The Illinois Trade Secrets Act (“ITSA”), which is consistent with both other states that have adopted the Uniform Trade Secrets Act and the federal Defend Trade Secrets Act, allows the recovery of attorneys’ fees for a party who has been forced to defend against a trade secret claim made in bad faith. See 765 ILCS 1065/5. This fee shifting provision provides an important mechanism to obtain relief for defendants who are forced to incur significant legal fees fighting baseless claims.

In a recent decision of the 1st Appellate District of Illinois, Multimedia Sales & Marketing, Inc. v. Marison Marzullo, et al., 2020 IL App (1st) 191790, the court affirmed the award of attorneys’ fees incurred by defendants under the bad faith fee shifting provision of the ITSA. Plaintiff Multimedia Sales & Marketing, Inc. (“MSM”) sued one of its competitors, Radio Advertising, Inc. (“RAI”) and three of its former employees who joined RAI, alleging that the former employees misappropriated trade secrets and used such information to solicit MSM’s customers. MSM and RAI compete to sell radio advertising time to businesses. The alleged trade secrets at issue were sales lead lists of potential and former purchasers of such advertising time.

MSM’s former employees admitted to taking the sales leads and using them at RAI, but disputed that such information was confidential, let alone a trade secret. The former employees were right. MSM’s owner and president, as well as its director, both testified that the sales lead lists were disclosed to the radio stations for which MSM sought to sell air time. Based on this undisputed testimony, the trial court entered summary judgment and awarded defendants their attorneys’ fees under the bad faith fee shifting provision of the ITSA.

On appeal, the court affirmed the decision of the lower court. Pertinent to the award of attorneys’ fees, the appellate court borrowed from Illinois Supreme Court Rule 137, which allows the court to penalize claimants who bring vexatious, false and/or frivolous filings. Applying Rule 137, the appellate court affirmed the trial court’s holding that MSM’s trade secret claims were “never well-grounded in fact or warranted by existing law or an argument to extend existing law.”

The Multimedia Sales & Marketing, Inc. decision is important for at least three reasons. First, as we have often counseled in this blog, owners of trade secrets must take reasonable efforts to protect the secrecy of their trade secrets. A failure to do so will negate a potential statutory cause of action to address theft and misuse of such information. Second, a plaintiff should obtain competent legal counsel before bringing suit under the ITSA or DTSA (or any other state’s adoption of the Uniform Trade Secrets Act) to make sure that its information meets the statutory definition of a trade secret before making a claim for misappropriation. Finally, the decision provides helpful authority to defendants who have been forced to incur significant costs and fees defending against misappropriation claims that should have never been filed, or that should have been promptly dismissed after facts undermining the claims were discovered.