Plaintiff’s Case Was Not Objectively Specious, Requiring an Overturn of Fee Award.
Under the Uniform Trade Secrets Act (UTSA), Civil Code section 3426.4 permits a trial court to award reasonable attorney’s fees and costs to a prevailing party if it determines that a UTSA claim has been made in “bad faith,” which has both objective and subjective components. (FLIR Systems, Inc. v. Parrish, 174 Cal.App.4th 1270, 1275 (2009); Gemini Aluminum Corp. v. California Custom Shapes, Inc., 95 Cal.App.4th 1249, 1261 (2002).) The objective component requires more culpability than mere negligence, meaning the UTSA claim must have been without substance in reality, if not frivolous in nature. (Gemini, 95 Cal.App.4th at 1261.) That objective specious component was front and center in the next case we discuss.
NuScience Corp. v. McKinney, Case No. B237119 (2d Dist., Div. 4 Nov. 2, 2012) (unpublished) involved a situation where plaintiff dismissed without prejudice an action, primarily anchored by a UTSA claim, against an individual defendant, who then moved to recover fees and costs under section 3426.4. The lower court awarded defendant $39,593.87 in fees and costs, triggering plaintiff’s appeal.
Plaintiff won a reversal upon review.
One of the important considerations leading to a reversal was the framing of the correct standard of review. The appellate court determined that the objective component is facially objective and reviewed under the de novo appellate standard. (See, e.g., Smith v. Selma Community Hospital, 188 Cal.App.4th 1, 32 (2010); Austin B. v. Escondido Union School Dist., 149 Cal.App.4th 860, 888 (2007).) With this standard in mind, the reviewing panel concluded that the objective specious standard was not demonstrated because there were emails that established the possible use of a trade secret–especially internal experimentation. In this regard, “use of a trade secret” was found to encompass even internal experimentation with trade secret information not resulting in a market product. (02 Micro Int’l Ltd. v. Monolithic Power Sys., Inc., 399 F.Supp.2d 1064, 1072 (N.D.Cal. 2005); JustMed, Inc. v. Byce, 600 F.3d 1118, 1130 (9th Cir. 2010); Agency Solutions Com., LLC v. TriZetto Group, Inc., 819 F.Supp.2d 1001, 1028-1029 (E.D.Cal. 2011).)
So, in this one, there was a reversal of fortune, which largely seemed to be dictated by de novo review and the internal emails greatly weighted by the appellate court.