Court Of Federal Claims Details How To Compute Damages For Misappropriation Of An Asset That Has No Readily Ascertainable Market Value

A few years after ruling that the Air Force violated the confidentiality clauses of contracts with a government contractor by disclosing its proprietary information relating to the manufacturing process for a conveyor used in assembling smart bombs weighing more than a ton each, the Court of Federal Claims recently determined the contractor’s damages. The court treated the controversy as involving a “lost asset” for which there is no known market, and not a “lost profits” case as the Government contended. Therefore, the appropriate measure of damages was an estimate of the amount a willing buyer would have paid a willing seller for the proprietary information. The proper methodology was to multiply the number of conveyor units the Air Force expected to purchase as of the date of the breach, times the contractor’s bid price, times a reasonable profit, and then to discount for the “risk that a potential buyer of [the] proprietary information would associate with realizing the profit stream deriving from the use of that asset.” Spectrum Sciences & Software, Inc. v. U.S., No. 04-1366C (Court of Fed. Claims, Feb. 14, 2011) (the court’s decision regarding liability is reported at 84 Fed. Cl. 716 (2008)). 

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