The Ninth Circuit Court of Appeals has reversed a significant $40 million judgment against XP Power, LLC, in a trade secret misappropriation case involving Comet Technologies USA, Inc. The court's ruling, filed on July 14, 2026, affects both companies and highlights the importance of proper jury instructions in legal proceedings.

The case, identified as docket number 23-15709, centered around allegations that XP Power misappropriated trade secrets from Comet Technologies, a manufacturer of components used in semiconductor fabrication. The ruling not only impacts the financial landscape for both companies but also sets a precedent regarding the handling of trade secret claims under the Defend Trade Secrets Act (DTSA).

Background

Comet Technologies USA, Inc., along with its affiliates, filed a lawsuit against XP Power, LLC, claiming that the latter had unlawfully taken proprietary information. The dispute arose when three engineers, including Christopher Mason, left Comet to join XP Power, allegedly bringing confidential documents and designs with them. Comet accused XP of using these stolen trade secrets to develop new products in the radio frequency power generator market.

The case was initially heard in the Northern District of California, where a jury awarded Comet $40 million in damages, including both compensatory and punitive damages, along with a permanent injunction against XP Power. However, the trial's outcome was contested by XP Power, leading to the appeal.

The Ruling

The Ninth Circuit's ruling reversed the district court's judgment in favor of Comet, citing errors in the jury instructions. The court found that the instructions incorrectly placed the burden of proof on XP Power to demonstrate that the trade secrets were readily ascertainable by proper means, rather than on Comet to prove that they were not. The court stated, "The panel concluded that the error was not harmless because the jury instructions were not accurate as a whole, and conflicting evidence...presented the sorts of disputes that a properly instructed jury must decide."

Judge David F. Hamilton authored the opinion, with Judges Ryan D. Nelson and Patrick J. Bumatay also on the panel. The ruling emphasized the importance of accurate jury instructions in ensuring a fair trial, particularly in complex cases involving trade secrets.

Impact

This ruling has significant implications for both Comet Technologies and XP Power. By reversing the earlier judgment, the Ninth Circuit has sent the case back for a new trial, which could lead to different outcomes regarding the alleged misappropriation of trade secrets. This decision also underscores the necessity for clear and correct jury instructions, particularly in cases that hinge on nuanced legal definitions.

The ruling may also influence how future trade secret cases are prosecuted and defended, particularly regarding the burden of proof. Companies involved in similar disputes may need to reevaluate their legal strategies and the way they present their cases to juries.

What's Next

The case has been remanded for a new trial, where the jury will need to be properly instructed regarding the burden of proof. It remains to be seen whether Comet Technologies will appeal this decision further or if there are related cases pending in the pipeline.