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Fee Shifting in Trade Secrets Cases

Fee Shifting in Trade Secrets Cases

A number of states, including Tennessee, have adopted the Uniform Trade Secrets Act (“UTSA”). A court may award attorney’s fees, if:

  • A claim of misappropriation is made in bad faith;
  • A motion to terminate an injunction is made or resisted in bad faith, or
  • Willful and malicious misappropriation exists,

T.C.A. § 47-25-1705 (West 2014).

So, what’s “bad faith” sufficient to trigger the fee shift?

“Bad faith” requires: (1) objective speciousness of the plaintiff’s claim, and (2) subjective bad faith in bringing or maintaining the claim. Wyndham Vacation Resorts, Inc. v. Wesley Fin. Grp., LLC, 3:12-CV-559, 203 WL 785938 (M.D. Tenn. 2/28/13). “Plausibility” of the claim defeats the claim of bad faith for the shifting purposes. Dominion Enterprises v. Dataium, LLC, M2012-02385-COA-R3CV, 2013 WL 6858266 (Tenn. Ct. App. 12/27/13)

Chancellor Ellen Lyle (Davidson County) succinctly summarized Tennessee law on the fee shifting aspects of the UTSA in a recent memorandum opinion. Hinson v. O’Rourke, Case No. 12-993-III, Davidson County Chancery Court, decided May 1, 2014.

Take Away #1 – Examine both the plausibility of the claim and motives of your client when considering pursuit of a UTSA claim.

Take Away #2 – Don’t assume automatic fee shifting in favor of the prevailing party.

William R. O'Bryan, Jr.