In June 2022, a federal resolve sitting inside the Southern District of New York issued an order denying defendants Lionbridge Utilized sciences, Inc. (“Lionbridge”) and its mum or dad agency HIG Middle Market, LLC (“HIG”) attorneys’ fees and costs related to their assertion that plaintiff Transperfect Worldwide, LLC (“Transperfect”) launched a misappropriation of commerce secrets and techniques and methods declare beneath the Defend Commerce Secrets and techniques and methods Act (“DTSA”) in unhealthy faith. The 2019 lawsuit was filed roughly 15 months after completion of a bidding battle for the sale of half of Transperfect in a Delaware court-supervised public sale. One in all many people inside the public sale was HIG, which had acquired Lionbridge—a competitor of Transperfect—in February 2017. In its swimsuit, Transperfect alleged that HIG engaged in “faux bidding” all through the general public sale so that it’d entry commerce secrets and techniques and methods inside the kind of confidential pricing info and purchaser lists and improperly share them with Lionbridge to poach two of Transperfect’s best purchasers.
All through the course of the lawsuit, Transperfect sought to search out proof in assist of its claims. However, the courtroom granted summary judgment in favor of the defendants, noting that Transperfect didn’t adduce any proof that the defendants used its commerce secrets and techniques and methods for any purpose aside from what was permitted by the phrases of the general public sale, and extra failed to point that HIG disclosed any commerce secrets and techniques and methods to unauthorized folks at Lionbridge. Subsequent to its success on summary judgment, defendants sought $11,604,469 in attorneys’ fees and $259,791 in costs from Transperfect based mostly totally on a declare of misappropriation “made in unhealthy faith” which “is also established by circumstantial proof.” 18 USC 1836(b)(3)(D). To satisfy its burden of proof to benefit such an award, the defendants wished to satisfy a two-prong regular: (1) that the declare was with none colorable basis beneath the laws; and (2) that the declare was launched in unhealthy faith (ie, motived by improper purpose). Beneath the laws, every elements should be supported by a “extreme diploma of specificity inside the factual findings.” See Opinions and Orders at 5-6.
Lastly the courtroom denied defendants’ request for fees and costs, holding that whereas they undoubtedly made a sturdy exhibiting, they didn’t fulfill the rigorous two-prong regular to benefit the requested award. The denial, however, did not save Transperfect from harsh phrases by the courtroom, which well-known that although Transperfect “felt” that Lionbridge was unfairly competing in direction of it, “feelings” do not current an excellent faith basis for submitting a lawsuit. id. at 6-7. The courtroom stated that even after it turned clear Transperfect did not have a viable declare and could not present it suffered damages from any alleged commerce secret misappropriation, it continued to pursue its declare, making it an “unsavory enterprise.” id. at 7-8.
This ruling is important for a minimum of two causes. First, whatever the courtroom’s criticisms with respect to the absence of legit bases for Transperfect’s misappropriation of commerce secrets and techniques and methods claims, and the corresponding lack of proof of damages, the courtroom was nonetheless reluctant to grant the defendants the requested discount and make a discovering of unhealthy faith. Second, this illustrates the obvious stress between the pliability to point out unhealthy faith by circumstantial proof and what meets the undefined “one factor additional” regular to benefit sanctions of attorneys’ fees and costs. That’s considerably true supplied that federal courts look like break up on whether or not or not purpose unhealthy faith, subjective unhealthy faith, or a exhibiting of every, are required to find out “unhealthy faith” misappropriation claims. See, eg, Aday v. Westfield Ins. Co., No. 21-3115, 2022 WL 203327, at *14 (sixth Cir. Jan. 24, 2022) (requiring subjective unhealthy faith such {{that a}} get collectively defending in direction of a misappropriation declare ought to present that “the claims superior had been meritless, that counsel knew or should have acknowledged this, and that the motive for submitting the swimsuit was for an improper purpose akin to harassment.”) compared with Akira Techs., Inc. v. Conceptants, Inc., 773 F. App’x 122, 125 (4th Cir. 2019) (because of declare not objectively meritless, sanctions not warranted); Insurent Firm Corp. v. Hanover Ins. Co., 2020 WL 86813 (SDNY Jan. 8, 2020) (declare should be “wholly with out benefit” to be entitled to attorneys’ fees beneath the DTSA).