Cypress Semiconductor Corp. v. Maxim Integrated Products
In Cypress Semiconductor Corp. v. Maxim Integrated Products, 236 Cal. App. 4th 243 (6th Dist. 2015), the California Court of Appeal, Sixth Appellate District found that a defendant in a trade secrets suit can be deemed a "prevailing party" entitled to attorney fees under California Civil Code § 3426.4 when a plaintiff voluntarily dismisses its lawsuit to avoid an adverse determination on the merits. Although attorney fees provisions in contracts are governed by California Civil Code § 1717 — which defines "prevailing party" in a manner that excludes voluntary dismissal without prejudice as a basis for finding prevailing party status — attorney fees awarded per statute are not subject to § 1717. Cypress clarified that, at least under § 3426.4, prevailing party status can be found following a voluntary dismissal without prejudice.
Plaintiff Cypress sued defendant Maxim, alleging that Maxim had misappropriated a trade secret, or was in the process of doing so, by seeking to hire away specialists in touchscreen technology. Cypress and Maxim compete in the field of touchscreen technology. Maxim responded that it was entitled to solicit prospective candidates from Cypress' workforce and that there was no evidence it acquired, or sought to acquire, any trade secret. Cypress tried and failed to secure temporary injunctive relief, and failed to obtain an order placing under seal evidence derived by Maxim from public sources. Cypress then dismissed the action. The trial court awarded Maxim attorney fees pursuant to § 3426.4, which authorizes such an award to the prevailing party where a claim for misappropriation of trade secrets is found to have been made in bad faith.
On appeal, Cypress argued that the trial court erred because it could not properly find that Maxim was the prevailing party, or that Cypress brought the action in bad faith. The court found that (1) the trial court's findings are free of procedural error; (2) the finding of bad faith is supported by evidence that defendants merely attempted to recruit a competitor's employees, which Maxim was entitled to do under California law; and (3) Maxim prevailed when, as the trial court implicitly found on substantial evidence, Cypress dismissed the suit to avoid an adverse determination on the merits.
A more detailed treatment of this case and its implications is available here.
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