18 U.S.C. § 1836(b)(3)(D) Fee-Shifting Statute Was At Issue.
Dunster Live LLC v. Lonestar Logos Management Co., LLC, 908 F.3d 948 (5th Cir. 2018) was a situation where a plaintiff filed a trade secret misappropriation suit in federal court under the Defend Trade Secrets Act (DTSA). After it lost an injunction, plaintiff moved to dismiss without prejudice so it could file in state court without the DTSA claim. The district court granted that request, and plaintiff did refile in state court. The defense then moved for recovery of over $600,000 in attorney’s fees under the “prevailing party” fees provision in the DTSA, 18 U.S.C. § 1836(b)(3)(D). The district court denied the motion, and the Fifth Circuit Court of Appeals affirmed.
Section § 1836(b)(3)(D) provides that “[i]f a claim of the misappropriation is made in bad faith, which may be established by circumstantial evidence, a motion to terminate an injunction is made or opposed in bad faith, or the trade secret was willfully and maliciously misappropriated, [a court may] award reasonable attorney’s fees to the prevailing party.” Much like the district court, the Fifth Circuit concluded that a dismissal without prejudice did not confer “prevailing party” status on the defense under the DTSA. It expressly rejected the argument that only a showing of “bad faith” by a plaintiff in filing a lawsuit sufficed. The Fifth Circuit reasoned that “[a]llowing bad faith alone to support a fee award would improperly read the concluding language of Section 1836(b)(3)(D) – ‘the prevailing party’ – out of the statute.” This means a fee claimant under the DTSA must establish two things for success on its request: (1) that it is a prevailing party, and (2) the existence of one of the three qualifying scenarios specified in the provision itself.
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