IP Law Daily, TRADE SECRETS—Fed. Cir.: Largely favorable appellate ruling for AMS-OSRAM in trade secrets dispute with rival chipmaker, (Apr 4, 2025)

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

Appellate court upheld all damages and fees awarded to AMS-OSRAM as supported by evidence and law.

The U.S. Court of Appeals for the Federal Circuit issued a largely favorable decision for AMS-OSRAM USA Inc. (formerly Texas Advanced Optoelectronic Solutions, Inc.) in its long running trade secrets and contract dispute with Renesas Electronics America, Inc. (formerly Intersil Corporation). The court affirmed all damages and attorney fees awarded for trade secret misappropriation and breach of a confidentiality agreement, finding them properly supported by the evidence and consistent with governing law. However, it reversed the district court’s determination of when the trade secret became publicly accessible, concluding that the lower court applied the wrong standard in assessing reverse engineering. The court also vacated and remanded the prejudgment interest award, agreeing with Renesas that interest should not accrue on future sales (AMS-Osram USA Inc. v. Renesas Electronics America, Inc., No. 22-2185 (Fed. Cir. Apr. 4, 2025)).

Background. The plaintiff/cross-appellant, AMS-OSRAM USA Inc. (TAOS), is a U.S.-based manufacturer of optoelectronic sensors. The defendant/appellant, Renesas Electronics America Inc. (formerly Intersil), is a semiconductor manufacturer. The plaintiff and defendant entered into confidentiality agreements in 2004 as part of merger discussions. During due diligence, TAOS disclosed confidential details of its ambient-light-sensing technology. The talks ended in August 2004, but Intersil quickly began developing competing products based on the disclosed information, including the ISL29003 and its derivatives.

TAOS released its product incorporating the trade secret in early 2005. Intersil began to secure design wins from Apple for the iPod Touch in 2006 and later for the iPhone 3G, leading to significant sales of its ISL29003. In November 2008, TAOS sued Intersil in the Eastern District of Texas, alleging patent infringement, trade secret misappropriation, breach of contract, and tortious interference.

A 2015 jury found in favor of TAOS on all claims, awarding nearly $71 million in disgorgement, exemplary, and contract damages. In a 2018 appeal, the Federal Circuit affirmed Intersil’s liability for trade secret misappropriation but narrowed its scope, vacated the monetary awards, and ordered the district court to make findings on when the trade secret became publicly accessible and how long the head-start period lasted. It also ruled that disgorgement as an equitable remedy should be decided by the judge. The contract damages were vacated as potentially duplicative.

On remand, a 2021 jury awarded advisory damages, which the district court mostly adopted, including an $8.5 million disgorgement award and $17 million in exemplary damages. Contract damages were awarded as royalties for products not included in the trade secret claim. Prejudgment interest and attorney fees were also awarded.

On appeal, Renesas challenged the district court’s rulings on disgorgement, exemplary damages, contract royalties, attorney fees, and prejudgment interest, arguing they were legally or factually flawed. AMS-OSRAM cross-appealed the court’s exclusion of certain product sales from the disgorgement award and defended the later trade secret accessibility date to preserve a longer head-start period.

Trade secret accessibility. The appellate court held that the district court erred in determining that TAOS’s trade secret became publicly accessible in January 2006, when Intersil completed reverse engineering of TAOS’s product. CitingTewari De-Ox Systems, Inc. v. Mountain States/Rosen, L.L.C., 637 F.3d 604, 612 (5th Cir. 2011), the court reaffirmed that information is no longer secret if it is “readily ascertainable by proper means,” such as reverse engineering of a publicly available product. Since TAOS’s TSL2560 product was publicly released by January 2005, and could have been reverse engineered in about a week using standard industry methods, the court found that the trade secret was properly accessible by February 28, 2005.

Head-start period. The Federal Circuit affirmed the district court’s factual finding that the head-start period—reflecting the unfair competitive advantage obtained by misappropriation—was 26 months. The district court found Intersil lacked relevant experience and took 26 months post-misappropriation to develop a competitive product. Relying onHyde Corp. v. Huffines,314 S.W.2d 763 (Tex. 1958) and Halliburton Energy Servs., Inc. v. Axis Techs., LLC, 444 S.W.3d 251 (Tex. App. 2014), the appellate court found no clear error in setting the head-start period ending in April 2007.

Disgorgement award. The court rejected Intersil’s challenge to the $8.5 million disgorgement award, which represented profits from sales of ISL29003 chips for Apple’s iPod Touch, secured through a “design win” in September 2006. Despite some of those sales occurring after the head-start period ended, the design win itself occurred within it and was a direct consequence of the misappropriated information.

The court also rejected TAOS’s cross-appeal seeking additional profits from iPhone 3G sales, concluding that key events leading to those sales occurred after April 2007 and thus fell outside the head-start period.

Exemplary damages. Intersil challenged the $17 million exemplary damages award under Texas Civil Practice and Remedies Code § 41.008, arguing that exemplary damages could not be awarded when the underlying relief was equitable. The Federal Circuit found the argument waived, as Intersil had failed to raise it in the prior appeal. CitingEngelIndus., Inc. v. Lockformer Co., 166 F.3d 1379, 1383 (Fed. Cir. 1999), the court held that Intersil’s failure to raise the issue in 2018 precluded its assertion now.

The court also rejected Intersil’s arguments that the judge should have decided the exemplary damages and that a new jury could not properly determine their amount. The court found no unfairness in the separate jury determinations and upheld the award.

Contract damages. The Federal Circuit affirmed the jury’s $6.6 million royalty award for breach of the confidentiality agreement under California law. Rejecting Intersil’s claim that the damages were duplicative, the court noted that the award covered products not included in the trade secret claim. The court also upheld the royalty for Derivative Products, even if they did not embody the trade secret, since TAOS provided evidence that Intersil had used its confidential information in their development. Citing Celeritas Techs., Ltd. v. Rockwell Int’l Corp., 150 F.3d 1354 (Fed. Cir. 1998), the court held that the breach of contract supported such a royalty.

It also rejected Intersil’s challenge to the 10-year duration of the hypothetical license, finding substantial evidence supported the jury’s inference that such a license term was realistic and necessary for competitive entry.

Attorney fees. Affirming the award of $3.9 million in attorney fees, the court found that the contract’s indemnification clause, which covered “all losses including reasonable attorneys’ fees resulting from breach,” was sufficient under California law to shift fees between contracting parties. Citing Zalkind v. Ceradyne, Inc., 124 Cal. Rptr. 3d 105 (Ct. App. 2011), the court held that indemnity clauses can include direct liability between parties when they expressly reference damages from breach.

Prejudgment interest. The court agreed with Intersil that the district court erred in awarding prejudgment interest on the entire award beginning from the date the complaint was filed, including on future sales. The court remanded for recalculation of interest to align with when sales generating disgorgement or royalty damages actually occurred. CitingKing Instruments Corp. v. Perego,65 F.3d 941, 952 (Fed. Cir. 1995), the court reiterated that interest must reflect compensable losses, not amounts not yet accrued.

Disposition. Thus, the Federal Circuit affirmed all damages and attorney fees except the calculation of prejudgment interest. It reversed the district court’s finding on trade secret accessibility date but found no impact on the disgorgement award. It remanded solely for recalculation of prejudgment interest consistent with the clarified legal standard.

The Case is Nos. 22-2185, 22-2186.

Judge: Taranto, R.

Attorneys: Chase Cobern (Munck Wilson Mandala, LLP) for AMS-OSRAM USA Inc. Seth W. Lloyd (Morrison & Foerster LLP) for Renesas Electronics America, Inc.

Companies: AMS-OSRAM USA Inc.; Renesas Electronics America, Inc.

MainStory: TopStory TechnologyInternet TradeSecrets FedCirNews TexasNews GCNNews