Inevitably whenever I talk with a client there is always the discussion about attorneys’ fees and how to get the other side to pay them.  The unfortunate reality is there are very limited circumstances where attorneys’ fees are recoverable.  The US has the “American Rule” which generally means that each party pays their fees.  There are exceptions.  For instance, a contract can provide that if there is a dispute related to a contract, the prevailing party can recover their reasonable and necessary attorneys’ fees.  Statutes can also provide for recovery of fees such as the the Texas Deceptive Trade Practices Act.

In 2013, the Texas Legislature adopted the Texas Uniform Trade Secrets Act.  It provides for the recovery of attorneys’ fees to a prevailing party if: (1) a claim of misappropriation is made in bad faith; (2) a motion to terminate an injunction is made or resisted in bad faith; or (3) willful or malicious misapporpriation exits.  This was a departure from the common law that did not provide for fee recovery.  In a recent case my client succesfully argued that it was entitled to its fees (as a Defendant) because the Plaintiff brought the case in bad faith.  Here is a link – Stream Awarded Legal Fees in Litigation with Solavei _ Business Wire

Unfortunately, the statute does not define what bad faith is.  Courts from other jurisdictions have not been consistent on the issue either.  We argued that bad faith (based on on other cases) equates to an ulterior motive.  The argument went that the Plaintiff brought the case to damage the client’s business, not to litigate or resolve a bona fide trade secret dispute.  This is hard to prove.  There will be very limited circumstances where a defendant will be able to prove “bad faith”.    In terms of the mechanics for prevailing under the statute, we were a “prevailing party” by way of summary judgment.  The same can be acheived by prevailing at trial.  We then proceeded with an evidentiary hearing on bad faith.

So the good news is there is a mechanism, even for defendants, to recover fees under the trade secret act.  The bad news is it will be hard to prove.  We’ll keep you posted as more cases come out that address what constitutes “bad faith” under the statute.