Cases from Hamilton

Court of Appeals for the Seventh Circuit
Seventh Circuit Allows Attorney's Fees under UTSA for Suits Maintained in Bad Faith

§ 4 of the UTSA provides that “[i]f a claim of misappropriation is made in bad faith . . . the court may award reasonable attorney’s fees to the prevailing party.” A recent decision by the Seventh Circuit suggests that this provision applies to suits maintained in bad faith, even when the initial claim may have been meritorious.

In Tradesman, International, Inc. v. Black, a Seventh Circuit panel reversed and remanded a decision of the District Court for the Central District of Illinois denying a request of attorney's fees. The district court found that while the plaintiff had not initiated the suit in bad faith, bad faith had developed over the course of the litigation, as it became clear that the plaintiff’s claims were without merit. Nonetheless, the district court found that the phrase “made in bad faith” in UTSA § 4 applied only to the initial filing of a lawsuit, and denied the request accordingly

In reversing, the Seventh Circuit took a broader “common sense” reading of § 4, holding that “[a] claim is made in bad faith [under UTSA § 4] when it is initiated in bad faith, maintained in bad faith, or both.” The Seventh Circuit's decision suggests a new avenue for collecting attorneys' fees in trade secret cases.

United States Court of Appeals for the Fourth Circuit
Fourth Circuit says CFAA does not apply to an employees unauthorized use of information where access to that information was authorized.

The Fourth Circuit has become the most recent Federal Court of Appeals to take a stance on the scope of the "without authorization" language of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030. Following the Ninth Circuit's recent en banc decision in Nosal, the Fourth Circuit concluded that the CFAA does not apply where an employee is authorized to access a company computer system but is not authorized to use the information he accessed in the manner in which it was used (against the employer's interest). The ruling narrows the scope of the CFAA, a statute that is often used to obtain jurisdiction in federal courts by plaintiffs asserting trade secret misappropriation or other state law-based claims.

In WEC Carolina Energy Solutions, LLC v. Miller, No 11-1201, July 26, 2012, the Fourth Circuit upheld the trial court's dismissal of the plaintiff's CFAA claim. Defendant Miller had downloaded his employer's files onto his personal computer before resigning and used them in a presentation made on behalf of a competitor to a potential WEC customer. WEC claimed that because company policies did not permit the downloading of confidential and proprietary information to a personal computer, and because Miller had breached his fiduciary duties, Miller either lost all authorization to access the information or exceeded his authorization, both of which are violations under the CFAA. The Fourth Circuit held that in the absence of a restriction of access to the company's computers, the alleged acts did not violate the CFAA. The Court rejected the view held by the Seventh Circuit that by violating the duty of loyalty to an employer, the employee's agency relationship is terminated and the employee consequently loses any authority to access company computers. The Court also declined to adopt the Ninth Circuit interpretation of the CFAA, which they considered a harsher approach that could lead to unwarranted criminal liability. Ultimately, the Court held that improper use of information validly accessed from a computer does not violate the CFAA.