Molon Motor and Coil Corporation v. Nidec Motor Corporation

              UNITED STATES DISTRICT COURT                           
           FOR THE NORTHERN DISTRICT OF ILLINOIS                     
                    EASTERN DIVISION                                 

MOLON MOTOR AND COIL               )                                      
CORPORATION,                       )                                      
                              )                                      
     Plaintiff,               )    No. 1:16-CV-03545                 
                              )                                      
v.                            )                                      
                              )    Judge Edmond E. Chang             
NIDEC MOTOR CORPORATION,           )                                      
                              )                                      
     Defendant.               )                                      

                        ORDER                                        
Last year, the Court dismissed the remaining claims in this action, which were 
trade-secrets claims under federal and state law. 

18 U.S.C. § 1836

(b) (Defend Trade 
Secrets Act); 765 ILCS 1065 (Illinois Trade Secrets Act). See R. 64, 184.1 The target 
of the trade-secrets claims, Nidec Motor Corporation, has now moved for attorney’s 
fees. For the reasons explained in this Opinion, the motion is granted in part and 
denied in part.                                                           
                     I. Background                                   
Molon Motor and Coil Corporation filed this case in March 2016, alleging that 
Nidec (and related entities) had infringed two of Molon’s patents. See R. 1. Not until 
May 26, 2016, when filing its Second Amended Complaint, R. 18, did Molon allege 
that Nidec had misappropriated trade secrets in violation of the federal Defend Trade 
Secrets Act and the Illinois Trade Secrets Act. These claims arose, in large part, from 
1Citations to the record are “R.” followed by the docket entry number and, if needed, 
a page or paragraph number.                                               
the alleged misappropriation and disclosure of trade secrets by former Nidec employ-
ees Manish Desai and Jose Delgado. Sec. Am. Compl. ¶¶ 68, 72, 83; R. 64, Third Am. 
Compl. ¶¶ 67, 80. After Nidec filed a dismissal motion, Molon successfully asked for 

leave to amend the trade-secret claims to provide additional detail about the secrets. 
R. 63. In September 2016, Molon filed a Third Amended Complaint (which ended up 
being the final operative complaint), R. 64, which dropped conspiracy and tortious 
interference claims.                                                      
Manish Desai, Molon’s Head of Quality Control, left Molon for Nidec in June 
2013. Third Am. Compl. ¶ 58. Molon alleged that, before leaving, Desai copied onto 
an unauthorized thumb drive a “significant amount of files related to engineering and 

design, quality control protocols and data, and customer specific data for Molon Mo-
tors.” 

Id. at 65

. Molon alleged (incorrectly, as it turns out) that Jose Delgado, a quality 
control engineer, also had left for Nidec during the same year (2013). R. 205-5, Pl. 
Resp. Br., Exh. 5, Carlson Decl. ¶ 5; Sec. Am. Compl. ¶ 59. In reality, however, Del-
gado actually left Molon in 2010. R. 199, Def. Br. at 4. Molon removed any mention 
of Delgado from the Third Amended Complaint. See R. 205, Pl. Resp. Br. at 11. 

In response to the new pleading, in October 2016, Nidec again moved to dismiss 
the trade-secrets claims. R. 67. The motion was denied. R. 81. By that point, the trade-
secrets claims were the only remaining claims. The two counts of patent infringement 
(Counts 1 and 2), were defeated on summary judgment, R. 78, and dismissed on joint 
stipulation, R. 75, respectively.                                         
In February 2019, Molon’s then-attorney, John Petrsoric, requested leave to 
withdraw as counsel, citing reservations about the case, as well as personal issues. 
R. 205-1, Pl. Resp. Br., Exh. 1, Tr. of Proceedings 2/28/19 at 2:15-24; R. 155. The mo-

tion was granted in March 2019. R. 160. Previously, the Court had extended the fact 
discovery deadline from November 16 to December 21, 2018, in light of Petrsoric’s 
personal circumstances. R. 151.                                           
Molon retained new counsel and eventually moved to re-open discovery for two 
depositions: a 30(b)(6) deposition of Nidec, and a third-party deposition of Desai. R. 
161, Pl.’s Mot. for Leave to Take Limited Discovery, ¶ 3. The Court denied the motion, 
noting this was “a paradigm case for holding a corporate litigant to its lawyer’s al-

leged inaction.” R. 173 at 2. Eventually, the Court dismissed the remaining claims, 
without foreclosing Nidec from seeking attorneys’ fees for having to defend against 
the trade-secrets claims. R. 184. The Court cautioned Nidec to “have another very 
serious talk with your client before that motion is filed.” R. 205-2, Pl. Resp. Br., Exh. 
2, Tr. of Proceedings 7/1/19 at 5:14–15. Nidec decided to file the motion, to which the 
Court now turns.                                                          

                      II. Analysis                                   
                  A. Bad-Faith Standard                              
The Illinois Trade Secrets Act allows a defendant to recover attorney’s fees if 
“a claim of misappropriation is made in bad faith.”2 765 ILCS 1065/5. But the Act 

2As Nidec states in their motion, the federal Defend Trade Secrets Act also allows 
recovery for attorney’s fees where a misappropriation claim is made in bad faith. See Def. Br 
at 8–9; 18 U.S.C § 1836(b)(3)(D). For some reason, however, Nidec failed to develop  any 
does not explicitly define what constitutes “bad faith.” The most pertinent Illinois 
decision on what bad faith means under the Act is Conxall Corp. v. Iconn Sys., LLC, 

61 N.E.3d 1081

 (Ill. App. Ct. 2016). In that case, by a 2-to-1 majority, the panel de-

clined to adopt the two-part test established in California case law interpreting the 
Uniform Trade Secrets Act. 

Id. at 1088

. Under the “California” standard, as Conxall 
labelled it, “bad faith” requires both “objective speciousness” and “subjective bad 
faith.” SASCO v. Rosendin Elec., Inc., 

207 Cal. App. 4th 837, 845

 (2012). In other 
words, the movant must show not only that the plaintiff acted with a culpable state 
of mind (subjective bad faith) but must also show that the claims were objectively 
frivolous (objective speciousness).                                       

Instead of that two-part test, the Conxall majority appeared to criticize the 
objective-frivolousness element, reasoning that the Act’s text requires only “bad faith” 
and there is no textual anchor in the Act for requiring “objective speciousness.” 

61 N.E.3d at 1101

. Conxall also noted that the Illinois Trade Secrets Act, although mod-
eled on the Uniform Trade Secrets Act, did not adopt a drafters’ comment that the 
California decision relied on. 

Id.

 The panel majority concluded that “bad faith” under 

the Act “should be given the preexisting definition of ‘bad faith’ of this state.” Id at 
1102.                                                                     
Unfortunately, the Act’s usage of “bad faith” actually had not been authorita-
tively interpreted by the Illinois Supreme Court. So Conxall turned to an Illinois Su-
preme Court decision, Krautsack v. Anderson, 

861 N.E.2d 633, 648

 (Ill. 2006), in 

argument for its entitlement to attorney’s fees under federal law. So Nidec has forfeited re-
covery on that basis.                                                     
which the state high court interpreted the Illinois Consumer Fraud Act. The Con-
sumer Fraud Act authorizes fee-shifting to the prevailing party, but the Illinois Su-
preme Court interpreted the fee-shifting provision to require a finding of “bad faith” 

for a prevailing defendant to recover fees (whereas plaintiffs need not make that 
showing if they win). 861 N.E.2d at 646–47. The next question was how to define “bad 
faith.”                                                                   
On that question, Krautsack refused to limit bad faith to the confines of Illi-
nois’s general litigation-sanctions rule, namely, Illinois Supreme Court Rule 137. 

861 N.E.2d at 648

. Rule 137 requires that every signed filing have a reasonable basis in 
fact and in law, and also the filing must not be made for any improper purpose: 

The signature of an attorney or party constitutes a certificate … that to the 
best of his knowledge, information, and belief formed after reasonable inquiry 
it is well grounded in fact and is warranted by existing law or a good-faith 
argument …, and that it is not interposed for any improper purpose, such as 
to harass or to cause unnecessary delay or needless increase in the cost of liti-
gation … .                                                           

Ill. S. Ct. R. 137. The Illinois Supreme Court reasoned that Rule 137 applies only to 
filings, but the Consumer Fraud Act’s fee-shifting provision was not so confined. 

Id.

 
So Krautsack held that, under the Consumer Fraud Act, it is possible to establish a 
plaintiff’s bad faith by proving misconduct outside of the pleadings. 

Id.

  
Returning to Conxall and the Illinois Trade Secrets Act, the panel majority 
concluded that, like the Consumer Fraud Act, it is possible to show that a plaintiff 
acted in “bad faith” without satisfying Rule 137—which has both an objective (“rea-
sonable inquiry” into the basis for the facts and the law) and a subjective (“improper 
purpose”) requirement. 

61 N.E.3d at 1103

. Still, Conxall noted that Rule 137 and the 
case law interpreting it will be useful guidance in deciding whether a plaintiff has 
acted in bad faith for purposes of the Illinois Trade Secrets Act. 

Id.

    
As a practical matter, in this case, it matters not whether the Act’s “bad faith” 

standard requires more than just subjective culpability. Nidec argues that Molon 
brought trade-secret claims that had no reasonable basis in law or fact and that Mo-
lon acted with subjective bad faith to harass Nidec. Indeed, in most cases—including 
this one—fee applicants try to prove objective frivolousness anyway, because it is one 
of the most powerful forms of circumstantial evidence to prove subjective bad faith. 
Here, as explained next, the record evidence does show that Molon’s trade-secret 
claims were both objectively frivolous and brought with subjective bad faith. 

                 B. Evidence of Bad Faith                            
With this standard of bad faith in mind, it is time to examine the record evi-
dence.                                                                    
                 1. The Three-Year Delay                             
First, Nidec points to Molon’s delay in even mentioning the trade-secret claims, 
let alone actually filing them as part of a lawsuit. Remember that Desai, who suppos-

edly stole the trade secrets, left Molon in June 2013. Third Am. Compl. ¶ 58. Shortly 
after he left, Molon hired a forensic consultant, Christopher Tragasz, to examine the 
Molon hard drive that Desai used. R. 207-3, Tragasz Aff. ¶ 7.3 This is when Molon 
first became aware of alleged misappropriation, if Molon’s interrogatory responses in 

3The parties filed various affidavits and exhibits under seal, but the evidence dis-
cussed in this Opinion cannot remain from public view given the strong presumption of public 
access to facts that are relied on as a basis for judicial decision-making. 
this case are to be believed. R. 207-2 at 18-19. Tragasz signed an affidavit, dated 
October 8, 2013, averring to his findings. See Tragasz Aff. The affidavit said that 
“documents potentially belonging to Molon were accessed in close proximity to Man-

ish Desai’s resignation on a removable device.” Id. ¶ 13. Perhaps not surprisingly, 
this tepid conclusion did not result in Molon leaping into action. One year went by, 
then two. In March 2016, almost 2½ years after the forensic analysis, Molon sued 
Nidec—but for unrelated patent infringement, not on the trade secrets. See R. 1. It 
was not until May 2016 that Molon added the trade-secret claims to the case. See Sec. 
Am. Compl. ¶¶ 55–84.                                                      
The three-year delay in bringing the trade-secret claims raises a burning ques-

tion: if Molon really had reason to believe that Desai potentially possessed trade se-
crets, then why the delay? This is an important question because the longer the delay, 
the stronger the circumstantial inference that, in reality, Molon had no reason to 
believe that Desai was truly disclosing trade secrets to Nidec. Molon’s response: (a) 
this case is complex and (b) the trade-secret claims were filed within the statute of 
limitations. Pl. Resp. Br. at 9–10. Those explanations do not hold water.  

On complexity, Molon offers no persuasive reason why the case was so complex, 
either factually or legally, that it would take three years to bring the case, yet all the 
while supposedly Desai was disclosing the trade secrets to Molon’s competitor, Nidec. 
Of course, it can be self-defeating to discuss trade secrets in detail on a public docket, 
but nothing in the sealed filings (or the sealed parts of filings) explains why any fac-
tual or legal issue necessitated three years’ worth of work to file the claims. On filing 
within the statute of limitations, it is not as if the Illinois General Assembly picked a 
statute of limitations period for the Illinois Trade Secrets Act on the notion that any 
claim brought within that period meant that the claim was brought in good faith. 

If Molon had other reasons for the delay—be they strategic, a constraint on the 
legal budget, or anything else—it could have said so. But Molon did not. The three-
year delay in bringing the trade-secret claims—indeed, the delay in even trying to 
confront Desai and Nidec about the purported trade secrets—is strong circumstantial 
evidence of both a lack of a reasonable basis for the claims and an improper purpose 
of frivolously raising the stakes of the patent-infringement claims.      
                 2. Inevitable Disclosure                            

In a similar vein, Nidec contends that Molon brought and maintained its 
claims without a good-faith basis to believe that Nidec—as distinct from Desai—ever 
acquired, disclosed, or used Molon’s trade secrets. Def. Br. at 11. Against this, Molon 
relies on the doctrine of inevitable disclosure, which allows a plaintiff to prove trade-
secret misappropriation by demonstrating that a former employee inevitably would 
disclose trade secrets to the new employer given the former employee’s job duties and 

knowledge. Third Am. Compl. ¶ 67; Strata Mktg., Inc. v. Murphy, 

740 N.E.2d 1166, 1178

 (Ill. App. Ct. 2000). Again, this explanation falls short given the circumstances 
of this case.                                                             
It is one thing to rely on inevitable disclosure at the pleading stage, which Mo-
lon successfully did here in fending off a dismissal motion. But in October 2018, Molon 
admitted in responses to interrogatories that it was “unaware of any actual losses 
resulting from Nidec’s use of Molon’s trade secrets either through generally known 
market activity or through Molon’s own customer relationships.” R. 207-2 at 23. Alt-
hough this admission was made after the trade-secret claims were pleaded, Molon 

does not explain what changed between the May 2016 filing of the claims to October 
2018 that made Molon realize that no harm had befallen Molon—and if genuine trade 
secrets were at issue, and Nidec had used them, then by definition Molon would have 
been harmed. It was not.4                                                 
Molon also argues that it had “a good-faith belief that Mr. Desai downloaded 
Molon’s trade secret information shortly before leaving Molon.” Pl. Resp. Br. at 9. 
That, at least, is somewhat supported by the Tragasz Affidavit. But Molon did not 

sue Desai; it sued Nidec. So the inevitable-disclosure doctrine was crucial to bringing 
the trade-secret claims in this case. Yet Molon had no reasonable basis to plead the 
application of the doctrine.                                              
To be sure, Molon’s weak reliance on the inevitable-disclosure doctrine is not, 
by itself, strongly probative of bad faith. But here, when the weakness of that conten-
tion is combined with the three-year, unexplained delay in bringing the trade-secret 

claims, plus Molon’s lack of any basis to believe that it had been harmed, R. 207-2 at 
23, the evidence does serve as another piece of circumstantial evidence of bad faith. 


4As purported evidence of inevitable disclosure, or at least a reasonable basis for as-
serting it, Molon points out that Desai’s November 2017 declaration did mention that “there 
have been a few times that I was curious about what I had done at Molon, and accessed [his] 
thumb drive contents.” R. 164-2, Exh. A, Desai Decl. ¶ 9. But that is not an admission that 
Desai used trade secrets in carrying out his job duties at Nidec, and indeed he denied disclos-
ing any trade secrets repeatedly throughout the same declaration. 

Id.

 ¶¶ 5–8, 10. 
          3. Delay in Disclosing the 2013 Analysis                   
In the most shocking piece of evidence of bad faith, Molon waited until the 
briefing of this very fees motion to finally share the 2013 forensic analysis of Desai’s 

hard drive. See Tragasz Aff. By Molon’s own admission in an interrogatory response, 
this was the crucial analysis that initially alerted Molon to the potential misappro-
priation of trade secrets by Desai. R. 207-2 at 18–19. Yet, despite Nidec’s routine dis-
covery request for this type of document, see R. 199-8, Pl. Resp. to RFP ¶ 61, Molon 
never produced the Tragasz Affidavit during discovery. Instead of producing the writ-
ten analysis, Molon produced what it deemed a forensic copy of Mr. Desai’s hard 
drive. R. 199-1, Watson Decl. ¶¶ 1–2. Nidec retained an e-discovery company to re-

view the copy of the hard drive. 

Id.

 According to a declaration submitted by the ana-
lyst, Lance Watson, the hard-drive copy did “not contain information necessary to 
make a conclusion regarding any activity of the files present, including a determina-
tion if a mass download had occurred.” Id. ¶ 4. Watson averred that the data did “not 
meet the standards I would expect for a forensic copy.” Id. ¶ 3. So the copy of the hard 
drive was hardly a substitute for the 2013 Tragasz Affidavit. Indeed, even if the hard 

drive had all the forensic-data bells and whistles that would allow Nidec’s expert to 
draw forensic conclusions, still there would be no basis to withhold the Tragasz Affi-
davit.                                                                    
Molon offers no reason why the 2013 analysis was not disclosed during discov-
ery. Zero. Molon makes no assertion, for example, that it withheld production on the 
basis of attorney-client or work-product privilege. The absence of an explanation, 
combined with the lack of a smoking gun in the analysis, strongly suggests that Molon 
knew that the analysis did not support the trade-secret claims against Nidec (or, for 
that matter, any potential claim against Desai). Over the course of five months in 

2013, only 18 files were downloaded by Desai from Molon hard drives to a thumb 
drive, including mundane files like a cover letter, an employment agreement, and a 
resignation letter. See Tragasz Aff., Exh. B. By withholding the Tragasz Affidavit and 
its exhibits, Molon was able to vaguely allege that that, on “multiple occasions” before 
his resignation, Desai copied a “significant amount” of files. Third Am. Compl. ¶ 65. 
Again, this is not to excuse Desai for potentially breaching his employment agree-
ment by downloading files to take home to work on, but the unexplained concealment 

of the Tragasz Affidavit is strong evidence that Molon knew that its trade-secret 
claims were brought in bad faith.                                         
               4. Delgado’s Departure Date                           
There is one final piece of evidence of bad faith. Remember that Molon alleged 
that Jose Delgado, a quality-control engineer, left Molon for Nidec in 2013. Sec. Am. 
Compl. ¶ 59. Molon cast Desai and Delgado in a “conspiracy” to “copy files from their 

Molon work computers. This was done for nefarious purposes.” Id. ¶ 68. To buttress 
this allegation of conspiracy, Molon described Delgado’s quality-control duties, id. 
¶ 63, and then grouped Desai and Delgado together in describing the post-employ-
ment restrictions on their disclosure of trade secrets, id. ¶¶ 64–65. Molon then alleged 
that “their respective computers” were accessed “[s]everal days” before they left, and 
“significant amounts of data from those computers were downloaded to portable 
drives.” Id. ¶ 67.                                                        
The problem is that Delgado left Molon in 2010—not 2013. R. 199, Def. Br. at 

4. That three-year gap significantly undermines the allegation of a “conspiracy” be-
tween Desai, Delgado, and Nidec. Of course, everyone makes mistakes. It is easy to 
imagine, for example, a human resources employee pulling the wrong departure year 
from the personnel file, or that there simply was a typo along the way in communi-
cating the year of departure to Molon’s lawyer. But Molon offers the most conclusory 
explanation possible for the mistake, simply stating in its lawyer’s declaration that 
Molon “inadvertently misstated” the year and the mistake was “not brought in bad 

faith.” Carlson Decl. ¶¶ 5–6. But what investigation into the source of the error did 
Molon undertake to arrive at that conclusion? Did the lawyers consult their notes or 
emails from around the time of the pleading’s drafting? Is there something in Del-
gado’s personnel file, whether a typo there or a 2013 document or something else, 
that is the likely culprit for the mistake? Molon offers no concrete facts of any kind 
and offers no description of the inquiry that generated the conclusion of inadvertence. 

What the Court is left with is an unexplained allegation of a Desai-Delgado-Molon 
conspiracy that had no reasonable basis in fact. To be sure, the Delgado-conspiracy 
angle was dropped a few months later, but its inclusion in the first place is evidence 
of bad faith infecting Molon’s other litigative conduct.                  
For all those reasons, the Court finds that Molon acted in both objective and 
subjective bad faith in bringing and maintaining the trade-secret claims against 
Nidec. Molon waited 2½ years to bring the trade-secret claims because they were 
baseless, withheld the Tragasz Affidavit because it showed the weakness of the 
claims, and alleged a false departure date to pin a baseless conspiracy on Desai, Del-

gado, and Nidec. Nidec is entitled to attorney’s fees for defending against the trade-
secret claims.                                                            
                     C. Cutoff Date                                  
Nidec, however, has its own explaining to do on a late disclosure that could 
have helped prevent further litigation on the trade-secrets claims as of December 1, 
2017. On around November 14, 2017, Nidec’s lead counsel met with Desai. R. 164-2, 
Telscher Decl.¶¶ 1–2. After that meeting, Desai provided defense counsel with a writ-

ten declaration, which he signed on December 1, 2017. See R. 164-2, Exh. A, Desai 
Decl. In it, Desai averred that he never disclosed Molon’s confidential information to 
Nidec. Id. ¶¶ 5–10. Following the meeting, Desai also provided Nidec’s counsel with 
the thumb drive used to access files on the Molon hard drives that Desai had used 
when working there. Telscher Decl. ¶ 4. Having analyzed its contents, Nidec’s counsel 
found that the thumb drive largely contained personal files, and some Molon docu-

ments, albeit copied over a period of years. R. 164-1, Schmalfeld Decl. ¶ 6. 
But Nidec waited until August 30, 2018 to produce the declaration and a fo-
rensic copy of the thumb drive. Schmalfed Dec. ¶¶ 4, 7. This time, it is Nidec that 
fails to offer an explanation for glaring inaction. It is likely that earlier production of 
the declaration would have led to an earlier conclusion to the trade-secret claims and 
prevented whatever work was expended on them in the interim. Indeed, after the 
production of the Desai declaration, the Court held a status hearing on November 19, 
2018. R. 151; R. 185, Tr. of Proceedings 11/19/2018. Nidec’s counsel explained that 
“there hasn’t been any evidence of use of these trade secrets.” Tr. of Proceedings 

11/19/2018 at 4:17-18. The lawyers had discussed Molon taking a few depositions to 
“vet that,” and then “there’s a chance this case could go away altogether by the end 
of this month potentially.” Id. at 4:19–24. It turned out that Molon did not end up 
taking any depositions, see R. 161 at 1, and the Court’s notes reflect that Molon’s 
counsel reported, at the January 15, 2019 status hearing, R. 153,  that Molon had 
undertaken further investigation of the thumb drive and would likely voluntarily dis-
miss the claims.                                                          

Based on the record, then, a timely disclosure of the Desai declaration and the 
thumb drive would probably have cut off the litigation much sooner. In exercising its 
discretion to consider any relevant factor in awarding fees, see Krautsack, 

861 N.E.2d at 644

, the Court finds that any trade-secrets defense fees incurred by Nidec after 
December 1, 2017—the execution date of the Desai declaration—shall not be shifted 
to Molon.                                                                 

                     III. Conclusion                                 
Nidec’s motion for fees is granted in part and denied in part. Nidec is entitled 
to attorney’s fees for defending the trade-secret claims, but only through December 
1, 2017. The parties shall start the Local Rule 54.3 fee-petition process so that the 
specific amount of the fees can be determined. The date of this Order’s entry on the 
docket shall be considered as the equivalent of the judgment date as the springboard 
for the schedule in Local Rule 54.3(d) and ultimately for the Local Rule 54.3(e) Joint 
Statement’s deadline. Of course, the Court urges the parties to put this case to bed 
once and for all by engaging in good-faith settlement negotiations. To incur more time 

and expense on a fee petition probably would disserve both sides. The tracking status 
hearing of December 11, 2020, is reset to December 18, 2020, at 8:30 a.m., but to track 
the case only (no appearance is required, the case will not be called). Instead, the 
parties shall file a joint status report on December 11, 2020, proposing the specific 
deadlines under Local Rule 54.3 (and the parties may propose appropriate extensions 
to those deadlines in light of the holidays and, hopefully, in light of settlement nego-
tiations).                                                                

                                   ENTERED:                          

                                        s/Edmond E. Chang            
                                   Honorable Edmond E. Chang         
                                   United States District Judge      

DATE: November 30, 2020