Tuesday, August 07, 2007, 9:02 PM

Attorneys' Fees Under Trade Secrets Protection Act

Today the COA resolved a perceived conflict in statutes regarding an award of attorneys' fees in trade secrets cases under the Trade Secrets Protection Act (TSPA), N.C.G.S. Ch. 66. The case is Bruning & Federle Mfg. Co. v. Mills.

In enacting the TSPA, the General Assembly said in N.C.G.S. 66-154(d): "If a claim of misappropriation is made in bad faith or if willful and malicious misappropriation exists, the court may award reasonable attorneys' fees to the prevailing party." Thus, an award of attorneys' fees to a prevailing defendant would be available only if the plaintiff's TSPA claim was advanced in bad faith.

On the other hand, in the same session law in which it enacted the TSPA, the General Assembly also amended the general statute on costs, N.C.G.S. 6-21, so that it reads: "Costs in the following matters shall be taxed against either party, or apportioned among the parties, in the discretion of the court: . . . (12) In actions brought for misappropriation of a trade secret under [the TSPA]." That's followed by this sentence in 6-21: "The word 'costs' as the same appears and is used in this section shall be construed to include reasonable attorneys' fees in such amounts as the court shall in its discretion determine and allow[.]"

Thus, Defendant in today's case argued that, by virtue of 6-21, a trial court has discretion to award attorneys' fees to a prevailing TSPA defendant regardless of whether the defendant could show that the TSPA claim was brought in fad faith.

The COA disagreed, holding that 66-154(d) governs all TSPA cases and that, therefore, a showing of bad faith is required to recover attorneys' fees.

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