Attorney Fees in Trade Secret Litigation

Employees are often trusted with proprietary and confidential information, like customer data, bid pricing, and technological processes. At Lobb & Plewe, LLP, we have represented businesses dealing with employees using this confidential information to gain an unfair "head start" for a competing business. We have also represented entrepreneurs who have done everything "by the book," and are falsely accused of stealing their former employee's trade secrets.

Whether fighting as plaintiff or defendant, litigation is expensive. While the general rule in the United States is that the winning side does not get an award for their attorney fees, there is an exception to this rule under California's Uniform Trade Secrets Act.

One section of that Act, found in California Civil Code Section 3426.4, provides that if a person brings a claim for misappropriation of trade secrets "in bad faith," then the court can award "reasonable attorney's fees and costs" to the winning party. That section also awards "reasonable attorney's fees and costs" to the winning party if there is "willful and malicious misappropriation."

This means that an "innocent party" can seek their attorney fees from a "guilty" party, whether that "guilt" comes from maliciously stealing confidential information, or by filing a frivolous trade secrets lawsuit against someone who has done no wrong.

Many business owners are not aware of this key provision in California's trade secret law, and the advantages it creates. When used effectively, this statute can encourage quick resolution of frivolous claims, and greatly increase the pressure on former employees who have stolen trade secrets.