Appellate Court Sustains Award Under Gemini Test.
What more perfect venue to devise the “bad faith” trade secret misappropriation fee test than the Silicon Valley? Well, there is none. In fact, the Sixth District in Gemini Aluminum Corp. v. California Custom Shapes, Inc., 95 Cal.App.4th 1249, 1262 (2002) did just that under the California Uniform Trade Secrets Act section 3426.4, holding that fees and costs can be awarded to a prevailing party in a bad faith misappropriation case where the claim was objectively specious and there was subjective bad faith in bringing or maintaining the action. Gemini was front stage and center in an appeal of a substantial fee award before the Second District, Division 6.
In Flir Systems, Inc. v. Parrish, Case No. B209964 (2d Dist., Div. 6 June 15, 2009) (certified for publication), plaintiffs lost a trade secret misappropriation case against defendants, with the lower court awarding plaintiffs $1,641,216.78 in fees and costs ($1,352,000 in fees and $289,216.78 in costs) out of a requested $2,399,650.55 in fees. Earlier, defendants moved for summary judgment, but it was denied even though the trial court found the defense “made a compelling argument for summary judgment” (but denied it because very technical issues were involved). Section 3426.4 was the basis for the subsequent award after the plaintiffs lost on the merits at trial.
Plaintiffs appealed the “bad faith” fee award, which was affirmed.
Presiding Justice Yegan, on behalf of a 3-0 panel, importantly observed early on that plaintiffs did not appreciate the trial court’s fact-finding power, commenting that “[w]e do not retry cases on appeal and we do not substitute our discretion for that of the trial court.”
The objective speciousness prong was satisfied based on defense evidence that the action was filed as a preemptive strike and for an anticompetitive purpose. Beyond that, there was no evidence of misappropriation, with the defendant employer only relying on the “inevitable disclosure” doctrine—speculation that will not show an actual use or actual threat for misappropriation purposes. Simple deletion of computer documents, emails, or phone messages after an employee changes jobs should not automatically give rise to misappropriation claims.
Plaintiffs argued that their prior victory in defeating a defendants’ summary judgment motion negated any section 3426.4 “bad faith” finding. Wrong—“Appellants cite no California authority that the denial of a summary judgment motion in a trade secret case precludes the trial court from finding, after it has heard all the evidence, that the action was brought or maintained in bad faith … If the rule was otherwise, a trade secrets plaintiff could file sham declarations to successfully oppose a summary judgment motion and immunize itself from sanctions.” (Slip Opn., at p. 13.)