Trade Secret Damages in California: Loss, Unjust Enrichment, Royalty, and Exemplary Damages

Last updated: November 2026

Trade secret damages in California come in three measures. The owner may recover its actual loss plus the defendant's unjust enrichment not already counted in the loss; if neither can be proved, the court may order a reasonable royalty. (Civ. Code, § 3426.3, subds. (a), (b).) For willful and malicious misappropriation, the court may add exemplary damages of up to twice that award and shift attorney fees. (Civ. Code, §§ 3426.3, subd. (c), 3426.4.) Kolmogorov Law, P.C. litigates these numbers in Orange County, Los Angeles, and across California.

Call (909) 235-6116 or contact us online to discuss what your claim, or the claim against you, is actually worth.

What trade secret damages the statute allows

The California Uniform Trade Secrets Act gives the plaintiff a choice of measures rather than one formula. Subdivision (a) of Civil Code section 3426.3 allows damages for the actual loss caused by the misappropriation, and separately allows recovery for unjust enrichment that is not taken into account in computing actual loss. Subdivision (b) applies only when neither of those is provable; then the court may order payment of a reasonable royalty for no longer than the period the use could have been prohibited. (Civ. Code, § 3426.3, subds. (a), (b).)

The federal Defend Trade Secrets Act uses the same structure, with the royalty available in lieu of other measures. (18 U.S.C. § 1836(b)(3)(B).) Our page comparing DTSA and CUTSA claims covers the forum choice.

Actual loss

Actual loss is the plaintiff's own harm. It includes profits lost on sales diverted to the defendant, price cuts forced by a competitor who knew the plaintiff's cost structure, and the cost of the research the defendant short-circuited. The proof resembles a lost profits case in a breach of contract action: historical sales, margins, and causation.

Causation is the fight. A defendant will argue that customers left for price or service reasons, that the market shrank, or that the plaintiff's own salesperson was the problem. The plaintiff needs account-level evidence tying each lost sale to the use of the secret.

Unjust enrichment

Unjust enrichment measures what the defendant gained. That can be profits on products built with the stolen process, development costs the defendant avoided, or the head start it bought by skipping years of trial and error. The statute lets the plaintiff recover this gain in addition to its own loss, so long as the same dollars are not counted twice. (Civ. Code, § 3426.3, subd. (a).)

This measure fits cases where the plaintiff has not yet lost sales but the defendant has leapt ahead. A startup whose prototype designs were taken by a former contractor may have no lost profits at all, and still have a substantial unjust enrichment claim.

Unjust enrichment depends on the defendant's financial records, so it usually cannot be quantified until discovery, and discovery relating to the trade secret cannot begin until the plaintiff identifies it with reasonable particularity. (Code Civ. Proc., § 2019.210.) Our page on identifying trade secrets under section 2019.210 explains the step.

Reasonable royalty

When neither loss nor gain can be proved, the court may order a reasonable royalty. (Civ. Code, § 3426.3, subd. (b).) The question becomes what a willing licensor and a willing licensee would have agreed to for the use that actually occurred, for a period no longer than the use could have been prohibited.

Royalty evidence usually comes from the plaintiff's licensing history, comparable industry licenses, and expert testimony about the value the secret added to the defendant's product. The royalty is a statutory fallback, and a plaintiff who could have proved loss or gain should expect that argument from the defense.

A court can also use a royalty on the injunction side. If it would be unreasonable to prohibit future use, an injunction may condition future use on payment of a reasonable royalty. (Civ. Code, § 3426.2, subd. (b).)

Exemplary damages and attorney fees

If willful and malicious misappropriation exists, the court may award exemplary damages in an amount not exceeding twice any award under subdivision (a) or (b). (Civ. Code, § 3426.3, subd. (c).) The same finding supports an award of reasonable attorney fees and costs to the prevailing party, and the recoverable costs include a reasonable sum for expert witnesses. (Civ. Code, § 3426.4.)

Two features of these provisions matter in settlement talks. The exemplary award is discretionary and capped at double, so the realistic ceiling is three times compensatory damages. And fee shifting runs both ways: a claim made in bad faith exposes the plaintiff to the defendant's fees. (Civ. Code, § 3426.4.) I raise that exposure early in cases where the plaintiff has sued first and looked for a trade secret later.

Injunctions as a remedy with a dollar value

Actual or threatened misappropriation may be enjoined, and the injunction may continue for an additional period after the secret ceases to exist in order to eliminate the commercial advantage the defendant gained. (Civ. Code, § 3426.2, subd. (a).) For many businesses the injunction is worth more than the damages. A competitor forced to stop shipping a product while it redesigns loses market share that no damages award will replace. Our page on TROs and preliminary injunctions covers the early stages.

How these cases come up

A manufacturer learns that a former process engineer joined a competitor whose new line uses the same tolerances and plating chemistry. The damages case will likely be unjust enrichment: the competitor's avoided development cost and the profit on the new line.

A staffing company loses three recruiters who take a client database. The case is actual loss: placements that went to the new firm, proved account by account, with a royalty theory in reserve if the client-level proof is thin.

What to bring to the first meeting

Bring your financial statements for the three years before and after the misappropriation, customer-level sales data, any licenses you have granted for the information, evidence of what the defendant has done with it, and your confidentiality agreements. If you are the defendant, bring your own development records; independent development is the strongest answer to both loss and gain.

Frequently asked questions

How are trade secret damages calculated in California?

The plaintiff may recover actual loss, plus the defendant's unjust enrichment not already counted in the loss. If neither is provable, the court may order a reasonable royalty for the period of use. (Civ. Code, § 3426.3, subds. (a), (b).) The measures are alternatives, not a formula, and the evidence decides which one carries the case.

Can I get punitive damages for trade secret misappropriation?

Yes, in a limited form. If the misappropriation was willful and malicious, the court may award exemplary damages up to twice the compensatory award. (Civ. Code, § 3426.3, subd. (c).) The award is discretionary, and the finding of willfulness and malice is usually the contested issue.

Who pays attorney fees in a trade secret case?

Each side pays its own unless the statute shifts them. The court may award reasonable fees and costs, including expert witness costs, to the prevailing party in three situations. They are willful and malicious misappropriation, a claim made in bad faith, and a motion to terminate an injunction made or resisted in bad faith. (Civ. Code, § 3426.4.)

What if I cannot prove lost profits?

You can still recover. Unjust enrichment captures the defendant's gain even if you lost no sales. If neither loss nor gain is provable, the court may award a reasonable royalty. (Civ. Code, § 3426.3, subd. (b).) An injunction is also available regardless of whether damages can be quantified.

Can I recover both my losses and the defendant's profits?

Yes, to the extent they do not overlap. The statute allows unjust enrichment that is not taken into account in computing actual loss. (Civ. Code, § 3426.3, subd. (a).) A sale you lost and the defendant won is one injury, not two.

Talk to a California trade secret attorney

To discuss the value of a trade secret claim or your exposure on one, call (909) 235-6116 or contact us online. Kolmogorov Law, P.C. is at 327 Magnet, Irvine, CA 92618, and litigates these cases in Orange County, Los Angeles, and throughout California. See also our trade secret attorney page and our misappropriation guide.

This page provides general information about California law and is not legal advice. Outcomes depend on the evidence of loss and gain, the conduct of the parties, and the court.