VERSATA SOFTWARE, LLC v. FORD MOTOR COMPANY
Authored by: Jeremy J. Gustrowsky
In a significant decision addressing trade secret damages, the Federal Circuit ruled that a software company was wrongly prevented from pursuing unjust enrichment damages, and reinstated a jury’s $82 million breach of contract award that a district court had reduced to just $3.
The case revolves around software that Versata Software developed for Ford Motor Company to handle vehicle configuration. Under a 2004 Master Subscription and Services Agreement (MSSA), Ford licensed two pieces of Versata software: the Automotive Configuration Manager (ACM) and the Materials Cost Analytics (MCA). When the agreement was set to expire in 2014 and the parties couldn’t agree on renewal terms, Ford released its own configuration software called PDO, which it had developed while still licensing from Versata. Ford sued for declaratory judgment of non-misappropriation, and Versata countersued for trade secret misappropriation and breach of contract. A jury found Ford liable on both counts, awarding roughly $22 million for trade secret misappropriation and $82 million for breach of contract, but the district court later zeroed out the trade secret award and slashed the contract damages to $3.
On the trade secret damages question, the Federal Circuit held that the district court legally erred by limiting Versata to a reasonable-royalty model tied to the parties’ licensing history. The court explained that both the federal Defend Trade Secrets Act (DTSA) and the Michigan Uniform Trade Secrets Act (MUTSA) expressly permit plaintiffs to recover unjust enrichment damages. Citing decisions from the Sixth, Tenth, and Eleventh Circuits interpreting nearly identical statutory language, the panel concluded that unjust enrichment is available as a matter of statutory right, and the district court misread Sixth Circuit precedent (Vitro Corp. and Mid-Michigan) as requiring damages to be calculated solely from prior licensing arrangements. The court vacated the trade secret damages ruling and remanded for a new trial, instructing the district court to reconsider two reasonable-royalty models it had previously excluded.
Turning to the contract damages, the Federal Circuit found the district court erred when it reduced the $82 million jury verdict to a nominal $3. Michigan law requires damages to be proven with “reasonable certainty” but not “mathematical certainty.” Versata had presented three base damages figures grounded in the parties’ licensing history ($17 million, $14.95 million, and $10.95 million per year), and instructed the jury to multiply by 7.5 years (the period of Ford’s breach). The jury’s award worked out to approximately $10.97 million per year, closely tracking the $10.95 million base license fee. Notably, even Ford’s own damages expert had called the $10.95 million figure a “much more reasonable starting point.” The Federal Circuit found this gave the jury a discernible path to calculate damages and reinstated the full $82,260,000 award.
The court also rejected Ford’s cross-appeal challenging trade secret liability. Ford argued that Versata had to prove Ford knew of the specific elements of the “combination” trade secrets (Grid, Buildability, and Workspaces components of ACM). The Federal Circuit found no such heightened knowledge requirement in either the DTSA or MUTSA, noting that the Sixth Circuit had rejected a similar argument in Caudill. Testimony from Versata’s technical expert and a former employee showed the trade secrets were disclosed to Ford’s engineers through manuals, presentations, technical documents, and the software itself, which was sufficient to support the jury’s liability finding.
The decision reinforces that trade secret plaintiffs have meaningful flexibility in choosing damages theories under both federal and state trade secret statutes, and that courts should not categorically restrict plaintiffs to licensing-based royalty calculations when the statutes plainly permit unjust enrichment recovery.