Pennsylvania Court Clarifies When Attorneys' Fees May Be Imposed For Bad-Faith Prosecution Of Misappropriation Of Trade Secrets

When may attorneys’ fees be imposed on a plaintiff for prosecuting a claim for misappropriation of trade secrets in bad faith under the Pennsylvania Uniform Trade Secrets Act (PUTSA)?  In a matter of first impression, in Best Medical International v. Spellman [pdf], a Pennsylvania district court held that bad faith justifies attorneys’ fees when two criteria are met:

            •  the claim must be objectively specious, which means that there is “a complete lack of evidence supporting [the] plaintiff’s claims”; and 

            •  “subjective misconduct” must underlie the claim, which means that the “plaintiff knows or is reckless in not knowing that” the misappropriation claim is meritless. 

Although it may often be difficult to prove that both elements existed at the inception of a lawsuit, the Best Medical court emphasized that fees may be justified even where a plaintiff brings a misappropriation claim in good faith but continues to prosecute the matter after discovery reveals that there is no evidence that the defendant stole any trade secret.  Indeed, the Best Medical court awarded fees in the defendant’s favor for that very reason.  Central to the court’s ruling was evidence that, after it knew or should have known that its misappropriation claim was without merit, the plaintiff continued to prosecute the action for nearly two years.

The practical result of the Best Medical opinion is that defendants now have a roadmap for obtaining attorneys’ fees under PUTSA, which may lead to an increase in successful fee petitions and provide defendants with more leverage to settle cases favorably.  Best Medical also increases the plaintiff’s incentive to assess, at each stage of the litigation, whether any evidence suggests a misappropriation of trade secrets, and to dismiss promptly and voluntarily cases in which discovery reveals a lack of such evidence.      

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.