Bad Faith Trade Secret Claims Brought for Anticompetitive Reasons Justify $1.6M Sanction

Case: FLIR Systems v. Parrish, Cal. App. 2nd Dist. No. B209964 (6/15/09)

The One Sentence Summary: Bad faith sanctions of $1,641,216.78 in attorney fees and costs for bringing and maintaining a bad faith trade secret action were affirmed under California's Uniform Trade Secret Act, Civ. Code, § 3426 et seq.


What They Were Fighting About: Plaintiff had asserted trade secret claims against former executives who left to start a competing company. After trial on the claim for permanent injunction, the court denied plaintiff's claims and awarded sanctions against plaintiff for pursuing a trade secret claim in bad faith.

California Court of Appeal Holdings:

• Sanctions for bad faith trade secret claim were supported by trial court's factual findings that there was no threat of misappropriation.
• The inevitable disclosure theory is not recognized in California, and cannot justify plaintiff's claims.
• A hard drive download by one of the defendants which was not used to misappropriate trade secrets did not prevent trial court's factual finding of subjective bad faith supporting sanctions.
• Objections to patent applications did not establish threat of misappropriation.
• Plaintiff's proposal of an injunction that did not identify the trade secrets or distinguish from non-trade secrets was properly considered in bad faith finding.
• Bad faith settlement demands and request for non-compete justified sanctions.
• Rulings on summary judgment and non-suit motions and tentative statement of decision did not preclude bad faith finding.
• The bad faith finding was supported by the plaintiff's CEO's testimony that there was an anticompetitive motive for the trade secret claim.