In Versata v. Ford, a key question emerges: does a license agreement cap trade secret damages at a royalty, or can the plaintiff still recover the defendant's ill-gotten gains? Trade secret law traditionally lets a plaintiff capture a taker's profits, a remedy broader than the reasonable royalty typical in patent cases. The contract at issue may narrow that recovery, but courts have not reached a consensus.
The split reflects a deeper tension between freedom of contract and the deterrent purpose of trade secret law. If a license can pre‑set damages, it might encourage early licensing but also weaken the penalty for misappropriation. Conversely, ignoring the contract could undermine negotiated risk‑allocation between sophisticated parties.
Until the courts resolve this, companies drafting trade secret licenses should watch the outcome closely. The decision in Versata v. Ford could clarify whether a royalty cap is a safe harbor or a trap, depending on which side of the split prevails.