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Litigation Journal

Litigation Journal | Summer 2023: Legitimacy

Identifying Trade Secrets

Veronica J. Lew

 

  • The proper identification of the trade secrets at issue in a case is a crucial component to the claim.
  • Given this importance, identification is often an early source of controversy between the parties.
  • Strategically, plaintiffs should consider the demands of pre-discovery identification before filing the complaint. 
  • Defendants should press their adversaries to identify their trade secrets early on—ideally, before discovery.
Identifying Trade Secrets
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In any case, there is the question of how much information to disclose and when. This tension increases exponentially when a case involves trade secrets. By definition, trade secrets derive their value from not being generally known to the public or readily ascertainable by another person who can use the information. They also require their owners to take reasonable measures to keep them secret.

The proper identification of the trade secrets at issue in a case is a crucial component to the claim. Without precise identification, the parties can’t differentiate between publicly available information, information that is obtainable through proper means, information already known to persons in the field, and trade secrets. Given this importance, identification is often an early source of controversy between the parties. Still, the Defend Trade Secrets Act and the Uniform Trade Secrets Act, versions of which have been adopted by 49 states and the District of Columbia, are silent on pre-discovery disclosure mandates for identifying trade secrets.

The requirements for identifying a trade secret often depend on the stage of the case, the venue, and sometimes even the court. At the pleading stage, a plaintiff needn’t spell out all the details but must, as one court put it, “describe the subject matter of the trade secret with sufficient particularity to separate it from matters of general knowledge in the trade, and to permit the defendant to ascertain at least the boundaries within which the secret lies.” Alta Devices, Inc. v. LG Elecs., Inc., 343 F. Supp. 3d 868, 881 (N.D. Cal. 2018).

Specifically, a plaintiff must describe the trade secrets at issue sufficiently to put a defendant on notice of the information that is the subject of the claims. If a plaintiff seeks temporary or permanent injunctive relief, the trade secrets must be described so as to satisfy Rule 65 of the Federal Rules of Civil Procedure. See Syntex Ophthalmics, Inc. v. Tsuetaki, 701 F.2d 677, 684 (7th Cir. 1983).

Discovery is where things get trickier. There are key policy reasons for and against forcing a plaintiff to specify the trade secrets at issue before discovery starts. In general, a plaintiff’s broad right to relevant information about the case should be weighed against a defendant’s concern that trade secret litigation not become a fishing expedition into its business and technology.

To address this issue, California and Massachusetts have enacted statutes that require pre-discovery identification with reasonable or sufficient particularity. In these states, a plaintiff cannot seek discovery until proper identification has occurred. A similar trend is underway in federal court, where plaintiffs are increasingly ordered to identify the trade secrets with reasonable particularity before discovery on the secrets can be had. See, e.g., Kalencom Corp. v. Shulman, No. CV 17-5453, E.D. La. Apr. 17, 2018) (gathering cases).

So what does it mean to identify a trade secret with reasonable or sufficient particularity? Though the terminology is similar, the definitions vary.

For example, some courts have held that a plaintiff must set out the subject of the trade secret with enough detail to distinguish it from matters of general knowledge in the trade and to permit a defendant to determine its boundaries. See, e.g., Mallet & Co. Inc. v. Lacayo, 16 F.4th 364, 382 (3d Cir. 2021); InteliClear, LLC v. ETC Glob. Holdings, Inc., 978 F.3d 653, 658 (9th Cir. 2020). Others have defined reasonable particularity as requiring a plaintiff to identify its trade secrets “in a manner that will allow the trial court to control the scope of subsequent discovery, protect all parties’ proprietary information, and allow them a fair opportunity to prepare and present their best case or defense at a trial on the merits.” Advanced Modular Sputtering, Inc. v. Superior Court, 132 Cal. App. 4th 826, 836 (2005).

While a plaintiff may be allowed to amend or supplement its identification of trade secrets, courts will often compel a demonstration of good cause. Because the purpose of pre-discovery identification is to facilitate an understanding of the case and inform the scope of discovery, amendment may be limited. In any event, a plaintiff may have to describe the trade secrets in response to interrogatories or during Rule 30(b)(6) depositions.

Strategically, plaintiffs should consider the demands of pre-discovery identification before filing the complaint and, if the trade secrets are especially technical, decide whether to engage outside experts to assist in defining them as part of the pre-discovery disclosure. Defendants, on the other hand, should press their adversaries to identify their trade secrets early on—ideally, before discovery—and determine whether any objections to the designation are appropriate. Because there is no uniform standard regarding the timing and content of trade secret disclosures, both sides should evaluate the applicable standards when selecting an appropriate venue.

The identification of trade secrets and when to identify them will continue to be crucial and contested issues in trade secret cases, and courts increasingly require identification before discovery even begins.