Many cases feature a “good” company and a “bad” ex-employee or other bad actor. I was recently asked if the opposite also happens, where a plaintiff files a trade secret misappropriation case without sufficient (or any) evidence of wrongdoing.
It definitely can happen when plaintiffs do not perform sufficient pre-filing diligence, or lack some or all of the relevant documentation before pulling the litigation trigger.
Assuming that the defendant prevails at litigation, can they recover attorneys’ fees? Sometimes yes, sometimes no – it is still a bit inconsistent. DTSA allows a court to award reasonable attorneys’ fees to the prevailing party when a misappropriation claim is “made in bad faith”.
In TransPerfect Global v. Lionbridge Technologies, the US district court in New York granted summary judgment in Lionbridge’s favor. There was no evidence that any trade secrets were obtained through improper means, no evidence of unpermitted use of trade secrets, no evidence of unauthorized disclosure, and no evidence of damage. Despite all this, the court did not award fees saying that Lionbridge failed to prove the “bad faith” high standard.
In contrast, the 1st Appellate District of Illinois affirmed attorneys’ fees due to bad faith under the Illinois Trade Secrets Act. In Multimedia Sales & Marketing, Inc. v. Marison Marzullo, plaintiff MSM sued competitor RAI and three of its former employees who joined the competitor.
The three employees did take MSM’s sales lead lists and used them at RAI, but argued that the information was not confidential and was not a trade secret. It turns out that MSM routinely shared such lists with potential customers not under any form of confidentiality agreement.
Unlike in TransPerfect, here the appellate court indicated that MSM’s trade secret claims were “never well-grounded in fact or warranted by existing law or an argument to extend existing law”. Attorneys’ fees were awarded to defendant RAI.