The following is for information purposes, and not meant to be legal advice.
In confidentiality agreements, should confidentiality breach be carved out of the limitaion of indirect damages? When confidentiality is breached, are the only damages that results indirect damages?
Compensatory damages are usually considered to be direct damages, though the distinction between direct and indirect damages is blurred. Compensatory damages in the trade secret context have included profits and lost sales, damages from disruption to business, investment value of trade secret prior to misappropriation, loss of reputation, fair market value of the trade secret lost by disclosure, and costs for remedial measures taken to minimize damages from misappropriation.
Restitution is another damage often imposed where the misappropriation is a breach of a confidential or fiduciary duty. Restitutionary awards have allowed a plaintiff to recover the defendant's profits, whether or not the profits represented losses to the plaintiff. A plaintiff may also receive other unjust enrichment awards to recover expenses saved as a consequence of misappropriation.
In California, direct damages may generally be shown based on either the trade secret holder's loss or the misappropriator's gain under a theory of unjust enrichment. If neither damages nor unjust enrichment is provable, the court may order payment of a reasonable royalty.
Some courts have upheld liquidated damages for breach of non-compete if the non-compete is not unenforceable, and the liquidated damages clause is reasonable.
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