern District of California noted, in dictum, that “trade secret law allows recovery of saved development costs.”  Oracle Corp. v. SAP AG, No. C 07-1658 PJH, — F.Supp.2d —-, 2010 WL 3258603, *14 (N.D. Cal. Aug. 17, 2010).

Plaintiffs sought to recover damages based on “saved development costs” for their unjust enrichment claim.  Id. *12.  Plaintiffs cited Ajaxo, Inc. v. E*Trade Group, Inc., 135 Cal. App. 4th 21, 37 Cal. Rptr. 3d 221 (2005).  In Ajaxo, defendant E*Trade gave the plaintiff’s trade secrets to one of the plaintiff’s competitors, which used the trade secrets and saved some development costs for E*Trade. Id. The Ajaxo court upheld an award of damages that included the saved development costs based on a theory of unjust enrichment/restitution. Ajaxo, 135 Cal. App. 4th at 55-57.

The court in Oracle held that “Plaintiffs cannot recover ‘saved development costs’ for alleged unjust enrichment, where plaintiffs retained their right to use, distribute, license, and profit from the software and support materials at issue.” Oracle Corp, 2010 WL 3258603, *13.  “It would not be equitable, logical, or legally permissible to award plaintiffs the full replacement value of property that they never lost or gave away.” Id. The court distinguished Ajaxo, noting that Ajaxo concerned trade secret claims in which the “court permitted recovery of ‘development costs’ saved by misappropriating, rather than developing, the trade secrets at issue.” Id. “Moreover, these cases are inapposite because, unlike the contract or tort claims for which plaintiffs’ unjust enrichment claim serves as an alternative here, trade secret law allows recovery of saved development costs.”

Judge and Attorneys

District Judge Phyllis J. Hamilton.

Donn P. Pickett, Bree Hann, Geoffrey M. Howard, Tanya King Dumas,  Zachary J. Alinder, Bingham McCutchen LLP, Chad Lawrence Russell, Holly A. House, McCutchen Doyle Brown Enersen LLP, Christopher D. Jensen, Barg Coffin Lewis & Trapp LLP, San Francisco, CA, Jennifer Wysong Gloss, Oracle USA, Inc., Dorian Estelle Daley, Redwood City, CA, for Plaintiffs.

Jane Louise Froyd, Tharan Gregory Lanier, Jones Day, Palo Alto, CA,  Robert Allan Mittelstaedt, Elaine Wallace, Jason S. McDonell, Jones Day, San Francisco, CA, Joshua Lee Fuchs, Jones Day, Scott Wagner Cowan, Houston, TX, for Defendants.


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