Elite Semiconductor, Inc. v. Anchor Semiconductor, Inc.

Background

Elite sued Anchor Semiconductor, Inc. and other defendants in 2020, asserting trade-secret misappropriation and related claims. Elite alleged that Anchor had stolen its technology in 2011 and argued that it did not discover the alleged claim until 2019, when it learned about an earlier Anchor patent application.

The court previously granted summary judgment for Anchor and Chenmin Hu. It concluded that Elite had received a United States Patent and Trademark Office office action referring to the Anchor application in 2013. That knowledge started the three-year limitations period, which expired in May 2016. Because Elite filed suit in 2020, the court found its claims time-barred.

After judgment, the parties agreed to separate the fee issue into two stages. The first stage concerned whether the defendants were entitled to fees; a later application would address the amount. The defendants sought fees from Elite and from four law firms that had represented Elite: Fish IP Law LLP, Thoits Law, Jeffer Mangels Butler & Mitchell LLP, and Sideman & Bancroft LLP. They relied on federal and California trade-secret statutes, the court’s inherent authority, Federal Rule of Civil Procedure 11, and 28 U.S.C. § 1927.

Trade-secret fees

Federal and California trade-secret law permit a court to award reasonable attorney’s fees to the prevailing party when a misappropriation claim was made in bad faith. The court found that the defendants were prevailing parties because they won summary judgment.

Applying California’s definition of bad faith to both federal and state trade-secret claims, the court required objective and subjective bad faith. Objective bad faith required “objective speciousness,” meaning that a claim superficially appeared to have merit but lacked supporting evidence. The court found Elite’s claims objectively specious because they were subject to an obvious three-year time bar. Elite filed nine years after the alleged theft and relied on a discovery-rule theory that was contradicted by its receipt of the relevant office action in 2013.

The court also found subjective bad faith, which requires an improper motive. It concluded that Elite had continued asserting that it first learned about the Anchor application in 2019 even after evidence showed that it had received the office action in 2013. The court inferred that Elite pursued the litigation to extract settlement value rather than to prevail on the merits.

The court therefore held that the defendants were entitled to fees from Elite under both federal and California trade-secret law.

Inherent authority

The court separately held that fees were warranted under its inherent authority because it expressly found that Elite had acted in bad faith. The court again relied on the reasons supporting its bad-faith finding under the trade-secret statutes.

Rule 11

The court ruled that Rule 11 sanctions were not available against Elite’s attorneys. It held that a Rule 11 motion filed after judgment does not promote judicial economy, even if the proposed motion was served before judgment. The court also found that the defendants waited more than two years after serving their proposed motion before filing it and that the motion served in 2022 was materially different from the motion filed in 2025. The earlier service therefore did not satisfy Rule 11’s procedural requirements.

28 U.S.C. § 1927

Section 1927 permits fees against counsel who unreasonably and vexatiously multiply litigation. The court found that fees were not available against Sideman & Bancroft because that firm began representing Elite only after judgment was entered.

The court deferred deciding whether Elite’s former law firms could be liable. The opinion states that it was unclear whether those firms knew defendants were seeking fees against them and that they had not filed oppositions. The court required defendants to serve the order on the former firms and any other third parties from whom they sought fees, file proof of service, meet and confer, and propose a schedule for resolving third-party fee liability and determining the amount of fees.

Disposition

The court granted in part and denied in part the defendants’ motion for attorney’s fees. It found the defendants entitled to fees from Elite under federal and California trade-secret law and the court’s inherent powers; ruled that Rule 11 sanctions were unavailable against Elite’s attorneys; ruled that § 1927 fees were unavailable against Sideman & Bancroft; and deferred the § 1927 issue as to Elite’s former law firms. The order did not determine the amount of fees.