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When Trade Secrets or Confidential Business Information Are Stolen, Can You Recover Pre-Judgment Interest in Massachusetts?

If your company’s confidential business information or trade secrets [1]are stolen, in Massachusetts you may not be entitled to statutory pre-judgment interest based on an unjust enrichment award. The recent Superior Court decision in Governo Law Firm, LLC v. CMBG3 Law, LLC, No. 1684CV03949BLS2, 2019 WL 3801560, at *1 (Mass. Super. July 29, 2019) highlights this point and the rationale behind whether to award statutory interest following a finding of misappropriation of either trade secrets or confidential business information.  

From an initial reading of the statute, it would not be unreasonable to think that Massachusetts’ catch-all statute on pre-judgment interest, M.G.L. c. 231 § 6H [2], applies to successful actions related to the theft of trade secrets or confidential business information. However, as Governo and USM Corp. v. Marson Fastener Corp., 392 Mass. 334, 351, 467 N.E.2d 1271, 1283 (1984) (USM Corp. II) make clear, the Court retains the discretion to award pre-judgment interest in these cases when the award is calculated based not on what the plaintiff lost, but on what the defendant gained.  

As the Court in Governo points out, M.G.L. c. 231 § 6H “provides for an award of prejudgment interest whenever compensatory damages are awarded” …[b]ut not all verdicts that order a defendant to pay money to a successful plaintiff constitute an award of ‘damages’ within the meaning of § 6H. Governo at *7. Where, as in Governo, the court’s award required the “defendant to disgorge and pay the plaintiff part or all of their profit or gain from certain conduct,” it is an “equitable remedy for unjust enrichment, not an award of ‘damages’ to compensate” the plaintiff for economic injury that it suffered. Id. (emphasis added). Part of the logic behind this reasoning is that the damages in these cases were calculated from the profits or gains enjoyed by the defendant in the years after the harm occurred, and therefore, starting the interest clock on the date the wrongful conduct occurred would pre-date the time that the profits were actually earned by the defendant.

The Court retains the power to award pre-judgment interest under common law principles, requiring a balancing of equities of the particular case. USM Corp. II, 392 Mass. at 350. In both USM Corp II and Governo, the Court declined to award pre-judgment interest because “the monetary relief…is based on the defendants’ gain and not on [plaintiff’s] losses.” USM Corp. II at 350 n. 14. The key issue, therefore, is whether the damages are based upon the plaintiff’s losses that occurred starting at the time of the wrongful conduct, or upon the profits earned by the defendant after the initial wrongful act occurred. In the latter case, pre-judgment interest from the date of the wrongful act is generally not awarded in Massachusetts.

Despite a seemingly on-point statute, in cases involving stolen trade secrets or confidential information, Massachusetts courts look to the equities of a particular case and the rationale behind a calculation of financial award when determining whether pre-judgment interest will be awarded.

[1] Massachusetts defines a “trade secret” at M.G.L. c. 93 § 42(4). Massachusetts also protects confidential business information, which does not rise to the level of a trade secret, from those who improperly procure such information. USM Corp. v. Marson Fastener Corp., 379 Mass. 90, 104, 393 N.E.2d 895, 903 (1979).

[2] M.G.L. c. 231 § 6H provides: In any action in which damages are awarded, but in which interest on said damages is not otherwise provided by law, there shall be added by the clerk of court to the amount of damages interest thereon at the rate provided by section six B to be determined from the date of commencement of the action even though such interest brings the amount of the verdict or finding beyond the maximum liability imposed by law. 

Copyright © 2020 Robinson & Cole LLP. All rights reserved.National Law Review, Volume X, Number 7

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About this Author

Jacqueline Pennino Scheib IP lawyer Robinson Cole
Partner

Jacqueline Scheib chairs the firm’s Intellectual Property +Technology Group. She works with clients across a range of industries in connection with intellectual property, technology, and corporate transactions. Jackie has more than two decades of experience helping national and international companies preserve their intellectual property. She has a particular depth of experience assisting clients in the healthcare, technology, consumer product, and food and beverage industries. 

Intellectual Property

•    Prosecuting, maintaining, and...

860.275.8285
Nathaniel Arden, Health Care and Intellectual Property Attorney, Robinson Cole Law Firm, Hartford, Connecticut
Counsel

Nathaniel Arden is a member of Robinson+Cole’s Health Law Group. He advises hospitals, health systems, physician groups, community providers, and other health care entities on a variety of health law and business issues. His practice focuses on health care-related regulatory and transactional matters, as well as health care-related information technology issues. Nathaniel has an extensive background in the healthcare industry, and he worked at a large academic medical center prior to joining the firm.

Regulatory

Nathaniel advises health care providers on Medicare and Medicaid fraud and abuse laws, including advice regarding compliance with the Stark law and federal anti-kickback statute, as well as similar state laws. He counsels providers on the Health Insurance Portability and Accountability Act (HIPAA) and similar state privacy laws, state provider and facility licensing laws, scope of practice issues, certificates of need, and other regulatory issues facing health care providers. As part of Nathaniel's practice, he also handles clinical trial agreements and related clinical research issues. He also assists clients with issues concerning accountable care organizations and bundled payment arrangements.

Information Technology

Nathaniel counsels health care providers as well as software companies on information technology issues. Headvises clients on software license, software as a service (SaaS), cloud services, data license and similar information technology agreements, including agreements for electronic medical records systems, population health management tools and health information exchange software. He also advises clients on data use and ownership issues.

Transactional

Nathaniel advises health care providers on corporate transactions, particularly those between or among physician groups, hospitals and health systems. His work in this area includes due diligence, document drafting and reviews for compliance with applicable federal and state health care and corporate laws. 

Community Involvement

Nathaniel has been active in the community, including serving for two years as a member of the Board of Directors for the Connecticut Association for the Gifted, which supports and advocates for Connecticut’s gifted and talented children.

He is a regular contributor to the firm’s health law newsletter, the Health Law Pulse, and blog, Health Law Diagnosis.

860-275-8269
John Cordani  Intellectual Property Attorney Robinson Cole
Partner

John Cordani is a member of the firm’s Business Litigation Group and focuses his practice on Intellectual Property litigation. He has litigated patent, trade secret, trademark, and antitrust cases through trial and appeal in federal courts across the United States, obtaining successful results in cases involving a diverse array of technology from specialty chemical products to automated pitching machines. 

John maintains a world-wide patent litigation, prosecution, licensing and counselling practice. He is a registered patent attorney with extensive experience before the U.S. Patent...

860-275-8287
William Egan Commercial Litigator
Partner

William Egan has over twenty-five years of commercial litigation and business law experience. He handles trials at the state and federal level, along with arbitrations and mediations, involving both domestic and international matters.

In addition to his litigation practice, Bill counsels businesses on the negotiation and drafting of contracts and business agreements.

He also counsels clients on issues related to franchises and distributorships, technology, and commercial business matters, as well as real estate and leasing-related matters. Bill is a lecturer on the topics of...

860-275-8365
Benjamin Jensen, Robinson Cole Law Firm, Hartford, Cybersecurity and Litigation Law Attorney
Partner

Benjamin Jensen represents clients in litigation and regulatory compliance matters involving technology, data privacy and cybersecurity. He is a member of the firm’s Intellectual Property + Technology and Business Litigation Groups, as well as the Data Privacy + Cybersecurity Team. Ben also leads the firm’s Financial Services Cyber-Compliance Team and the Blockchain and Cryptocurrency Technology initiative.

Technology Litigation

Ben represents business clients in technology-based disputes, including...

860-275-8236