The Uniform Trade Secrets Act, which has been adopted in some form in every state except New York, Massachusetts, and North Carolina, provides that if “a claim of misappropriation is made in bad faith . . . the court may award reasonable attorney’s fees to the prevailing party.” Uniform Trade Secrets Act, § 4 (emphasis added). One question under this provision is whether it only applies to lawsuits filed in bad faith, or whether it also applies to lawsuits that are maintained in bad faith (i.e., lawsuits that continue to be prosecuted – even after it becomes clear that there was no trade secret misappropriation).
Although no Illinois state court has addressed this issue under the Illinois version of the Uniform Trade Secrets Act, the U.S. Court of Appeals for the Seventh Circuit recently did so in Tradesman International, Inc. v. John Black, et al., holding that “common sense” supports interpreting this provision as applying to trade secret misappropriation lawsuits that are filed and/or maintained in bad faith. As the Seventh Circuit wrote, “[r]egardless of her intention at the time of filing, surely a plaintiff makes a claim in bad faith if she continues to pursue a lawsuit – even after it becomes clear that she has no chance to win the lawsuit – in order to cause harm to the defendant.”
By necessity, trade secret misappropriation cases are frequently crafted amidst great time constraints and factual uncertainties. While such filings are contemplated by the Uniform Trade Secrets Act – which expressly authorizes injunctive relief against mere threatened misappropriation – Tradesman and other cases about which we have recently blogged emphasize the need to re-evaluate the continued prosecution of trade secret misappropriation cases as the facts unfold in discovery.