Syntel v. TriZetto: Trade Secrets

The Second Circuit vacated a roughly $285 million unjust-enrichment award, holding that avoided development costs were unavailable because Syntel's only unjust gain was already addressed in computing TriZetto's actual loss.

In Syntel Sterling Best Shores Mauritius Ltd. v. The TriZetto Group, Inc., 68 F.4th 792, No. 21-1370 (2d Cir. May 25, 2023), the Second Circuit confronted one of the most consequential remedies questions under the Defend Trade Secrets Act: when may a trade-secret owner recover the costs the misappropriator avoided by stealing, rather than developing, the information? On appeal from the Southern District of New York (Schofield, J.), the court vacated an unjust-enrichment award of roughly $285 million in avoided development costs, holding that this measure was unavailable on the facts because the defendant’s only unjust gain was already addressed in computing the plaintiff’s actual loss and the plaintiff suffered no compensable harm beyond its lost profits. The decision is now the leading appellate authority cabining “avoided costs” as a DTSA damages theory.

The case grew out of a soured commercial relationship in healthcare information technology. TriZetto licenses software used by health insurers to process claims; Syntel was, for a time, its partner in providing implementation and support services, with contractual access to TriZetto’s platform and confidential materials. After the relationship deteriorated, TriZetto counterclaimed that Syntel had misappropriated its trade secrets to build a competing services capability. A jury agreed, finding that Syntel had misappropriated 104 of TriZetto’s trade secrets in violation of the DTSA and New York law, and also found copyright infringement. The jury’s DTSA award was measured by the development costs Syntel avoided (what it would have cost to create the information itself), and came to $284,855,192.

At a glance

Case: Syntel Sterling Best Shores Mauritius Ltd. v. The TriZetto Group, Inc., 68 F.4th 792, No. 21-1370 (2d Cir. May 25, 2023), on appeal from the Southern District of New York.
Liability: Jury found misappropriation of 104 trade secrets under the DTSA and New York law, plus copyright infringement; liability was not the focus of the reversal.
The vacated award: approximately $284.9 million in “avoided” development costs, awarded as unjust enrichment under the DTSA.
Statute: DTSA damages provision, 18 U.S.C. § 1836(b)(3)(B), permitting actual loss plus unjust enrichment “not addressed in computing damages for actual loss.”
Core holding: Avoided development costs were unavailable here because Syntel’s only unjust gain was already addressed in computing TriZetto’s actual loss and, beyond its lost profits, TriZetto showed no compensable harm.

The structure of DTSA damages

The court’s analysis starts from the text of § 1836(b)(3)(B), which authorizes two compensatory measures. A plaintiff may recover “damages for actual loss caused by the misappropriation,” and separately “damages for any unjust enrichment caused by the misappropriation … that is not addressed in computing damages for actual loss.” The statute thus permits stacking actual loss and unjust enrichment, but only to the extent the unjust-enrichment component reaches gains not already counted in the actual-loss figure. That “not addressed in computing” clause does the decisive work.

Avoided development costs are a recognized form of unjust enrichment: the idea is that a thief who skips the research-and-development expense is enriched by the savings, and the law can strip that benefit. The problem in Syntel was that nothing was left for the unjust-enrichment measure to reach. The jury awarded avoided costs alone, because TriZetto took the position at trial that awarding lost profits and avoided costs together would be double counting, and the verdict form therefore never asked the jury to fix lost profits. On the Second Circuit’s reading of the record, Syntel’s only unjust gain was the $823,899 in profits it earned servicing one customer with the secrets, and that gain was “addressed in computing damages for [TriZetto’s] actual loss,” which TriZetto’s own expert put at $8.5 million in lost profits. A $285 million avoided-cost figure therefore reached no enrichment the statute left unaddressed and would have functioned as a windfall untethered to any incremental harm.

Why “avoided costs” failed on these facts

The court was careful to frame its holding as fact-dependent rather than as a categorical ban on avoided-cost recovery. The decisive points were that Syntel never developed or sold a competing software product using the secrets, that the misappropriation did not diminish, much less destroy, the secrets’ continued value to TriZetto (the court noted that Facets is worth more today than when the misappropriation occurred), and that the district court’s permanent injunction had already ended Syntel’s ability to profit from any costs it avoided. In the court’s words, “[b]eyond its lost profits, however, TriZetto suffered no compensable harm supporting an unjust enrichment award of avoided costs.” Where the trade secret retains its value to the owner and the misappropriator’s enrichment is already reflected in the owner’s actual loss, an avoided-cost figure measures nothing the statute leaves unaddressed.

That reasoning ties unjust enrichment back to the misappropriation’s real economic consequences. Avoided development cost is sometimes pitched as a free-standing, easy-to-quantify number (take the plaintiff’s R&D budget and hand it to the plaintiff), but the Second Circuit insisted that the measure must correspond to an enrichment that is both caused by the misappropriation and not already counted elsewhere. The court effectively rejected using avoided costs as a punitive proxy or as a default windfall when actual harm is modest or already compensated.

What survived and what was sent back

Liability survived intact: the panel affirmed the misappropriation and copyright findings and vacated only damages. It remanded for the district court to address the propriety of the two remaining jury awards, the $142,427,596 New York trade-secret award measured as a reasonable royalty and the $59,100,000 copyright award. Notably, the court expressly declined to send back the question whether TriZetto could instead recover its $8.5 million in lost profits under § 1836(b)(3)(B)(i)(I), because TriZetto had not asked the jury to find lost profits and did not argue for them on appeal.

Subsequent history (as of July 2026): on remand, the district court vacated the reasonable-royalty and copyright awards as well (March 13, 2024), finding the royalty figure bore no reasonable relation to the harm TriZetto actually suffered, then granted a new trial on compensatory damages. The retrial jury returned $69,977,813 in compensatory damages on June 30, 2025, and the court later reduced punitive damages to $139,955,626. An amended final judgment of roughly $297.9 million was entered on April 29, 2026, and Syntel and its parent Atos filed a notice of appeal to the Second Circuit on May 19, 2026, so the damages story is not yet final.

The remand underscores a practical lesson: a plaintiff who anchors its entire trade-secret case to a single, aggressive damages theory risks losing the lot on appeal, whereas alternative measures (reasonable royalty, profits causally tied to the misappropriation, or actual lost profits) may prove more durable. The opinion is best read not as hostility to large trade-secret recoveries but as a demand that each dollar map onto a recognized, non-duplicative measure of harm or gain.

Open questions

Syntel leaves the boundaries of avoided-cost recovery for future cases. When is an avoided-cost award proper: must the trade secret’s value to the owner be demonstrably diminished, or is it enough that the misappropriator obtained a head start the owner cannot otherwise capture? How should courts treat cases where the defendant has not yet marketed a competing product but has banked the development savings for later use? And how does the “not addressed in computing damages for actual loss” clause interact with reasonable-royalty awards, which are themselves a hybrid measure? The court’s fact-bound framing means practitioners must reason by analogy, and district courts will continue to test how much daylight the opinion leaves for avoided-cost theories in cases where actual loss is hard to prove.

Implications

Map every dollar to the statute. Under § 1836(b)(3)(B), unjust enrichment is recoverable only to the extent it is “not addressed in computing damages for actual loss.”
Avoided costs are not a default windfall. Where the defendant’s gain is already addressed in computing actual loss, and the owner shows no compensable harm beyond its lost profits, avoided costs measure nothing the statute leaves open.
Plead alternative damages measures. Reasonable royalty, causally connected profits, and actual lost profits may survive where an aggressive avoided-cost theory will not.
Tie enrichment to consequences. Avoided-cost recovery should track a real, non-duplicative benefit caused by the misappropriation, not the plaintiff’s historical R&D budget.
Big verdicts face hard appellate scrutiny. A nine-figure award resting on a single theory is vulnerable if the theory double counts.

Frequently asked questions

What are “avoided costs” in a trade-secret case? They are the development or research-and-development expenses a misappropriator did not have to incur because it took the information instead of creating it. They are treated as a form of unjust enrichment under the DTSA.

Why did the Second Circuit vacate the avoided-cost award? Because Syntel’s only unjust gain, roughly $823,899 in profits from servicing one customer, was already addressed in computing TriZetto’s actual loss, and beyond its lost profits TriZetto showed no compensable harm. The DTSA allows unjust-enrichment damages only for gains “not addressed in computing damages for actual loss.”

Does Syntel eliminate avoided-cost damages under the DTSA? No. The court’s holding is fact-specific. Avoided costs remain a recognized unjust-enrichment measure; they are simply unavailable where the defendant’s gain is already addressed in computing the owner’s actual loss and the owner shows no compensable harm beyond its lost profits.