Trade-Secret “Ownership” Limits for Third-Party Deal Data and Non-Secret Acquisition Strategy: ZipBy USA LLC v. Parzych (1st Cir. 2026)

Court: United States Court of Appeals for the First Circuit
Date: March 19, 2026
Posture: Defendant appeal and plaintiffs’ cross-appeal from post-trial rulings (including partial JMOL on trade secrets), injunction, and fee award.

1. Introduction

ZipBy USA LLC v. Parzych arises from a classic duty-of-loyalty fact pattern set in the M&A context. Gregory Parzych, ZipBy’s president and the founder of a predecessor company (TCS), learned that TCS’s then-owner, Q-Free International (“Q-Free”), was considering selling TCS. Parzych was tasked with investigating the opportunity for ZipBy, received TCS financial information from Q-Free, and then (as the jury found) steered ZipBy away from the acquisition while positioning himself—through a shell entity—to buy TCS personally.

ZipBy and affiliates sued, asserting breach of fiduciary duty, breach of contract, trade-secret misappropriation (under Massachusetts law and the DTSA), and related IP/unfair competition claims, seeking damages and an injunction. After a jury verdict for ZipBy on all counts, the district court granted judgment as a matter of law (JMOL) against ZipBy on the trade-secret claims, but otherwise sustained the verdict, entered a permanent injunction barring Parzych from acquiring TCS, and awarded substantial attorneys’ fees and expert fees under a fee-shifting clause in the parties’ IP Agreement.

The First Circuit affirmed across the board. Of particular doctrinal importance, it endorsed a practical limit on trade-secret “ownership” theories that attempt to re-characterize a third party’s deal-room financials as the plaintiff’s trade secrets simply because the plaintiff received the information under confidentiality, and it rejected the claim that an “internal strategy” to forgo a deal was a trade secret where the strategy was implemented by telling the counterparty (i.e., not kept secret).

2. Summary of the Opinion

  • Expert damages (Rule 702/Daubert): The district court permissibly admitted ZipBy’s expert’s lost-profits analysis; disputes about projections and COVID-era performance went to weight, not admissibility.
  • Exclusion of late-disclosed tax returns (Rules 26/37): The court did not abuse discretion in excluding TCS’s 2021–2022 tax returns disclosed on the eve of trial; the late disclosure was neither substantially justified nor harmless.
  • Continuance/remote participation: Denial of a mid-trial continuance when lead counsel contracted COVID-19 was within trial-management discretion; no concrete prejudice was shown where co-counsel proceeded in person and lead counsel participated remotely.
  • Trade secrets (DTSA and Massachusetts): JMOL for Parzych was proper; ZipBy failed to prove it “owned” Q-Free’s financial data for misappropriation purposes, and ZipBy’s “strategy to forgo the TCS opportunity” was not secret (nor protected by reasonable secrecy measures).
  • Fee shifting (California law): The IP Agreement authorized fees incurred “in enforcing” the agreement’s covenants and was not limited to fees tied only to injunctive relief; no improper apportionment where issues were common and the district court reasonably reduced the request.

3. Analysis

3.1. Precedents Cited (and How They Shaped the Decision)

A. Expert testimony and “gatekeeping”

  • Gen. Elec. Co. v. Joiner, 522 U.S. 136 (1997): Anchored deferential abuse-of-discretion review for evidentiary rulings, including expert admissibility.
  • Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999): Provided the governing relevance/reliability framework and confirmed it applies to all expert testimony.
  • Lawes v. CSA Architects & Eng'rs LLP, 963 F.3d 72 (1st Cir. 2020), and Milward v. Acuity Specialty Prods. Grp., 639 F.3d 11 (1st Cir. 2011): Emphasized that Daubert is not a correctness test; the proponent must show the Rule 702 elements are more likely than not satisfied, and weaknesses are generally for cross-examination.
  • United States v. Mooney, 315 F.3d 54 (1st Cir. 2002), and Crowe v. Marchland, 506 F.3d 13 (1st Cir. 2007): Reinforced that expert opinions need not be “unassailable” and that objections to factual underpinnings often go to weight.

B. Discovery disclosure and sanctions

  • Gomez v. Rivera Rodriguez, 344 F.3d 103 (1st Cir. 2003): Confirmed abuse-of-discretion review for discovery sanctions.
  • Harriman v. Hancock Cnty., 627 F.3d 22 (1st Cir. 2010): Supplied the multi-factor test for Rule 37(c)(1) preclusion (justification, harmlessness, litigation history, docket impact, and need).
  • Thibeault v. Square D Co., 960 F.2d 239 (1st Cir. 1992), quoting United States v. Procter & Gamble Co., 356 U.S. 677 (1958): Framed disclosure as preventing “trial by ambush.”

C. Continuances and trial management

  • United States v. Saccoccia, 58 F.3d 754 (1st Cir. 1995), quoting Morris v. Slappy, 461 U.S. 1 (1983): Established the demanding standard for overturning denial of continuance—no “unreasoning and arbitrary insistence” on speed—and identified relevant factors (reasons offered, utility, inconvenience, prejudice).

D. Trade-secret standards, “ownership,” and secrecy measures

  • Allstate Ins. Co. v. Fougere, 79 F.4th 172 (1st Cir. 2023): Guided the court’s approach to analyzing DTSA and Massachusetts misappropriation claims “in tandem” where standards are substantially similar.
  • Incase Inc. v. Timex Corp., 488 F.3d 46 (1st Cir. 2007): Provided the Massachusetts formulation requiring acquisition/use by improper means in breach of a confidential relationship.
  • Viken Detection Corp. v. Videray Tech. Inc., 384 F. Supp. 3d 168 (D. Mass. 2019): Cited for the similarity between DTSA and Massachusetts misappropriation standards.
  • Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984): Supplied the property-right conception that a trade secret’s scope is defined by the owner’s measures to prevent disclosure.
  • Jet Spray Cooler, Inc. v. Crampton, 282 N.E.2d 921 (Mass. 1972): Used to highlight that secrecy measures are central to whether information qualifies as a trade secret.

E. Damages for loyalty breaches and analogies to trade-secret remedies

  • Demoulas v. Demoulas Super Mkts., Inc., 677 N.E.2d 159 (Mass. 1997), and Hanover Ins. Co. v. Sutton, 705 N.E.2d 279 (Mass. App. Ct. 1999): Demonstrated that restitution is an available remedy for duty-of-loyalty/corporate opportunity violations, but (as the First Circuit stressed) not necessarily the exclusive remedy.
  • Jet Spray Cooler, Inc. v. Crampton, 385 N.E.2d 1349 (Mass. 1979): Supported the proposition that, at least in the analogous trade-secret context, Massachusetts recognizes both unjust-enrichment and “actual loss” damages—undercutting a categorical bar on lost profits.

F. Attorneys’ fees and apportionment under California law

  • Small Just. LLC v. Xcentric Ventures LLC, 873 F.3d 313 (1st Cir. 2017), Gay Officers Action League v. Puerto Rico, 247 F.3d 288 (1st Cir. 2001): Established standards of review (abuse of discretion for fee awards; legal errors are per se abuses).
  • Holsum de P.R., Inc. v. ITW Food Equip. Grp. LLC, 116 F.4th 59 (1st Cir. 2024): Confirmed de novo review for contract interpretation questions.
  • In re Newport Plaza Assocs., L.P., 985 F.2d 640 (1st Cir. 1993): Allowed acceptance of parties’ agreement on applicable substantive law (here, California via the contract’s choice-of-law clause).
  • Reynolds Metals Co. v. Alperson, 599 P.2d 83 (Cal. 1979): Provided the key California apportionment principle—no need to apportion fees when incurred on issues common to fee-eligible and non-fee-eligible claims.

3.2. Legal Reasoning

A. Rule 702/Daubert: projection-based lost profits survived admissibility scrutiny

The court treated Parzych’s objections to ZipBy’s expert (Scally) as primarily attacking the inputs (pre-COVID projections and “but-for” performance assumptions), not the methodology’s reliability under Rule 702. The First Circuit emphasized that synergies from an acquisition could rationally support projections exceeding TCS’s standalone results, and that Scally did incorporate a pandemic-related decrease while pointing to receivables and backlog to justify recovery. The opinion frames these disputes as the paradigmatic “weight, not admissibility” contest, especially where cross-examination and contrary evidence (including a defense expert) were available.

B. Lost profits are not categorically barred as a remedy for misappropriated corporate opportunities under Massachusetts law

Parzych sought a rule that corporate-opportunity cases are limited to restitution/disgorgement because lost profits are speculative. The First Circuit rejected that categorical limitation: it read Demoulas v. Demoulas Super Mkts., Inc. as permissive (“may properly order restitution”), not exclusive, and drew a remedy analogy to Jet Spray Cooler, Inc. v. Crampton (1979), which allows either unjust enrichment or actual loss for trade-secret misappropriation. The takeaway is practical: Massachusetts law does not, by default, forbid plaintiffs from proving actual-loss/lost-profit damages for loyalty-based diversion of an opportunity; the dispute is more properly about proof and causation than remedy availability.

C. Rule 37(c)(1): late-disclosed tax returns were properly excluded

The opinion treats the exclusion not as an unduly harsh “sanction,” but as the expected consequence of Rule 37(c)(1) where a party fails to comply with Rule 26’s pretrial disclosure/supplementation duties and cannot show substantial justification or harmlessness. Applying Harriman v. Hancock Cnty., the court found: (i) unjustified delay (raised two years after fact discovery, seven days before trial); (ii) non-harmlessness (ZipBy would have no meaningful chance to test the returns’ contents or context); and (iii) limited necessity (the returns largely duplicated testimony that TCS performed worse than projections). The ruling underscores that “impeachment” framing does not automatically immunize late-disclosed documents if they are substantively relevant to damages and should have been timely disclosed.

D. Continuance denial: remote participation plus co-counsel presence defeated a showing of prejudice

The First Circuit applied the Saccoccia/Morris v. Slappy standard and found no “unreasoning and arbitrary” insistence on speed. Central to the analysis was the absence of concrete prejudice: co-counsel tried the case in person, lead counsel conducted key examinations remotely, and she declined an opportunity to argue in person masked. The court also noted that the contemporaneous record reflected no formal objection or mistrial request, reinforcing the view that the trial-management solution was not unfair in practice.

E. Trade secrets: the court imposed functional limits on “owner” and secrecy theories in deal-context disputes

The cross-appeal turned on whether ZipBy could sustain a trade-secret misappropriation verdict based on (1) Q-Free’s TCS financial data and (2) ZipBy’s internal “strategy to forgo” the acquisition.

  • Q-Free financial data: ZipBy’s theory was that it was an “owner” under the DTSA because it held the information subject to confidentiality (a “licensee” theory under 18 U.S.C § 1839(4)), and Parzych used it without consent when pursuing TCS personally. The First Circuit, echoing the district court’s commercial realism, held the record could not support that reframing. It emphasized that Q-Free—the actual originator/owner—appeared untroubled once it knew it was “dealing with” Parzych personally (“Fine for us. It doesn't matter as long as we know who we deal with.”). Citing Ruckelshaus v. Monsanto Co., the court treated trade-secret rights as bounded by the true owner’s control and protection decisions; ZipBy’s confidentiality obligations did not entitle it to “stand in Q-Free’s shoes” to police Parzych’s use where Q-Free itself did not object and would likely have provided the same information to a serious bidder.
  • “Strategy to forgo” the opportunity: The court held that no reasonable jury could find this was a trade secret because implementing the strategy required informing Q-Free that ZipBy was not interested, and ZipBy identified no evidence that the communication was confidential. Under 18 U.S.C. § 1839(3)(A), trade-secret status requires “reasonable measures” to keep information secret; disclosure to the counterparty without confidentiality measures defeats the claim.

Importantly, the court did not excuse Parzych’s conduct—indeed, the fiduciary-duty and contract verdicts remained intact. The point was classification: ZipBy’s trade-secret label was “ill fitting” for these facts, making JMOL appropriate even under a verdict-preserving standard.

F. Fee shifting: “incurred in enforcing” covenants was not limited to injunction-only work, and apportionment was properly handled

Applying California law (per the contract and the parties’ agreement), the court read the IP Agreement’s fee clause as doing two things: (1) facilitating injunctive relief without litigating irreparable harm, and (2) shifting “reasonable attorneys’ fees and court costs incurred in enforcing” the agreement’s covenants. It rejected Parzych’s attempt to confine fee recovery to injunction-related fees only.

On apportionment, the court relied on Reynolds Metals Co. v. Alperson to permit recovery of fees on common issues across claims, while crediting the district court’s practical reduction (awarding roughly two-thirds) given ZipBy’s lack of billing detail and its loss on the trade-secret claim. The opinion reflects appellate deference to a trial judge’s granular sense of what work actually advanced the fee-eligible contract enforcement.

3.3. Impact

  • Trade-secret claims in M&A and “deal data” contexts: The decision will be cited against plaintiffs attempting to convert third-party diligence materials into their own trade secrets absent evidence that the true owner objected to the defendant’s use or that the plaintiff held enforceable, owner-like exclusionary control. It signals heightened skepticism toward trade-secret theories that duplicate loyalty/contract claims without fitting the statutory secrecy/ownership architecture.
  • “Internal strategy” as a trade secret: The case illustrates that business decisions about whether to pursue a transaction are hard to protect as trade secrets once they are implemented by communicating them externally without confidentiality constraints.
  • Remedies for diverted opportunities: By rejecting a categorical prohibition on lost profits for corporate opportunity claims under Massachusetts law, the opinion encourages plaintiffs to develop robust “but-for” proof (and defendants to meet it with experts), rather than litigating remedies as a threshold bar.
  • Trial practice: The decision reinforces (i) the expectation of timely supplementation and pretrial disclosure for damages-related documents, and (ii) that remote participation solutions—especially with co-counsel in court—will often defeat claims of prejudice absent specific, record-based examples.
  • Contract drafting and fee clauses: Parties litigating under California fee-shifting provisions should expect courts to read “incurred in enforcing” language broadly where the breach theory was actually tried as a covenant breach, and to rely on common-issue logic to avoid rigid apportionment.

4. Complex Concepts Simplified

  • Corporate opportunity / duty of loyalty: Senior employees and fiduciaries generally may not divert to themselves a business opportunity that belongs to the company (or that the company is actively evaluating), especially when they learned of it through their role.
  • Trade secret (DTSA): Information qualifies only if it derives independent economic value from not being generally known and the “owner” takes reasonable measures to keep it secret (18 U.S.C. § 1839(3)). Misappropriation requires acquisition/use without consent and by improper means (18 U.S.C. § 1839(5)).
  • “Ownership” of information: Merely receiving a third party’s confidential information does not automatically give the recipient the same power as the third party to sue anyone who uses it; the underlying owner’s control and the actual secrecy measures matter.
  • JMOL (judgment as a matter of law): A judge may set aside a jury’s verdict where no reasonable jury could reach it on the evidence, even while leaving other verdicts intact.
  • Daubert/Rule 702 gatekeeping: Courts screen experts for reliable methods and sufficient factual basis; they do not decide whether the expert is “right,” only whether the opinion is reliable enough to be heard and tested at trial.
  • Rule 37(c)(1) preclusion: If a party fails to timely disclose documents required by Rule 26, the default remedy is exclusion unless the failure was substantially justified or harmless.
  • Fee shifting and “common issues”: Under Reynolds Metals Co. v. Alperson, when work overlaps across claims and turns on common issues, courts may award fees without line-by-line apportionment.

5. Conclusion

ZipBy USA LLC v. Parzych affirms robust liability and equitable relief for disloyal executive conduct while drawing a clean boundary around trade-secret law: third-party transaction financials and externally implemented deal decisions do not become a plaintiff’s “trade secrets” absent real owner-like control and secrecy measures. At the same time, the opinion rejects a categorical bar on lost-profits damages for diverted corporate opportunities under Massachusetts law, reinforcing that remedy disputes should turn on proof rather than labels. Procedurally, it underscores rigorous adherence to disclosure rules, deference to trial-management solutions (including remote participation), and broad—but not unlimited—enforcement of contractual fee-shifting provisions.