One Wrong Jury Instruction Wiped Out a $40 Million Trade Secret Verdict: What the Comet Technologies Case Means for Your Business

The U.S. Court of Appeals for the Ninth Circuit reversed a $40 million trade secret verdict on July 14, 2026, in Comet Technologies USA, Inc. v. XP Power, LLC, vacated a permanent injunction and an attorneys' fee award exceeding $17 million, and sent the case back for a new trial. The reason was not a lack of evidence. The court found that a single jury instruction placed the burden of proof on the wrong party. For any business that protects proprietary information or faces trade secret claims, this case is a sharp reminder that winning at trial means nothing if the legal framework underlying the verdict is flawed.

The Dispute

Comet Technologies manufactures radio frequency power generators and impedance matching products. In February 2018, three senior Comet engineers left the company to join XP Power and develop competing product lines. According to the court's findings, the departing engineers carried with them thousands of confidential Comet documents and files covering product designs, research and development strategy, and underlying technologies. Within nine days of their arrival at XP, the company had complete designs and a development plan for its new product lines. Comet sued in the Northern District of California under both the federal Defend Trade Secrets Act (DTSA) and the California Uniform Trade Secrets Act (CUTSA).

During trial, Comet voluntarily dismissed its California state law claims to simplify the case for the jury, leaving only its federal DTSA claims. The jury ultimately found that XP had misappropriated three of five asserted trade secrets and awarded $20 million in compensatory damages, plus $20 million in punitive damages for willful and malicious misappropriation. The trial court then entered a permanent injunction and awarded over $17 million in attorneys' fees. On appeal, however, all of that was undone by one jury instruction that had not been updated when the CUTSA claims were dropped.

Why the Jury Instruction Mattered

The critical issue was which side had to prove whether the trade secrets were "readily ascertainable" through proper means. Under the federal DTSA, the absence of ready ascertainability is built into the definition of a trade secret itself. That means the plaintiff (the company claiming its secrets were stolen) must prove that the information was not readily ascertainable as part of its case. Under California's CUTSA, the law takes the opposite approach: ready ascertainability is treated as an affirmative defense that the defendant must prove. When Comet dismissed its California claims but the jury instruction still followed the California framework, the jury was told that XP bore the burden of proving the secrets were readily ascertainable. In reality, under the DTSA, Comet should have carried that burden. The Ninth Circuit held that this error was not harmless and ordered a new trial.

This distinction may sound technical, but it carries enormous practical consequences. When the burden is on the defendant, the plaintiff can win without ever having to demonstrate that its information was truly secret in a way that competitors could not have discovered on their own. When the burden shifts to the plaintiff under the DTSA, the plaintiff must affirmatively prove this element, and failure to do so can sink the entire case. In Comet Technologies, the jury never evaluated the evidence under the correct standard, which meant the $40 million verdict could not stand.

Key Takeaway for Business Owners

If your business depends on proprietary information, this case highlights two critical lessons. First, understand that trade secret protection is not just about what you know but about what you can prove. A company claiming trade secret misappropriation under federal law must be prepared to demonstrate that its information was not readily ascertainable by competitors through legitimate means. That requires documenting and maintaining the measures you take to keep your information confidential, from access controls and non-disclosure agreements to employee training and exit procedures. Second, the choice of which legal claims to pursue, and the details of how those claims are presented to a jury, can determine whether a multimillion-dollar verdict survives appeal. Litigation strategy matters at every stage of a trade secret dispute, not just during trial.

Whether you are building a trade secret protection program or facing a dispute over proprietary information, having the right legal strategy from the start is essential. Schedule a free consultation with Diorio IP Law Group to discuss how to protect your business's confidential information and prepare for the legal challenges ahead.