In the right circumstances, trade secrets litigation is well suited for contingency-fee representation. My firm uses contingency and alternative-fee structures regularly. We also work closely with the major litigation funders, which gives us a clear view of how these matters get evaluated when real capital is committed to them.
If you’re a business owner, executive, or general counsel trying to figure out whether your situation might fit, here’s how to think about it.
What “contingency” actually means in this space
A few structures show up:
Pure contingency. The firm gets paid only out of recovery. Pure contingency works for the right case, but the case has to be strong enough on liability, damages, and collectability to justify the firm taking on potentially years of work with no incoming revenue.
Hybrid fee. A reduced hourly rate combined with a success fee on recovery. This is increasingly common in trade secrets work because it gets serious cases filed with risk shared between the client and the firm.
Funded matters. A litigation funder covers fees and/or costs in exchange for a portion of the recovery. The funder underwrites the case, the client preserves cash, and the firm gets paid as work is done with an additional success component. This is how a lot of mid-to-large trade secrets matters get financed today, and we have established relationships with many funders in the space.
What makes a trade secrets case attractive for contingency?
A handful of factors matter, and they work together. A weakness in one can sometimes be offset by strength in another, but a case that’s weak across the board isn’t a contingency case no matter how aggrieved the client feels.
Liability that’s clear and provable. Cases where you can already point to evidence of misappropriation: the departing employee’s forensics, the customer who got the cold-call from the new venture, the source code that showed up in a competitor’s product, the text messages, the downloads to a personal drive in the final two weeks.
A defendant who can actually pay. A judgment against a shell company that the former employee set up last month is worth nothing. Contingency cases need a real defendant, such as an established competitor, a well-funded startup, a deep-pocketed acquirer, or individuals with collectible assets. This is often the threshold question. Not “did they steal it,” but “if we win, can we collect.”
Damages that are substantial and demonstrable. Trade secrets damages can be measured several ways: actual losses, unjust enrichment, and/or a reasonable royalty, with exemplary damages and fees available for willful and malicious misappropriation. The cases that work on contingency have a credible damages theory that produces a meaningful recovery, supported by real economic facts like lost customers, lost revenue, the defendant’s gains, or the value of the head start. Cases where the damages story is speculative or thin don’t work for contingency representation.
A reasonable path to resolution. Some trade secrets cases settle relatively quickly because the evidence is overwhelming and the defendant has too much to lose. Others grind for years through discovery battles and expert wars. Both can work on contingency, but the underwriting is different.
Injunction-driven cases vs. damages-driven cases
Some trade secrets cases are primarily about stopping the misappropriation: getting a TRO or preliminary injunction, shutting down the competing use, and recovering or destroying the misappropriated materials. The client’s goal is to stop the bleeding, and a successful outcome may not produce a large monetary recovery. These cases are often filed quickly, fought hard at the front end, and resolved through injunctive relief or a settlement that focuses on conduct rather than dollars.
Other cases are primarily about damages. The misappropriation has already produced economic harm (lost customers, lost revenue, the defendant’s gains) and the goal is to recover money. These cases tend to be longer, more discovery-intensive, and more expert-heavy, but they also produce the kind of recovery that can be shared with counsel and funders.
A pure contingency or funded structure works most cleanly on the damages side, because there’s a recovery to share. Injunction-driven cases can work on alternative fees, but they generally require a substantially larger success-fee component to make the economics work. The reason is straightforward: the firm is doing intense, time-compressed work at the front end, and there isn’t necessarily a pot of gold at the back end to compensate for the risk.
Most cases have elements of both. A serious matter often starts with an injunction phase, then transitions into a damages case once the immediate threat is contained. Fee structures in those matters get tailored to the arc, with different terms for the injunction phase than for the merits phase, or a blended structure that accounts for both.
If you are interested in exploring contingency-fee representation for a trade secrets matter, reach out. Given our extensive experience in this area, we have the capability to figure out quickly whether a contingency, hybrid, or funded structure works for your matter. In many cases, after an initial conversation and a review of the key materials, we can tell you within a meeting or two whether we would take the case on an alternative fee arrangement and what that arrangement would look like. If it isn’t a fit for us, we can usually point you somewhere it might be.
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