Page:MGE UPS Systems Inc. v. GE Consumer and Industrial Inc. (5th Cir., 20 July 2010).djvu/14

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No. 08-10521

profits on sales attributable to the use of the trade secret. . . . The

plaintiff has the burden of establishing the defendant’s sales; the defendant has the burden of establishing any portion of the sales not attributable to the trade secret and any expenses to be deducted

in determining net profits.

MGE points to PMI’s total revenue in DX-37 and argues that, under the Restatement, this exhibit satisfies its burden of proof with regard to PMI’s “sales” of providing service to UPS machines. MGE contends that GE/PMI subsequently had the burden of demonstrating which portions of PMI’s revenue were not attributable to the state law claims, which it failed to do.

Texas courts have not adopted the Restatement (Third) of Unfair Competition in its entirety and whether § 45’s comment f is controlling in Texas courts is still an open question. See, e.g., In re Bass, 113 S.W.3d 735, 739–40 (Tex. 2003) (following the original Restatement of Torts’ definition of and factors used to identify trade secrets, despite this section’s slight alteration thereof in the Restatement (Third) of Unfair Competition[1]); Lear Siegler, Inc. v. Perez, 819 S.W.2d 470, 471–72 (Tex. 1991) (adopting an “instructive” portion of the Restatement (Second) of Torts but noting that the Texas Supreme Court has not adopted the Restatement in its entirety). The burden-shifting procedures noted in comment f are not included in the first Restatement of Torts, whose definition of and factors used to identify trade secrets are still used by Texas courts. See In re Bass, 113 S.W.3d at 739–40. Neither the Texas Supreme Court nor any of the Texas appellate courts have specifically applied comment f to determine a defendant’s profits in a trade secret action. Given that comment f’s standard sets a plaintiff’s burden of proof for trade secret damages

  1. The concept of unfair competition, which was originally included in the first Restatement of Torts and was tentatively slated for inclusion in the Restatement (Second) of Torts, is now addressed in the Restatement (Third) of Unfair Competition.

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