Defendant Did Prevail, And Both Objective/Subjective Prongs Of Fee-Shifting Statute Were Satisfied.
For a non-prevailing plaintiff in a trade secret misappropriation under the California Uniform Trade Secret Act (CUTSA), where objective speciousness and a subjective improper purpose is demonstrated, the prevailing defense can be awarded reasonable attorney’s fees and costs under Civil Code section 3426.4 in the trial court’s discretion. Both the objective and subjective prongs must be satisfied under the leading Gemini decision, discussed in many of our posts under the home page category “Trade Secrets.”
A lower court awarded a defendant sued by a trade secret misappropriation plaintiff $180,817.50 in fees after plaintiff dismissed a suit hinged on the claim that the defense was improperly hiring away touchtone technology specialists from plaintiff. Plaintiff had dismissed the suit after losing a TRO, sensing it was going to lose on the merits.
The appellate court affirmed in Cypress Semiconductor Corp. v. Maxim Integrated Products, Inc., Case No. H038555 (6th Dist. Apr. 28, 2015) (published). Defendant did prevail on a practical level by abandoning an action that was designed to “cow” other competitors into not soliciting potential employee candidates from plaintiff, but only after it had a fear it would lose. Plaintiff’s case was objectively specious because the defense had a right to solicit and there was an absence of evidence of misappropriation, with the theory advanced by plaintiff akin to the inevitable disclosure theory rejected in other California appellate decisions. The subjective element was met even though there was no express finding of bad faith. The appellate court rejected the proposition that a subjective belief in the merits by plaintiff defeated the “improper purpose” shown by plaintiff’s efforts to muscle competitors only soliciting qualified employees as they were entitled to do. This subjective element was further confirmed by plaintiff’s vague specification of the trade secrets at issue (required under CUSTA) and its evasive discovery responses.