Labor & Employment Law Daily Wrap Up, TORT CLAIMS—9th Cir.: Computer chip equipment manufacturer secures new trial in $40 million trade secrets dispute, (Jul 16, 2026)

By Saurabh Kashyap, B.A., M.A., LL.B., LL.M.

The district court erroneously shifted the burden of proof on an essential element of the Defend Trade Secrets Act claims.

In a precedential disposition, the U.S. Court of Appeals for the Ninth Circuit has reversed a judgment awarding semiconductor equipment manufacturer Comet Technologies USA Inc. (Comet) and its affiliates $40 million in compensatory and exemplary damages, a permanent injunction, and more than $17 million in attorney fees in a trade secret misappropriation suit against competitor XP Power LLC (XP). The appellate court found that the district court erroneously instructed the jury that XP bore the burden of proving Comet's alleged trade secrets were readily ascertainable through proper means, even though the Defend Trade Secrets Act (DTSA) places that burden on the trade secret owner. Because the instructional error affected an essential element of Comet's claims and was not harmless in light of conflicting evidence regarding reverse engineering and public availability, the court vacated the damages award, injunction, and attorney fees award, and remanded for a new trial. It left undisturbed the jury's verdict that XP did not misappropriate one asserted trade secret and the district court's judgment as a matter of law on another (Comet Technologies USA, Inc. v. XP Power, LLC, No. 23-15601 (9th Cir. Jul. 14, 2026)).

Background. Comet develops radio-frequency power technology used in semiconductor manufacturing equipment. XP manufactures power-control components for the semiconductor industry and competes with Comet in the radio-frequency generator and impedance-matching markets, supplying components used to fabricate computer chips.

The case ultimately concerned five alleged trade secrets after Comet narrowed its claims before trial. Four related to radio-frequency generator and matching-network technologies—the Da Vinci RF Generator Control, Digital Measurement and Software (Trade Secret D), the Next Generation RF Matching Network (Trade Secret E), the Kiyo Matching Network (Trade Secret L), and the AMAT Matching Network (Trade Secret S). The fifth, Trade Secret T, covered Comet's manufacturing, sales, and pricing information. According to Comet, the trade secrets comprised confidential engineering designs, software, testing data, research-and-development strategy, manufacturing processes, and proprietary technologies used in semiconductor fabrication equipment.

The dispute arose after three senior Comet engineers, including Christopher Mason, left the company in 2018 to join XP. Comet alleged that they took thousands of confidential files, including complete product designs and research materials, allowing XP to develop competing product lines rapidly. Comet sued under the DTSA and California's Uniform Trade Secrets Act (UTSA), but voluntarily dismissed its California claims during trial. The jury found XP liable for misappropriating Trade Secrets D, E, and L, but not Trade Secret S, while the district court granted judgment as a matter of law for XP on Trade Secret T. The jury awarded $20 million in compensatory damages and $20 million in exemplary damages, after which the district court entered a permanent injunction and awarded more than $17 million in attorney fees. XP appealed, and Comet conditionally cross-appealed the jury's zero-dollar damages award on Trade Secret L.

Burden shift. The Ninth Circuit held that the district court erred in shifting the burden of proof on an essential DTSA element. The challenged instruction required XP to prove that the alleged trade secrets were readily ascertainable through proper means. Under the DTSA, however, the plaintiff must prove the opposite—that the information was not readily ascertainable.

The error arose because the instruction originally reflected California law, under which ready ascertainability may operate as an affirmative defense. After Comet voluntarily dismissed its state-law claims, XP requested that the instruction be modified to conform to the DTSA, while Comet sought to remove the instruction altogether. The district court did neither and left the erroneous burden allocation in place.

No waiver. Comet argued that XP could not complain about the instruction because it had invited the error. The Ninth Circuit rejected that argument, finding that XP timely objected once Comet abandoned its California claims and specifically informed the district court that federal law required Comet—not XP—to prove lack of ready ascertainability. XP's later alternative argument that retaining the imperfect instruction was preferable to eliminating it did not waive its earlier objection. Relying on United States v. Perez, 116 F.3d 840 (9th Cir. 1997) (en banc), and United States v. Laurienti, 611 F.3d 530 (9th Cir. 2010), the court concluded that XP neither intentionally relinquished its objection nor invited the instructional error.

Harmless error. The Ninth Circuit also rejected Comet's contention that the error was harmless. Comet argued that another jury instruction requiring proof that the alleged trade secrets possessed independent economic value adequately conveyed the governing law. The Ninth Circuit disagreed, explaining that the DTSA separately requires proof that the information derives independent economic value and is not readily ascertainable through proper means. Because those are distinct statutory elements, the correct instruction on economic value did not cure the erroneous burden shift. Citing Clem v. Lomeli, 566 F.3d 1177 (9th Cir. 2009), the court held that placing the burden of proof on the wrong party regarding an essential element ordinarily taints the verdict.

Expert dispute. It was also found that the error could not be dismissed as harmless, as the parties presented sharply conflicting evidence on whether significant portions of the asserted trade secrets could have been obtained lawfully.

Comet maintained that proprietary manufacturing data, calibration information, testing results, and design strategies could not be reverse engineered. XP, however, presented expert testimony that many aspects of the technology—including physical dimensions, configurations, and certain design concepts—could be determined from commercially available products, public patents, and standard components. The Ninth Circuit emphasized that the relevant question under the DTSA was whether the information could have been readily ascertained through proper means, not whether XP actually reverse engineered it. Resolving that factual dispute required a properly instructed jury.

Damages. The instructional error also undermined the damages award, the court said. Comet sought unjust-enrichment damages based on XP's avoided research-and-development costs rather than lost profits or XP's profits. Because the jury returned a single damages award without identifying which development costs related solely to protectable information, the court could not determine whether the award would have remained unchanged if some portions of the asserted trade secrets were readily ascertainable and therefore outside DTSA protection. Accordingly, it vacated the entire judgment and remanded for a new trial on liability and damages relating to Trade Secrets D, E, and L.

Concurrence. Judge David F. Hamilton wrote separately to address an issue likely to arise on remand. He stated that awarding both unjust-enrichment damages based on avoided research-and-development costs and a permanent injunction under the DTSA did not constitute an impermissible double recovery. In his view, the two remedies address different harms—damages remedy the defendant's past unjust enrichment, while an injunction prevents future misuse of the trade secrets. He, therefore, would have joined the Third and Seventh Circuits in holding that a prevailing DTSA plaintiff need not choose between those forms of relief.

Dissent. Judge Patrick J. Bumatay dissented, agreeing that the jury instruction erroneously shifted the burden of proving ready ascertainability but concluding that the error was harmless. He reasoned that Comet presented overwhelming and largely undisputed evidence that the asserted trade secrets consisted of confidential engineering files, testing data, calibration information, and proprietary manufacturing materials that competitors could not readily obtain through lawful means. He also relied on the jury's findings that the trade secrets derived independent economic value from their secrecy, and on its $40 million damages award, as evidence that the verdict would have been the same under a proper instruction. Thus, he would have affirmed the district court's judgment.

The Case is No. 23-15601.

Judge: Bumatay, P.

Attorneys: Adam R. Alper (Kirkland & Ellis) for Comet Technologies USA, Inc. Michael E. Bern (Latham & Watkins) for XP Power, LLC.

Companies: Comet Technologies USA, Inc.; XP Power, LLC

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