In a question of first impression, the Illinois Appellate Court recently addressed what constitutes “bad faith” for purposes of awarding attorneys’ fees to the prevailing party under §5 of the Illinois Trade Secret Act (ITSA). That section provides, in pertinent part, that if “a claim of [trade secret] misappropriation is made in bad faith” or

In what turned out to be a disastrous result for defendants, a Massachusetts Court issued a default judgment against certain salespeople who left their former company to form the new competing company. The default judgment was based on the defendants’ conduct during the discovery phase of the case, in which they failed to follow the terms of the Court’s Preliminary Injunction, including misrepresenting their compliance to the Court, destroying evidence, and using confidential information to sell products to certain businesses, all of which was specifically barred by the terms of the Court’s Order.
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Judge Ruben Castillo, the Chief Judge for the United States District Court for the Northern District of Illinois, recently declined to follow a widely publicized Illinois Appellate Court decision in which the Appellate Court held that, absent other consideration, two years of employment is required consideration for a restrictive covenant in Illinois.
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California Courts have discretion to award attorneys’ fees to a prevailing defendant in a trade secrets action where the commencement or continued prosecution of a trade secrets action is in bad faith. A recent decision underscores that a plaintiff pursuing a trade secret claim in California must be careful that it can actually identify with some particularity what trade secrets have been misappropriated.
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Although California has a strong public policy, based on Cal. Bus. & Prof. Code § 16600, against the enforcement of employer/employee non-compete agreements, employers might get some traction in this area by including a choice of venue or forum selection provision in their employment contracts and – through that provision – having the case transferred to a jurisdiction that will be more likely to enforce a restrictive covenant.
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In California, a non compete given in return for the sale of a business’ goodwill is one of the few exceptions to the state’s broad prohibition against non competes. In Fillpoint, LLC v Maas, a California appellate court narrowly construed the exception and invalidated a non compete/non solicit agreement contained in an employment agreement which was signed in connection with the sale of goodwill.
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