21-1370 Syntel Sterling Best Shores Mauritius, Ltd., et al. v. The TriZetto Grp., Inc., et al.

In the United States Court of Appeals For the Second Circuit ______________

August Term 2022

(Argued: September 19, 2022 | Decided: May 25, 2023)

Docket No. 21-1370

SYNTEL STERLING BEST SHORES MAURITIUS LIMITED, SYNTEL, INC.,

Plaintiffs-Counter-Defendants-Appellants,

v.

THE TRIZETTO GROUP, INC., COGNIZANT TECHNOLOGY SOLUTIONS CORP.,

Defendants-Counter-Claimants-Appellees. †

______________

Before: RAGGI, WESLEY, and LOHIER, Circuit Judges.

Plaintiffs-Counter-Defendants-Appellants Syntel Sterling Best Shores Mauritius Limited and Syntel, Inc. (collectively, “Syntel”) appeal from a final judgment entered in favor of Defendants-Counter-Claimants-Appellees The TriZetto Group, Inc. and Cognizant Technology Solutions Corporation (collectively, “TriZetto”) after a jury trial in the United States District Court for

† The Clerk of the Court is directed to amend the official caption as set forth above. Southern District of New York (Schofield, J.). Relevant here, the district court ordered and entered judgment that (1) Syntel misappropriated 104 of TriZetto’s trade secrets in violation of the Defend Trade Secrets Act (“DTSA”) and New York law; and (2) TriZetto’s $284,855,192 compensatory damages award was proper under the DTSA.

On appeal, Syntel challenges the district court’s judgment with respect to liability and damages. Regarding liability, Syntel advances two related arguments. First, Syntel argues TriZetto failed to identify any trade secret with the requisite specificity at trial. Second, Syntel argues there was no misappropriation as a matter of law because TriZetto authorized Syntel’s use of the trade secrets. Both arguments fail. With respect to damages, Syntel argues upholding a compensatory damages award based on avoided development costs is impermissible under the DTSA in this case. Under these specific facts, we agree. Accordingly, we AFFIRM IN PART and VACATE IN PART the judgment of the district court and REMAND the case for further proceedings consistent with this opinion. _________________

KANNON K. SHANMUGAM, Paul, Weiss, Rifkind, Wharton & Garrison LLP, Washington, DC (Jaren Janghorbani, Nicholas P. Groombridge, Crystal L. Parker, Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York, NY; J. Steven Baughman, Paul, Weiss, Rifkind, Wharton & Garrison LLP, Washington, DC, on the brief), for Plaintiffs-Counter-Defendants-Appellants.

JOHN C. O’QUINN, Kirkland & Ellis LLP, Washington, DC (Jason M. Wilcox, Hannah L. Bedard, Kirkland & Ellis LLP, Washington, DC; Michael W. De Vries, Kirkland & Ellis LLP, Los Angeles, CA; Adam R. Alper, Kirkland & Ellis LLP, San Francisco, CA; Leslie Schmidt, Kirkland & Ellis LLP, New York, NY, on the brief), for Defendants-Counter-Claimants-Appellees. _________________

2 WESLEY, Circuit Judge:

This is a tale of trade secrets. 1 The TriZetto Group, Inc. and Cognizant

Technology Solutions Corporation (collectively, “TriZetto”) develop software

used by healthcare insurance companies. One software product is Facets®, a

platform which automates and manages common healthcare administrative tasks

such as claim processing, claim adjudication, and billing. TriZetto licenses its

Facets software to healthcare insurance companies to manage services for over 170

million people in America. But installing, upgrading, and customizing Facets to

fit a client’s specific needs requires a significant amount of time and skilled

personnel. As a part of its business, TriZetto also provides Facets customization

and implementation consulting services to clients. TriZetto competes in this

services market with third-party companies because it permits Facets customers

to choose their service provider. 2

Although TriZetto performs much of its own Facets related services,

sometimes it utilizes subcontractors. One such subcontractor was Syntel Sterling

Best Shores Mauritius Limited (“Syntel”). In 2010, TriZetto and Syntel entered into

a Master Services Agreement (“MSA”). In exchange for a guaranteed annual

payment from TriZetto, Syntel agreed to support Facets customers on TriZetto’s

1 Citations to “App’x” refer to the Appendix, citations to “Special App’x” refer to Plaintiffs- Counter-Defendants-Appellants’ Special Appendix, and citations to “Trial Tr.” refer to portions of the trial transcript that do not appear in the Appendices. 2 Depending on the terms of TriZetto’s contract with each customer, a third-party provider can either (1) freely access TriZetto’s materials through the customer or (2) enter into a separate contract directly with TriZetto—a so-called “third-party access agreement”—to gain access to TriZetto’s materials for purposes of servicing the customer. In each case, the service provider is allowed to use TriZetto’s guides, manuals, and other Facets materials for free. 3 behalf instead of competing with TriZetto for Facets services contracts. Under the

MSA, TriZetto treated Syntel as a trusted business partner and gave Syntel’s

employees access to its trade secrets to perform Facets-related services for

TriZetto.

TriZetto and Syntel enjoyed a cooperative relationship for much of their

partnership, working together to outperform the Facets services competition. The

relationship remained cooperative even after the parties’ 2012 amendment to the

MSA, which allowed Syntel to compete directly with TriZetto in the consulting

services market (“Amended MSA”). 3

However, things began to sour in 2014 when Cognizant—Syntel’s

competitor—acquired TriZetto. As was its right, Syntel terminated the MSA and

requested payment of rebates owed under the contract. In response, TriZetto

refused to pay the rebates and raised concerns about Syntel continuing to use its

confidential trade secrets post-termination.

Syntel filed suit against TriZetto in the Southern District of New York.

Syntel’s amended complaint alleged breach of the MSA, misappropriation of

confidential information, and intentional interference with contractual relations,

stemming from Cognizant hiring several Syntel employees to perform Facets work

for TriZetto. TriZetto counterclaimed, alleging, as relevant here, that Syntel

misappropriated trade secrets related to Facets in violation of the Defend Trade

3 In exchange for lowering TriZetto’s payment commitment, the parties deleted a provision barring Syntel from competing for Facets services contracts and “any other provision in the [MSA] related to [Syntel] being restricted from competing with TriZetto.” App’x 613–14. 4 Secrets Act (“DTSA”),

, et seq., and New York law. TriZetto also

asserted that Syntel infringed its copyrights.

During discovery, Syntel destroyed documents and computers. As a result,

the district court ordered a neutral forensic examination of Syntel’s digital

electronic devices and files, which revealed that “Syntel was actively creating a

repository of [TriZetto’s] trade secrets on its own or of its own to be used in future

work.” App’x 336. Based on those findings, the district court entered a preclusion

order to sanction Syntel for continued discovery misconduct (“Preclusion

Order”). 4 Citing the Preclusion Order, the district court instructed the jury that

Syntel had misappropriated 2 of the 104 claimed trade secrets—TriZetto’s so-

called “test cases” and “automation scripts.” App’x 2131. Syntel does not appeal

the Preclusion Order.

At trial, TriZetto elected to proceed with misappropriation counterclaims

on its Facets trade secrets, which TriZetto characterized as falling into three

categories: (1) software; (2) tools; and (3) guides and manuals. Syntel did not

contest that it downloaded and used the trade secrets. It instead framed the entire

case as about “what use was proper or improper.” App’x 387. Its central theme

was that the Amended MSA authorized Syntel to compete for Facets services

business while using TriZetto’s trade secrets.

4 “The Preclusion Order barred Syntel from (1) ‘offering or presenting any evidence that it did not misappropriate and unlawfully copy TriZetto’s Facets test cases and automation scripts’ and (2) ‘offering or presenting any evidence that it independently developed any of the Platform Management Tools at issue in this case.’” Special App’x 3. 5 With respect to damages, TriZetto presented expert testimony indicating

Syntel avoided expending roughly $285 million in research and development costs

through its misappropriation. This is not the full amount that TriZetto spent on

research and development to make Facets; that is over $500 million. As TriZetto’s

damages expert testified at trial, the $285 million figure represented a portion of

the overall research and development costs, specifically, those costs for the period

between 2004 to 2014, excluding client-funded research and development. The

record does not reflect the reason that the $285 million figure was so limited. The

expert also testified that TriZetto lost $8.5 million in profits, based on a Facets

software upgrade Syntel performed for United Health Group (“UHG”) using

TriZetto’s trade secrets.

The district court charged the jury on “several types of compensatory

damages that could be available to TriZetto for its trade secret misappropriation

claims:” (1) TriZetto’s lost profits, (2) Syntel’s unjust enrichment, and (3)

“reasonable royalty” damages, which were available “[a]s an alternative to lost

profits or unjust enrichment.” Trial Tr. 867:17–19, 869:8–9. As to unjust

enrichment, the district court instructed:

Unjust enrichment is the amount that Syntel benefited as a result of any misappropriation. One form of unjust enrichment can be measured by accounting for the infringer’s profits earned by using the trade secrets, when such profits can be proven. An alternative form of unjust enrichment is called avoided costs. Avoided costs may be considered only for TriZetto’s federal misappropriation claim, and not for its state misappropriation claim. Avoided costs are the amount

6 that Syntel would have incurred to achieve the same result without the use of the appropriated trade secret.

App’x 529 (868:13–23) (emphasis added).

In summation, TriZetto’s lawyer noted that it had introduced an expert

avoided costs estimate of roughly $285 million, while Syntel had offered none.

TriZetto’s lawyer emphasized that this amount was “much less than the overall

price of the development” and was “only a tiny fraction of the overall money that

[Syntel] hoped to make.” Trial Tr. 907:2–6. TriZetto’s lawyer was referring to

evidence suggesting Syntel’s goal was to make $1 billion with TriZetto’s trade

secrets.

Meanwhile, Syntel’s lawyer characterized TriZetto’s avoided costs request

as an effort to “crush[] a potential competitor” that bore no rational relation to

actual damages.

. Syntel’s lawyer repeatedly emphasized the lack of

causal connection between the “actual infringing conduct” and TriZetto’s avoided

costs demand.

at 939:10–41:22. Syntel’s lawyer argued several reasons why

“[a]voided costs make no sense here:” (1) Syntel did not take or destroy the value

of Facets; (2) Syntel could have used the same material for “free” by obtaining a

third-party access agreement from TriZetto; (3) “TriZetto still has the product” and

“makes hundreds of millions of dollars a year licensing [it] out;” and (4) Syntel

was just a competing services company—not a software company.

at 940:5–

41:10.

In rebuttal, TriZetto’s lawyer again emphasized that Syntel had offered no

alternative to the $285 million figure and argued—incorrectly (though without

7 objection)—that avoided costs damages are “what needs to be paid under the law

when you violate the United States trade secret law.”

at 954:7–10.

The jury returned a verdict for TriZetto on all counts. It found Syntel

misappropriated TriZetto’s trade secrets, violating both the DTSA and New York

law, and that it infringed TriZetto’s copyrights. To compensate for Syntel’s

misappropriation, the jury awarded TriZetto $284,855,192 in avoided

development costs under the DTSA and $142,427,596 (one half that amount) as a

“reasonable royalty” under New York law. 5

at 907:14–17. The jury ultimately

limited its award to $284,855,192 in compensatory damages and double that

amount—$569,710,384—in punitive damages.6

After trial, Syntel renewed a motion for judgment as a matter of law under

Federal Rule of Civil Procedure 50(b) and moved in the alternative for a new trial

or remittitur under Federal Rule of Civil Procedure 59. Syntel made three

arguments relevant to this appeal. First, it argued that TriZetto failed to identify

any trade secrets with the requisite specificity at trial. Second, it argued that there

was no misappropriation because the Amended MSA authorized Syntel to use 102

5 The jury separately awarded TriZetto $59,100,000 for copyright infringement, unchallenged on appeal. 6 The jury limited its compensatory damages award in response to Question 11 on the verdict form: “Being mindful of not awarding damages that result in double or multiple recovery for the same injury, what is the total amount of compensatory damages, if any, TriZetto is entitled to receive from Syntel in light of your answers to the previous three questions?” App’x 2254. With respect to the $8.5 million in lost profits, TriZetto took the view that awarding lost profits and avoided costs would constitute “double counting” under the DTSA; the district court accepted that view. Special App’x 15. As a result, the verdict form that TriZetto proposed and the district court accepted did not ask the jury to determine if (and to what amount) TriZetto was entitled to lost profit damages. 8 of the 104 TriZetto trade secrets at issue. Third, it argued that DTSA avoided costs

damages were improper in this case as a matter of law.

The district court denied Syntel’s post-trial motions but remitted the

punitive damages award to $284,855,192, which TriZetto accepted. The district

court also entered a permanent injunction that, with two exceptions not relevant

here, enjoins Syntel from using any of the 104 trade secrets going forward. Syntel

does not challenge the injunction. This appeal followed.

DISCUSSION

Syntel challenges the judgment’s liability finding in two ways. First, it

argues the district court applied the wrong legal standard for identifying a trade

secret with specificity. Syntel contends that had the court applied the correct

standard, no reasonable jury could have found the existence of any trade secret

on the evidence TriZetto presented at trial. Second, Syntel argues that even if

TriZetto adequately identified the alleged trade secrets, the district court erred in

its understanding of the Amended MSA. To Syntel, the Amended MSA

unambiguously authorized its use of 102 of the 104 alleged trade secrets, such that

there is no misappropriation as a matter of law. Syntel separately challenges the

damages award, arguing the district court erred in allowing avoided costs as

permissible unjust enrichment damages under the DTSA in this specific case.

I. Standard of Review.

We review the denial of a Rule 50(b) motion de novo, “considering the

evidence in the light most favorable to the non-moving party and giving that party

the benefit of all reasonable inferences that the jury might have drawn in that

9 party’s favor.” 7 Triolo v. Nassau Cnty.,

(2d Cir. 2022). In other

words, we apply the same standard as the district court. See

A district court may grant judgment as a matter of law only if it finds that

“a reasonable jury would not have a legally sufficient evidentiary basis to find for

the [non-moving] party.” FED. R. CIV. P. 50(a)(1). We affirm the denial of a Rule

50(b) motion “unless there is such a complete absence of evidence supporting the

verdict that the jury’s findings could only have been the result of sheer surmise

and conjecture, or the evidence in favor of the movant is so overwhelming that

reasonable and fair minded persons could not arrive at a verdict against it.” Ashley

v. City of New York,

, 138–39 (2d Cir. 2021). This standard presents a

“particularly heavy” burden for Syntel, where, as here, “the jury has deliberated

in the case and actually returned its verdict” in favor of the non-movant. Triolo,

. Further, “[i]t is an axiom of appellate procedure that we review

legal questions de novo and questions of fact for clear error.” United States v.

Rajaratnam,

(2d Cir. 2013).

II. Liability.

Syntel first argues no reasonable jury could have found for TriZetto on the

trade secret misappropriation claims because TriZetto inadequately specified each

asserted trade secret as a matter of law. But whether TriZetto’s trade secrets were

adequately identified (and proved) was ultimately a question for the jury. While

presented as a legal challenge, Syntel’s argument really attacks the sufficiency of

7 Unless otherwise indicated, in quoting cases, all internal quotation marks, alterations, emphases, footnotes, and citations are omitted. 10 the evidence supporting the jury’s verdict. Because Syntel cannot show a

“complete absence of evidence supporting” the jury’s findings, they survive the

challenge. Ashley, 992 F.3d at 138–39.

Syntel separately argues that the Amended MSA unambiguously

authorized Syntel to use 102 of the 104 TriZetto trade secrets at issue.8 Whether

framed as a legal issue regarding the contract’s interpretation or a factual issue

based on extrinsic evidence, we conclude Syntel’s argument comes up short.

TriZetto Adequately Identified its Trade Secrets at Trial.

Under both the DTSA and New York law, a claimant bears the burden of

identifying a purported trade secret with sufficient specificity. 9 See InteliClear, LLC

v. ETC Glob. Holdings, Inc.,

, 657–58 (9th Cir. 2020) (DTSA); Next

Commc’ns, Inc. v. Viber Media, Inc.,

, 48–49 (2d Cir. 2018) (New York

law). The specificity requirement “place[s] a defendant on notice of the bases for

8 As mentioned above, the two remaining claimed trade secrets were the subject of the district court’s Preclusion Order; as a result, the jury was directed to find misappropriation as to those alleged secrets. 9 Although this Court “has not squarely articulated the precise contours of the specificity requirement in the context of trade secrets,” Next Commc’ns, 758 F. App’x at 49 n.3, we decline to do so here. Our review in this appeal is limited to examining the sufficiency of the evidence supporting the jury’s verdict. Syntel does not argue that the district court’s instruction or verdict sheet were deficient but instead elects to bring a sufficiency challenge. See Oral Arg. at 3:38–4:16. See generally Syntel Br. at 18–37 (nowhere arguing error in jury instructions or verdict sheet). Although Syntel has not requested that we do so, we may review jury instructions and verdict sheets for “fundamental error” in accordance with FED. R. CIV. P. 51. See Kotler v. Jubert,

, 158 n.38 (2d Cir. 2021). “Fundamental error” is “so serious and flagrant that it goes to the very integrity of the trial.” Anderson Grp., LLC v. City of Saratoga Springs,

(2d Cir. 2015). Because the precise contours of the specificity requirement in the context of trade secrets is “unsettled,” we conclude that the jury charges and verdict sheet in this case did not compromise “the very integrity of the trial” and thus were not fundamental error. See

at 49– 50. 11 the claim being made against it,” Oakwood Labs. LLC v. Thanoo,

(3d Cir. 2021), and allows a factfinder to determine whether certain information is,

in fact, a trade secret. See Restatement (Third) of Unfair Competition § 39 cmt. d

(characterizing purpose of specificity requirement as permitting determination of

“fact of an appropriation”); IDX Sys. Corp. v. Epic Sys. Corp.,

, 583–84

(7th Cir. 2002) (observing that, if plaintiff fails to separate “trade secrets from the

other information that goes into any software package,” the court “cannot do its

job” at summary judgment). The existence of a trade secret, including whether it

was adequately identified, is “a fact-specific question to be decided on a case-by-

case basis.” Oakwood Labs.,

; see Speedry Chem. Prods., Inc. v. Carter’s

Ink Co.,

(2d Cir. 1962) (“An exact definition of a trade secret is not

possible.”) (quoting Restatement (First) of Torts § 757 cmt. b). Thus, although the

parties press for a general specificity rule, we need not and do not articulate such

a rule today.

Viewing the evidence adduced at trial in the light most favorable to TriZetto,

a reasonable jury could have determined the asserted trade secrets were in fact

trade secrets. TriZetto’s witnesses, including its fact witness Mr. Noonan and its

technical expert Dr. Bergeron, provided extensive testimony identifying and

describing the trade secrets. For each trade secret, Noonan explained (1) what the

secret was, (2) how the secret was developed, (3) the value of the secret to TriZetto,

and (4) that the secret was maintained as confidential. The jury was provided, for

its viewing, a court exhibit—jointly submitted by the parties—listing each asserted

trade secret by name. Moreover, Dr. Bergeron presented several demonstratives

linking the title of each individual trade secret to specific exhibits. These

12 demonstratives listed the name, exhibit numbers, and general category for each

asserted trade secret. Finally, the jury received the documents or source code tied

to the asserted trade secrets.

1. Software Trade Secrets (Nos. 1–3).

We begin with TriZetto’s three asserted software trade secrets: (1) the Facets

software code, (2) TriZetto’s DBBLD scripts, and (3) the framework for updating

the Facets database.

After providing the jury a thorough overview of Facets’ functionality,

Noonan discussed the database tables and claim data model at “the heart of

Facets.” App’x 247 (88:16–19). At a high level, these tables and the data model

convey the architecture of the Facets software. Noonan showed the jury depictions

of TriZetto’s claim tables and confirmed to the jury that the data model and the

rest of Facets’ internal computer architecture is “ke[pt] confidential.” App’x 246

(87:5–24). He then described the DBBLD scripts and upgrade framework software.

Noonan detailed what each software application does, the “necessary and very

important” competitive advantage each piece of software provides to its

customers’ businesses, App’x 254–56 (115:6–117:15), and the steps TriZetto takes

to keep the applications confidential. TriZetto then introduced the source code for

all three of the software trade secrets into evidence.

Viewing the evidence in the light most favorable to TriZetto, a reasonable

jury could have determined that the asserted software trade secrets were in fact

trade secrets. Noonan identified the trade secrets by name, described them in

detail, tied them to specific documents or source code, and communicated that

TriZetto kept them confidential. 13 2. Tools Trade Secrets (Nos. 4, 102–104).

For the same reasons, we find TriZetto presented sufficient detail about its

four asserted tools trade secrets: the (1) Data Dictionary, (2) Custom Code Impact

Tool, (3) test cases, and (4) automation scripts. Noonan also identified TriZetto’s

tools trade secrets by name, described them in detail, tied them to specific

documents or source code, and testified that TriZetto kept them confidential.

For example, Noonan not only described how the Data Dictionary operates,

but also the confidential window it opens into “th[e] data structure that [TriZetto]

built at the heart of Facets.” 10 App’x 259 (120:4–7). Further, the jury heard it

“would be damaging” to TriZetto if “the Data Dictionary was copied by a

competitor and used for an unauthorized purpose.” App’x 261 (122:11–17).

With respect to the Custom Code Impact Tool, Noonan described what the

tool does, explained how it benefits customers, and confirmed TriZetto keeps its

source code confidential “as a trade secret.” App’x 261–63 (122:22–124:19). The

source code for both the Data Dictionary and the Custom Code Impact Tool were

admitted into evidence.

Noonan separately addressed the test cases and automation scripts trade

secrets.11 Those trade secrets, he explained, contain detailed instructions about

10 Unlike situations where significant aspects of the trade secrets are publicly known or where versions of the trade secrets are used by others in the industry, the jury heard that Noonan, in his 30 years of experience, has never “seen anything like the Facets Data Dictionary out in the world” and would not “expect to see the Data Dictionary software code or the documents describing it out in the public” domain. App’x 261 (122:1–10). 11 The Preclusion Order did not relieve TriZetto of its burden of proving that both of the items were, in fact, trade secrets. 14 how to test Facets after an installation or upgrade. The jury also heard that these

trade secrets are not generic items generally known in the field—Noonan testified

that TriZetto has “been building these with Facets [] over the course of Facets’ life”

and that they are completely confidential. 12 App’x 266–67 (127:24–128:2). Noonan

then illustrated a test case—showing the jury a specific case for processing a claim

and explaining the steps it performs. The test cases and automation scripts were

also admitted into evidence as confidential exhibits.

As before, viewing the above evidence in the light most favorable to

TriZetto, we conclude that a jury could have reasonably determined that the

asserted tools trade secrets were in fact trade secrets.

3. Manuals and Guides Trade Secrets (Nos. 5–101).

Syntel takes special aim at the jury’s finding that TriZetto sufficiently

identified its 97 asserted manuals and guides trade secrets. In the procedural

context before us, TriZetto produced sufficient evidence at trial to affirm the jury’s

findings.

For example, the jury heard testimony that TriZetto’s manuals and guides

differ meaningfully from those accompanying “off-the-shelf software.” App’x 267

(128:12–15). Noonan testified that each manual and guide—in similar amounts of

detail—dives deeply into “the inner workings of Facets” and the software’s

internal architecture. App’x 268 (129:6–17). He used the Data Model Guide as a

12 While showing the jury a cover page for a Facets test, TriZetto’s lawyer asked Noonan if there was “anything in [the] document that shows that TriZetto keeps this document confidential and that it believes it’s its trade secret information.” App’x 264 (124:1–18). Noonan alerted the jury to a copyright notice on the page reading: “confidential and proprietary.” Id. at 124:19–23. 15 representative example, showing the jury detailed architectural information on

several of its pages.

Noonan also used the Data Model Guide as a representative example to

demonstrate that all 97 manuals and guides comprise commercially valuable

information that TriZetto keeps confidential. 13 Based on these identifications

themselves, a jury could have reasonably determined that the contents of each

manual and guide amounted to protected trade secrets.

The parties also provided the jury with a jointly submitted list of TriZetto’s

104 proposed trade secrets, which included the corresponding trade secret number

and title for each. Dr. Bergeron presented several demonstratives linking the title

of each individual manual or guide to specific exhibits. These demonstratives

listed the name, exhibit numbers, and general category (i.e., “Billing” or

“Commissions”) for each asserted manual or guide trade secret. TriZetto also

submitted all 97 manuals and guides into evidence.

When all the above evidence, along with all the reasonable inferences that

may be drawn from it, is viewed in the light most favorable to TriZetto, it

constitutes sufficient support for the jury’s determination that the asserted

manuals and guides trade secrets were in fact trade secrets as well.

* * *

13 For example, Noonan told the jury that TriZetto guards the Data Model Guide as “confidential [] property” because it “contains TriZetto’s trade secrets.” App’x 247 (88:9–12); 246 (87:18–22). The jury later learned that TriZetto keeps the other 96 manuals and guides confidential for similar reasons. Noonan then described the commercial value of TriZetto’s manuals and guides—explaining they are “very important” materials whose unauthorized use “would be damaging” to TriZetto’s service business. App’x 268–69 (129:19–130:18). 16 Accordingly, we affirm the district court’s denial of Syntel’s Rule 50(b)

motion on this issue.

The Amended MSA Did Not Authorize Syntel to Use 102 of the 104 Claimed Trade Secrets. Syntel separately argues that even if TriZetto met its burden to specify its

104 trade secrets, the district court erred in denying Syntel’s Rule 50(b) motion for

an independent reason: the Amended MSA unambiguously authorized Syntel’s

use of 102 of the 104 claimed trade secrets. We disagree.

The district court rejected Syntel’s interpretation of the Amended MSA for

two separate and independent reasons: (1) it is at odds with the unambiguous

terms of the parties’ agreements as a matter of law, and (2) even if the agreements

were ambiguous, the jury considered and rejected Syntel’s interpretation.

According to Syntel, the district court improperly deferred to the jury on the legal

issue of the interpretation of an unambiguous contract. Whether Syntel’s

argument is framed as a legal issue regarding the contract’s interpretation or a

factual issue based on extrinsic evidence, there is no basis to overturn the jury’s

findings that Syntel misappropriated TriZetto’s trade secrets.

1. Applicable Law.

“New York law applies pursuant to the MSA.” Special App’x 5 n.1. Under

New York law, “[w]hether a contract is ambiguous is a question of law, and courts

may not resort to extrinsic evidence to aid in interpretation unless the document

is ambiguous.” Banos v. Rhea,

(N.Y. 2015); see also, e.g., L.

Debenture Tr. Co. of N.Y. v. Maverick Tube Corp.,

(2d Cir. 2010).

On the other hand, “[t]he resolution of an ambiguous provision, for which

17 extrinsic evidence may be used, is for the trier of fact.” Rhoda v. Rhoda,

, 1573 (2d Dep’t 2019).

2. Relevant Contractual Provisions.

Three provisions in the original MSA are relevant here. Sections 13.01 and

19.01 both impose confidentiality obligations on Syntel, preventing the use of any

TriZetto trade secret without TriZetto’s permission.

Under Section 13.01, Syntel agreed not to “use[]” TriZetto’s intellectual

property “other than in connection with providing the Services” under the

agreement. App’x 659 (§13.01); 651 (§1.01(125)). “Services” is defined in the MSA

to include certain enumerated categories of services and “any new services agreed

to by the Parties to be provided by [Syntel] pursuant to this Agreement.” App’x

650 (§1.01(99)) (“Services”); 653 (§3.02) (“Designated Services”). Those “Services”

are only ones that TriZetto subcontracted with Syntel to provide. Syntel similarly

agreed in Section 19.01 not to “use” or “disclose Confidential Information”

without TriZetto’s “prior consent.” App’x 661–62 (§19.01); 647 (§1.01(13))

(defining “Confidential Information”). The third relevant provision is Section

29.17, a non-compete provision that prohibited Syntel from, among other things,

competing with TriZetto for Facets services contracts. 14 App’x 604 (§29.17).

In 2012, the parties agreed to amend the MSA—Syntel lost its right to

guaranteed revenue from TriZetto but gained the right to compete with TriZetto

14 Specifically, “to prevent any misuse or disclosure of Confidential Information,” Section 29.17 prohibited Syntel from “provid[ing] any products or services” that required “technical, design, process or architectural knowledge of TriZetto’s products or services relating to TriZetto’s products.” App’x 604 (§29.17). 18 by billing directly for servicing Facets customers. To effect that change, the parties

removed the non-compete provision in “Section 29.17 and any other provision in

the Agreement related to [Syntel] being restricted from competing with TriZetto.”

App’x 613–14 (Art. 2(2)) (emphasis added).

3. Analysis.

The parties’ dispute boils down to whether the deletion of the MSA’s non-

competition provision authorized Syntel to use TriZetto’s confidential information

to compete with TriZetto. The district court correctly concluded the Amended

MSA did no such thing. Syntel’s view of the MSA in its altered format is that the

agreement authorized Syntel to compete with TriZetto while TriZetto waived the

very thing it values most.

The Amended MSA is unambiguous; Syntel was free to compete with

TriZetto, but it was still obligated to abide by the MSA’s confidentiality provisions.

In the 2012 Amendment, the parties deleted the non-compete provisions in the

MSA only so that Syntel could offer its own consulting services like any TriZetto

competitor.

Syntel offers a rationale for the Amendment. Syntel first contends that by

eliminating Section 29.17’s restriction on competition, the Amended MSA

“effectively expanded” the definition of “Services” to encompass any services

Syntel performed “for third parties in competition with TriZetto.” Syntel Br. 41–

42. While Syntel’s position finds no support in the Amendment’s express

provisions, Syntel argues no amendment to the definition of “Services” itself was

necessary because the original MSA defined “Services” to include “any new

services agreed to by the Parties.” Syntel Rep. Br. 20 (citing App’x 550 (§1.01(99)). 19 Accordingly, Syntel contends the new “Services” the Amended MSA authorized

were those that could leverage TriZetto’s confidential trade secrets under Sections

13.01 and 19.01. See id. at 20–21 (citing App’x 577, 584). Syntel’s reasoning—that

the parties made an implied change to the definition of “Services”—is plainly

inconsistent with the Amendment’s actual changes to the MSA.

While the 2012 Amendment made numerous edits to specific provisions of

the MSA, it made no change to the definition of “Services.” When the Amendment

states that Section 29.17 and any other “related” non-compete provisions are

deleted in their entirety, it identifies the definitions impacted. 15 “Services” is not

on that list and is not referenced anywhere in the Amendment.

Even if the Amended MSA had somehow implicitly changed the definition

of “Services,” Syntel unequivocally still could not use TriZetto’s trade secrets to

offer competing Facets services. The Amended MSA separately prohibits Syntel

from “commercially exploit[ing]” any “TriZetto Data.” App’x 659 (§13.01(3)).

Modifying the definition of “Services” (implicitly or otherwise), would not remove

that restriction. 16

15 The list includes “Noncompetition Services,” “Restricted Period,” and “TriZetto Products.” App’x 614 (Art. 2(1)); 648–49 (§§1.01(58), (73)); 652 (§1.01(132)). 16 Further to the point, “Syntel’s post-hoc re-definition of ‘Services’ is also inconsistent” with other relevant MSA terms. TriZetto Br. 52. For example, for all “Services,” Syntel needed to provide reports to TriZetto, which included tracking against project plans, estimates, budgets, and staff recruitment and retention—precisely because it was acting as a subcontractor, not a competitor. Those requirements would not make sense if “Services” included competing services. The MSA also defines “Service Delivery Organizations” as “the personnel of Service Provider [Syntel Mauritius] and Service Provider Agents who provide the Services,” App’x 649 (§1.01(77)), and requires that “[a]ll members of the Service Delivery Organization shall be dedicated on a full time basis to the TriZetto account.” App’x 657 (§10.03(13)). In our view, by

20 Syntel’s alternative argument, that the 2012 Amendment “deleted Sections

13.01 and 19.01 in their entirety,” is equally divorced from the agreement’s

language and common sense. Syntel Br. 40, 42–43. Syntel contends both

provisions fall within the catch-all phrase deleting “any [] provision in the

Agreement related to [Syntel] being restricted from competing with TriZetto,”

App’x 635 (Art. 2(2)), but that interpretation finds no support in the MSA’s

language. Sections 13.01 and 19.01 recite confidentiality protections, not non-

compete provisions. We find it fanciful to suggest that TriZetto would authorize

Syntel to use its trade secrets to compete for business without saying so. Further,

we are unpersuaded that the parties—both sophisticated, multi-billion-dollar

enterprises—would alter fundamental aspects of their contractual relationship in

vague terms or through catch-all provisions.

Even if we considered the Amended MSA to be ambiguous, there is no basis

for reweighing the extrinsic evidence that Syntel claims supports its

interpretation. 17 Syntel’s assertion that extrinsic evidence showed it was

authorized to use TriZetto’s trade secrets raised factual issues for the jury, which

definition, “Services” would not encompass Syntel’s competitive efforts because everyone performing Services seemingly needed to be dedicated full time to TriZetto’s account, not another Syntel customer’s. 17 Syntel principally relied on two pieces of extrinsic evidence. First was the testimony of Mr. Murlidhar Reddy—the man in charge of Syntel’s competing services and Syntel’s relationship with TriZetto. At trial, Mr. Reddy testified that TriZetto congratulated Syntel on winning Capitol District Physicians Health Plan’s (“CDPHP”) business. To Syntel, TriZetto’s gesture supported its view that the Amended MSA authorized Syntel to use TriZetto’s confidential information while servicing Facets customers. Second, Syntel cites testimony from TriZetto’s witnesses stating that TriZetto’s confidential materials were necessary for Syntel to provide “complex” consulting services to third parties, such as software upgrades. 21 was free to reject those arguments, especially in light of Syntel’s lead witness’s

curious testimony that it would be “flat wrong” to interpret the Amended MSA as

authorizing Syntel to freely use TriZetto’s trade secrets to compete. See App’x 464–

66 (514:6–516:1); 489–90 (620:22–24, 630:1–21). Because Syntel cannot show a

“complete absence of evidence supporting the verdict” rejecting Syntel’s

interpretation, we will not overturn it. 18 Ashley, 992 F.3d at 138–39.

In sum, the unambiguous terms of the Amended MSA are clear and so is the

extrinsic evidence: TriZetto did not authorize Syntel to use TriZetto’s trade secrets

to compete with TriZetto. Thus, Syntel misappropriated TriZetto’s intellectual

property in violation of the DTSA and New York law.

* * *

Accordingly, we affirm the district court’s denial of Syntel’s Rule 50(b)

motion on this issue, too.

18 The jury apparently gave both pieces of Syntel’s extrinsic evidence little weight. First, there was no evidence corroborating Mr. Reddy’s testimony that TriZetto congratulated Syntel on winning CDPHP business, and the jury was not required to accept it as true. TriZetto also supposedly offered its congratulations in 2013, years before discovering Syntel’s misappropriation of its trade secrets. Second, undisputed evidence established Syntel could compete for “less complex” and “low-end” consulting work without using TriZetto’s trade secrets, as could many other service providers. See App’x 403 (387:1–17); 319 (215:3–6). Even for the “complex” work that required use of the types of tools TriZetto’s trade secrets protect, Syntel had options other than misappropriation: independent development at its own expense. 22 III. Damages.

Syntel separately contends the district court erred by upholding the jury’s

$285 million compensatory damages award under the DTSA. 19 The primary

question presented is whether the DTSA permits recovery of avoided costs as

unjust enrichment damages in this specific case. It does not. Accordingly, we

vacate the district court’s DTSA damages judgment and remand the case for

further proceedings consistent with this opinion. 20

Standard of Review.

“[T]he amount of recoverable damages is a question of fact” reviewed for

clear error, but the district court’s understanding of whether avoided costs

damages are proper under the DTSA in this specific case—i.e., “the applicable

damages measurement”—is a legal question reviewed de novo. 21 Bessemer Tr. Co.,

N.A. v. Branin,

(2d Cir. 2010).

19 Syntel does not directly challenge the legality of the district court’s permanent injunction or its punitive damages award. That said, it asks this Court to “direct the district court on remand” to “adjust[] [the] punitive damages award” should we vacate the district court’s DTSA compensatory damages judgment. Syntel Br. 59–60. 20 Syntel argues the district court made two independent errors in upholding the jury’s $285 million avoided costs award. The first, Syntel says, was determining that avoided costs damages are available as unjust enrichment damages under the DTSA in this specific case. Under the particular facts before us, we agree. Therefore, we need not consider Syntel’s second argument: that no reasonable jury could have found that a causal link existed between the $285 million award and any misappropriation alleged by TriZetto after the DTSA’s enactment. 21 TriZetto contends we must review the district court’s DTSA damages judgment under the more deferential abuse of discretion standard. TriZetto frames Syntel’s argument on appeal as challenging the excessiveness of the jury’s award. To be sure, when assessing whether a damages award is excessive, we have held that damages calculations are “generally within the province of the jury, and a district court’s refusal to set aside a jury award will be overturned only for abuse

23 The DTSA’s Remedial Scheme.

Before the DTSA’s enactment, trade secret plaintiffs claiming

misappropriation had to pursue remedies governed by state law. The Uniform

Trade Secrets Act (“UTSA”) served as a model statute for trade secret laws in forty-

eight states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.22

See David S. Levine & Christopher B. Seaman, The DTSA at One: An Empirical Study

of the First Year of Litigation Under the Defend Trade Secrets Act, 53 WAKE FOREST L.

REV. 105, 113 (2018). One of the DTSA’s main intended benefits was that it would

provide a “single, national standard for trade secret misappropriation with clear

rules and predictability for everyone involved.” H.R. Rep. No. 114-529, at 6 (2016);

S. Rep. No. 114-220, at 14 (2016); 162 Cong. Rec. H2032 (Rep. Conyers supporting

the bill because it “would foster uniformity among the States”). Accordingly, the

of discretion.” TriZetto Br. 25–26 (citing Paolitto v. John Brown E. & C.,

, 66 (2d Cir. 1998)). But even if we accept TriZetto’s framing of Syntel’s arguments, we functionally review de novo the district court’s decision to uphold the jury’s award of avoided costs as unjust enrichment. The jury award fails as a matter of law because the district court’s decision to uphold the award is itself “premised on a legal error [and] is necessarily an abuse of discretion.” See, e.g., Fund Liquidation Holdings LLC v. Bank of Am. Corp.,

(2d Cir. 2021), cert. denied,

(2022) (functionally reviewing de novo denials of motions for leave to amend, to substitute into an action under Rule 17(a), and to approve a class action settlement agreement). 22 Despite its name, the UTSA did not induce a uniform set of laws. Although many states have adopted variations of the UTSA, “the state laws vary in a number of ways . . . .” H.R. Rep. No. 114-529, at 4 (2016). The Senate Committee on the Judiciary observed in their consideration of the DTSA that, “[a]lthough the differences between State laws and the UTSA are generally relatively minor, they can prove case-dispositive . . . .” S. Rep. No. 114-220, at 2–3 (2016). Congress thus sought to harmonize the differences in state trade secret law by enacting the DTSA. See

(“This narrowly drawn legislation will provide a single, national standard for trade secret misappropriation . . . .”). 24 DTSA’s language and its remedial scheme dictate the analysis when considering

the monetary remedies available under the statute.

To be clear, though, the DTSA does not preempt or displace state trade

secret law remedies. 23 Indeed, the federal statute directly incorporates certain

provisions from the UTSA—for example, the DTSA’s compensatory damages

provision is “drawn directly” from § 3 of the UTSA. 24 H.R. Rep. No. 114-529, at 13

(2016). There are, as a result, several cases examining state enactments of the

UTSA’s compensatory damages provision that, in doing so, analyze identical

language found in the DTSA.25

23 See

(“[T]his chapter shall not be construed to preempt or displace any other remedies, whether civil or criminal, provided by United States Federal, State, commonwealth, possession, or territory law for the misappropriation of a trade secret . . . .”); see also H.R. Rep. No. 114-529, at 6, 14, 25 (2016). 24 The UTSA provides that “actual loss caused by misappropriation and the unjust enrichment that is caused by misappropriation that is not taken into account in computing actual loss” can all be included as a measure for trade secret compensatory damages. Unif. Trade Secrets Act § 3(a) (amended 1985). 25 Federal courts have expressed views about the availability of avoided costs damages in misappropriation cases arising under state law. In the cases pre-dating the DTSA, the state law claims made their way into federal court due to diversity jurisdiction or supplemental jurisdiction. See, e.g., Salsbury Labs., Inc. v. Merieux Labs., Inc.,

(11th Cir. 1990) (applying Georgia trade secret law while sitting in diversity). The same is true for state- law-based claims filed after the DTSA’s enactment. See, e.g., Epic Systems Corp. v. Tata Consultancy Servs., Ltd.,

(7th Cir. 2020) (applying Wisconsin’s UTSA on two bases, diversity and supplemental jurisdiction); see also PPG Industries, Inc. v. Jiangsu Tie Mao Glass Co., Ltd.,

, 160 n.10 (3d Cir. 2022) (applying Pennsylvania’s UTSA based on supplemental jurisdiction). 25 The DTSA’s enactment created a federal civil cause of action for the

misappropriation of trade secrets occurring on or after May 11, 2016. 26 Defend

Trade Secrets Act of 2016,

(e),

, 381–82 (2016).

The remedies available under the DTSA include both equitable relief and

monetary damages. For example, the DTSA empowers a federal court to grant an

injunction to prevent actual or threatened misappropriation of trade secrets. See

(b)(3)(A)(i). Additionally, upon the finding of liability, the DTSA

permits the recovery of compensatory damages, 27 punitive damages, 28 and

attorney’s fees. 29 See

(b)(3)(B–D).

The DTSA’s broad compensatory damages provision allows a court to

award: (1) “damages for actual loss caused by the misappropriation;” 30 and (2)

“damages for any unjust enrichment caused by the misappropriation . . . that is not

addressed in computing damages for actual loss;” 31 or (3) “in lieu of damages measured

26 Although some claims of misappropriation occurred prior to the DTSA’s effective date, the parties agree that the profits and losses at issue here arise from misappropriation occurring after May 11, 2016. Syntel’s use of TriZetto’s trade secrets to conduct UHG’s Facets upgrade occurred in November 2016. Accordingly, the application of the DTSA to this controversy is not in question. 27 See

(b)(3)(B). 28 See

(b)(3)(C) (“[I]f the trade secret is willfully and maliciously misappropriated, award exemplary damages in an amount not more than 2 times the amount of the [compensatory] damages awarded under subparagraph (B).”). 29 See

(b)(3)(D) (“[I]f a claim of the misappropriation is made in bad faith, which may be established by circumstantial evidence, a motion to terminate an injunction is made or opposed in bad faith, or the trade secret was willfully and maliciously misappropriated, award reasonable attorney’s fees to the prevailing party.”). 30

(b)(3)(B)(i)(I). 31

(b)(3)(B)(i)(II). 26 by any other methods . . . a reasonable royalty for the misappropriator’s

unauthorized disclosure or use of the trade secret.” 32

(b)(3)(B)

(emphasis added). The statute thus permits a plaintiff to recover both its actual

losses and a misappropriator’s unjust benefit caused by misappropriation, so long

as there is no double counting. See

(b)(3)(B)(i).

Deciding what constitutes unjust enrichment is a fact-intensive endeavor.

Because courts take a “flexible and imaginative approach to damages calculation

in trade secret misappropriation cases,” unjust enrichment can take several forms

and cover a broad array of activity.33 GlobeRanger Corp. v. Software AG U.S. of Am.,

Inc.,

(5th Cir. 2016). In some instances, unjust enrichment can

include “avoided costs”—i.e., the costs a trade secret holder had to spend in

research and development that a trade secret misappropriator saves by avoiding

development of its own trade secret. See, e.g., id.; see also Restatement (Third) of

Unfair Competition § 45 cmt. f (1995). The parties concede that avoided costs are

recoverable as damages for unjust enrichment under the DTSA. They dispute,

however, whether avoided costs are available under the particular facts of this

case.

32

(b)(3)(B)(ii). 33 For example, unjust enrichment can include a “defendant’s increased profits derived from its use of a misappropriated trade secret.” David S. Almeling et al., Disputed Issues in Awarding Unjust Enrichment Damages in Trade Secret Cases, 19 SEDONA CONF. J. 667, 687 (2018). Unjust enrichment “may also include any increased business value to [a] defendant that is attributable to the [trade secret] misappropriation, such as the company’s potentially lucrative (though difficult to quantify) ‘first mover advantage’ achieved by acceleration of its product or business to market before that of any other competitor (including the plaintiff).”

27 To answer that question, one needs to consider the entirety of the DTSA’s

remedial scheme, not each provision in isolation. See Auburn Hous. Auth. v.

Martinez,

, 144 (2d Cir. 2002) (stating that the “meaning of a particular

section in a statute can be understood in context with and by reference to the whole

statutory scheme”). Section 1836(b)(3)(B)(i)(II) awards compensatory damages to

aggrieved trade secret holders whose injuries are not adequately addressed by lost

profits. It provides a tool to make trade secret holders whole by further awarding

“damages for any unjust enrichment caused by the misappropriation . . . not

addressed in computing damages for [their] actual loss”—i.e., in instances where

the value of the secret is damaged, or worse yet—destroyed.

(b)(3)(B)(i)(II).

The origins of “unjust enrichment,” which is “a basis of civil liability

involving a claim for recovery that sometimes also goes by the name restitution,”

Unjust Enrichment, BLACK’S LAW DICTIONARY (11th ed. 2019), also inform our

review of § 1836(b)(3)(B)(i)(II). See Restatement (Third) of Restitution and Unjust

Enrichment § 1 cmt. c (“In short, most of the law of restitution might more

helpfully be called the law of unjust or unjustified enrichment.”); see also

Restatement (Third) of Unfair Competition § 45 cmt. c (“The restitution remedy

awards to the plaintiff the enrichment unjustly acquired by the defendant as a

result of the appropriation of the plaintiff’s trade secret.”).

Restitution may consist of “a return or restoration of what the defendant has

gained in a transaction,” which “may be a return of a specific thing or . . . a money

substitute for that thing.” 1 Dan B. Dobbs, Law of Remedies § 4.1(1) (1993); see also

Restatement (Third) of Restitution and Unjust Enrichment § 1 cmt. e(1) (describing

28 “specific restitution” as a “remedy” that may “restore[] the identical asset that the

claimant has lost”). To the extent that TriZetto’s trade secrets were “specific

thing[s]” that TriZetto sought to recover from Syntel, the district court’s remedial

order accomplished that restitutionary goal by ordering Syntel to “remove from

its possession and quarantine” the 104 trade secrets at issue. App’x 2325.

The remedy of restitution can sometimes require more than the return of

specific things. Indeed, “there are significant instances of liability based on unjust

enrichment that do not involve the restoration of anything the claimant previously

possessed.” Restatement (Third) of Restitution and Unjust Enrichment § 1 cmt. c.

Such instances can arise in cases where a defendant profits from the plaintiff’s

property. Under such circumstances, an “accounting of the defendant’s profits on

sales attributable to the use of the trade secret” may serve as one available remedy

for trade secret misappropriation. Restatement (Third) of Unfair Competition § 45

cmt. f.

In still other circumstances, restitution can require a defendant to return the

costs it saved through the misappropriation of a plaintiff’s property. The Third

Restatement of Unfair Competition explains that “[i]n some situations the

defendant’s enrichment is represented by profits from sales made possible by the

appropriation,” while in others it is represented “by savings achieved through the

use of the trade secret in the defendant’s business.” Restatement (Third) of Unfair

Competition § 45 cmt. c. Under the common law, in other words, “[a] saved

expenditure . . . is no less beneficial to the recipient than a direct transfer.”

Restatement (Third) of Restitution and Unjust Enrichment § 1 cmt. d. But the

amount of avoided costs damages recoverable must still derive from “a

29 comparative appraisal of all the factors of the case,” among which are “the nature

and extent of the appropriation” and “the relative adequacy to the plaintiff of other

remedies.” Restatement (Third) of Unfair Competition § 45(2).34 Awarding

avoided costs in the absence of such a comparative appraisal risks producing an

unjust windfall for trade secret holders.35

Accordingly, for purposes of deciding whether unjust enrichment in the

form of avoided costs was permissibly awarded in this case, the relevant question

is: did Syntel’s misappropriation injure TriZetto beyond its actual loss of $8.5

million in lost profits? The answer to that legal question turns on several

important facts—for example, TriZetto retaining the use and value of its trade

secrets and the district court permanently enjoining Syntel from using TriZetto’s

secrets. These facts matter; the DTSA’s equitable remedies work as a powerful

tonic to reduce the harm a trade secret holder suffers beyond its lost business. The

DTSA allows district courts to enjoin the misappropriation of a trade secret to

prevent its continued use and/or its diminution in value. See

(b)(3)(A)(i).

Reading the statute’s compensatory damages provision otherwise—as

focusing exclusively on Syntel’s saved expenses to award avoided costs—ignores

the extent to which Syntel’s misappropriation injured TriZetto and impermissibly

34 Such an appraisal might well support an avoided costs award where misappropriation effectively destroys a trade secret, precluding both the secret’s restitution to its owner and a reliable measure of the owner’s future lost profits. The example is merely illustrative, not exhaustive. 35 These common law principles are consistent with the language and the structure of the DTSA. 30 discounts the comparative appraisal that governs equitable trade secret remedial

determinations. See Restatement (Third) of Unfair Competition § 45(2). Under

that reading, avoided costs would be available as unjust enrichment damages in

any case of misappropriation, even where a trade secret owner suffers no

compensable harm beyond its lost profits or profit opportunities. If accepted, that

view would permit avoided costs awards that are more punitive than

compensatory. 36 That would be a curious distortion of the DTSA’s remedial

scheme and would ignore the significance and the reach of a district court’s

permanent injunction power.

Analysis.

There is no dispute that Syntel unjustly benefitted from misappropriating

TriZetto’s trade secrets to service UHG (i.e., earning $27 million in revenue,

corresponding to $823,899 in profits). But critically, those profits were the only

enrichment Syntel unjustly gained at TriZetto’s expense, and they were

“addressed in computing damages for [TriZetto’s] actual loss.”

(b)(3)(B)(i)(II). TriZetto’s expert testified that the actual loss TriZetto suffered

post-DTSA from Syntel using its trade secrets to service UHG was $8.5 million in

lost profits. See App’x 412 (396:9–12); 433 (419:4–8). Thus, through its

misappropriation, Syntel realized $823,899 in unjust profits “at the expense of”

36 The policy of punishing wrongdoers is already served by the DTSA’s separate provision for punitive damages. See

(b)(3)(C). 31 TriZetto’s $8.5 million profit opportunity. 37 Kaye v. Grossman,

(2d

Cir. 2000).

Beyond its lost profits, however, TriZetto suffered no compensable harm

supporting an unjust enrichment award of avoided costs. The district court’s

permanent injunction ended Syntel’s use of TriZetto’s trade secrets, and, therefore,

its ability to profit from any avoided costs. Further, Syntel’s misappropriation did

not diminish, much less destroy, the secrets’ continued commercial value to

TriZetto. In fact, TriZetto has retained the profitable use of its trade secrets; Facets

is worth even more today than it was when the misappropriation occurred.

Accordingly, TriZetto is not entitled to avoided costs as a form of unjust

enrichment damages in this specific case.

To be sure, future cases may present a range of factual scenarios concerning

a defendant who has realized only modest profits from its misappropriation of

trade secrets but has, nevertheless, been enriched by avoided costs in a larger

amount at the expense of the secret holder. This might depend on, for example,

the extent to which the defendant has used the secret in developing its own

37 As noted above, TriZetto’s expert (Britven) presented three damages theories to the jury at trial. TriZetto’s principal theory was unjust enrichment based on avoided development costs. As a first alternative, Britven presented a reasonable royalty theory that set damages at 50% of TriZetto’s relevant development costs, or $142 million. As a second alternative, he suggested that TriZetto’s damages should be the $8.5 million in TriZetto lost profits. TriZetto was of the view that an award of lost profits ($8.5 million) and avoided costs damages ($285 million) would constitute impermissible double recovery under the DTSA. The jury was therefore not asked to specify the source of its compensatory damages award under the DTSA. Because the jury awarded TriZetto avoided costs damages, the jury did not specifically decide to award TriZetto lost profits damages. We do not need to decide the extent to which an award of lost profits and avoided costs may (or did) overlap under the DTSA, as the question before us is limited to whether avoided costs are recoverable as a matter of law under these facts. 32 competing product, the extent to which the defendant’s misappropriation has

destroyed the secret’s value for its original owner, or the extent to which the

defendant can be stopped from profiting further from its misappropriation into

the future. But in this case, perhaps unusually, none of those circumstances

supports awarding TriZetto $285 million of the costs it spent in developing the

misappropriated secrets. TriZetto’s valuable trade secrets are still that—valuable

and secret.

Most of the cases TriZetto and the district court employ to support awarding

avoided costs concern claimants who, at least to some degree, lost the value of

their misappropriated trade secrets. 38 Avoided costs compensated for that loss.

For example, in GlobeRanger Corp. v. Software AG U.S. of Am., Inc., the defendant

“used the [claimant’s trade secrets] in developing its own product,” thereby

diminishing the value of the trade secret to the claimant.

(5th

Cir. 2016). In Salsbury Laboratories, Inc. v. Merieux Laboratories, Inc., too, the

defendant destroyed the value of a claimant manufacturer’s trade secret when it

adopted and used the manufacturer’s vaccine production process to create its own

competing vaccine. 39

, 714–15 (11th Cir. 1990). But again, this

case is different: TriZetto offered no proof that Syntel’s misappropriation

diminished the value of its trade secrets to any degree.

Syntel never developed or sold a competing software product using

TriZetto’s trade secrets. Syntel competed for services in a market in which Syntel

38 We need not consider the unpublished out-of-circuit decisions that TriZetto cites. 39 The Eleventh Circuit “enjoined defendants from disclosing Salsbury’s trade secrets and from using Stabilizer H but not from producing or selling the competing vaccine.”

. 33 and other third parties were routinely granted permission to use TriZetto’s trade

secrets, often for free. TriZetto contends that there is no difference from an

avoided costs perspective when the trade secrets relate to competing services as

opposed to a competing product. Even if that were so—a point we need not

decide—that argument misses the point. Syntel might have had to turn over

avoided costs (or some portion of avoided costs) for using TriZetto’s trade secrets

to gain a significant head start into the market for Facets-related services if, for

example, it either diminished the value of, or publicly disclosed, TriZetto’s trade

secrets while advertising or providing Facets services to third parties. But TriZetto

offered no proof that is what happened here.

Our holding might appear in some tension with Epic Systems Corp. v. Tata

Consultancy Services, Ltd., a Seventh Circuit decision applying Wisconsin’s

Uniform Trade Secrets Act. 40

(7th Cir. 2020). There, the Seventh

Circuit upheld a $140 million avoided costs award based on the “significant head

start” in operations TCS gained through misappropriation. 41 See

, 1132–

33. Importantly, however, Epic suffered no economic harm from TCS’s

40 As discussed supra at 25 n.25, the Wisconsin UTSA’s compensatory damages provision mirrors the DTSA’s. Compare

(4)(a) (“A court may award [compensatory] damages in addition to, or in lieu of, injunctive relief under sub. (3). Damages may include both the actual loss caused by the violation and unjust enrichment caused by the violation that is not taken into account in computing actual loss.”), with

(b)(3)(B)(i) (“A court may . . . award . . . [compensatory] damages for any unjust enrichment caused by the misappropriation . . . that is not addressed in computing damages for actual loss.”). 41 TCS used Epic’s trade secrets to create a “comparative analysis”—a spreadsheet comparing TCS’s health-record-software (called “Med Mantra”) to Epic’s software.

. TCS used the comparative analysis in “an attempt to enter the United States health-record- software market, [in an unsuccessful attempt] to steal Epic’s client, and [to] address key gaps in TCS’s own Med Mantra Software.”

34 misappropriation,

at 1144 n.5, and the “district court entered an injunction

prohibiting TCS from using, possessing, or retaining any of Epic’s trade secrets.”

. We disagree with the court’s reasoning insofar as it can be seen to

endorse a view that avoided costs are available as compensatory damages under

the DTSA whenever there is misappropriation of any trade secret relating to an

owner’s product. To the extent no corresponding harm to the trade secret owner

would be necessary, such a view unhinges avoided costs from the DTSA’s

compensatory moorings and overlooks the remedial benefits, as here, of a timely

injunction that prevents the dissemination and use of a trade secret. 42 Cf. 4 Roger

42 TriZetto and the district court also cite Steves & Sons, Inc. v. JELD-WEN, Inc. to support awarding avoided costs. No. 16-cv-545-(REP),

(E.D. Va. May 10, 2018). There, the district court denied Steves’ motion for summary judgment on JELD-WEN’s trade secret misappropriation damages claims arising under the DTSA and Texas’s UTSA.

. In the court’s view, JELD-WEN presented enough evidence on its unjust enrichment claim to avoid summary judgment.

. It reasoned avoided costs could be available where the defendant used doorskin manufacturing trade secrets to assess the feasibility of building a competing manufacturing plant.

The avoided costs theory went: Steves’ possession of trade secrets about important manufacturing components would allow it to “increase the plant’s profitability through a reduction in its per skin costs.”

. Critically, however, Steves did not build the plant—it only took limited steps towards doing so, such as negotiating with potential business partners.

. Moreover, JELD-WEN suffered minimal harm from the actual misappropriation, and the injunctive relief it requested would have precluded Steves’ future use of the trade secrets.

. TriZetto never referenced PPG Industries, Inc. v. Jiangsu Tie Mao Glass Co., Ltd. in support of its argument to uphold the district court’s avoided costs award.

(3d Cir. 2022). There, the Third Circuit affirmed an $8.8 million avoided costs award under Pennsylvania’s UTSA even though the claimant “did not demonstrate actual loss from [the defendant’s] misappropriation,” and a permanent injunction prevented the defendant from any further misappropriation of the claimant’s secrets.

; compare 12 Pa. Cons. Stat. Ann. § 5304(a), with

(b)(3)(B)(i). As with Epic Systems Corp., we decline to follow the reasoning of these two decisions. They denied summary judgment on/affirmed avoided costs awards based solely on the defendant’s cost savings, despite no corresponding harm to the trade

35 M. Milgrim, Milgrim on Trade Secrets § 15.02 (measuring an unjust enrichment

award “by the value of the misappropriated trade secret . . . may preclude an

award of injunctive relief on the theory that having received the full value of its

trade secret, the owner is not entitled to further relief”).

Here, as well, the district court effectively awarded punitive damages under

the guise of compensatory damages. TriZetto presented evidence of the actual

financial impact of Syntel’s actions on both parties. Yet rather than focusing on

that evidence, the district court reasoned that avoided costs that have no

correlation to Syntel’s gain at TriZetto’s expense were appropriate because Syntel

“should bear the business risk” of its misappropriation regardless of its temporal

length. Special App’x 16. To the extent the district court deemed it necessary to

punish Syntel for any unrealized potential profits or “business risk” it took, that

punishment is appropriately considered in the context of punitive damages under

the DTSA. See

(b)(3)(C).

Accordingly, we conclude that, as a matter of law, an unjust enrichment

award of avoided costs was unavailable under the specific facts of this case.

Syntel’s unjust gain was fully “addressed in computing damages for [TriZetto’s]

actual loss,” and TriZetto suffered no compensable harm beyond that actual loss. See

(b)(3)(B)(i)(II). Syntel’s onetime use of the trade secrets to service

UHG did not jeopardize their continued value to TriZetto. TriZetto—not Syntel—

currently retains their profitable use, and a permanent injunction prohibits Syntel

from using them in the future. Awarding TriZetto $285 million of the costs it

secret holder. That result is inconsistent with our view of when avoided costs are available as unjust enrichment damages under the DTSA. See

(b)(3)(B)(i)(II). 36 incurred to develop its trade secrets would be inconsistent with the purpose of

avoided costs in trade secret cases and with the DTSA’s remedial scheme. Under

these facts, upholding the avoided costs award would entitle TriZetto to a

windfall. The district court’s DTSA damages judgment is vacated.

Disposition.

We remand the case for the district court to address the propriety of the two

jury awards based on TriZetto’s damages theory of awarding a reasonable royalty:

(1) the $142,427,596 New York trade secret misappropriation award and (2) the

$59,100,000 copyright infringement award. Although the parties addressed the

propriety of these awards in their motion papers below, 43 there was nothing to

appeal here since the jury, to avoid double counting, did not factor them into their

total compensatory damages award, instead relying exclusively on the

$284,855,192 damages in avoided costs for the DTSA claim. 44 See Special App’x 12

n.3; App’x 2254.

43 In its Rule 50(a) and Rule 50(b) motions, Syntel objected to the jury’s reasonable royalty awards of $142 million for trade secret misappropriation under New York law and $59 million for copyright infringement because: (1) both were based on avoided costs that are inapplicable in this case; and (2) both were based on a 50/50 split methodology between TriZetto and Syntel for avoided costs that is improper as a matter of law. As mentioned, the district court did not resolve the challenge to either award because it awarded avoided costs under the DTSA. 44 Both Syntel and TriZetto waived consideration by this Court of the propriety of the $142 million reasonable royalty award under New York law. Syntel waived the argument that the award was improper by raising it only in a footnote on appeal. See U.S. v. Restrepo,

, 1463 (2d Cir. 1993). And the same is true for TriZetto, who also addressed the award’s propriety only in a footnote. See TriZetto Br. 75–76 n.3 (“[E]ven if Syntel were to prevail on its avoided-cost argument, TriZetto is at least entitled to a $142 million reasonable royalty.”).

37 Of note, we do not remand for the court to determine if TriZetto is entitled

to lost profit damages under § 1836(b)(3)(B)(i)(I) of the DTSA. To be sure,

TriZetto’s expert testified that the company suffered $8.5 million in lost profits

through Syntel’s misappropriation, and the district court instructed the jury that

TriZetto could recover those lost profits as damages under the DTSA. But at trial,

TriZetto took the view that awarding lost profits and avoided costs would

constitute “double counting” under the DTSA; the district court accepted that

view. Special App’x 15. As a result, the verdict form that TriZetto proposed and

the district court accepted did not ask the jury to determine if (and to what

amount) TriZetto was entitled to lost profit damages. Because TriZetto does not

argue on appeal that it is entitled to its lost profits if we vacate the avoided costs

award, we do not instruct the district court to consider the issue on remand.

CONCLUSION

For the foregoing reasons, we AFFIRM IN PART and VACATE IN PART

the judgment of the district court and REMAND the case for further proceedings

consistent with this opinion.

38