Practice Tips for the Trade Secret Holder: Navigating Discovery Under the Defend Trade Secrets Act

ALM Media
Updated

Since May 11, 2016, owners of trade secrets have been able to pursue remedies against alleged misappropriators in federal court under the Defend Trade Secrets Act (DTSA). The first article in this two-part series assessed how courts have evaluated the sufficiency of allegations in complaints filed under the DTSA and proposed steps to avoid unnecessary pitfalls. This article explores how courts have treated the trade secret holder s disclosure obligations in cases brought under the DTSA, including whether, when, and how the reasonable particularity standard has been applied. Finally, this article provides practice tips for navigating discovery under cases brought under the DTSA.

Offensive Versus Defensive Discovery

Among the most critical issues for trade secret holders under the DTSA is whether, when, and how to disclose allegedly misappropriated trade secrets. As noted in the first article in this series, at the outset of the case, the complaint must put the defendants on notice of what is at issue but need not disclose trade secrets, for the simple reason that disclosure in a public complaint would destroy those trade secrets.

The plaintiffs disclosure of trade secrets can potentially impact the entire case. Under both state law and under the DTSA, defendants often seek early, detailed, comprehensive disclosure of all trade secrets owned by the plaintiffs, while plaintiffs seek to engage in discovery of defendants so that they may focus their list of trade secrets on items at issue in the litigation. When applying the DTSA, federal courts may look to how courts have applied the Uniform Trade Secrets Act (UTSA), and, notably, different standards for trade secret disclosure apply in different venues. Some states most notably California require that a trade secret holder identify its trade secrets with reasonable particularity before obtaining discovery from defendants on related issues such as misappropriation. See Cal. Civ. Proc. Code 2019.210. At best, this standard (1) promotes well-investigated claims and dissuade the filing of meritless trade secret complaints, (2) prevents plaintiffs from using discovery as a means to obtain a defendant s trade secrets, (3) assists the court in framing the scope of discovery, and (4) enables the defendants to form complete and well-reasoned defenses, without waiting until the eve of trial to effectively defend against charges of trade secret misappropriation. See Via Technologies, Inc. v. Asus Computer Int l, Civ. A. No. 14-cv-03586, 2016 WL 5930280, *3 (Oct. 12, 2016). At worst, this standard provides defendants with significant strategic and tactical advantages by allowing them to avoid or delay responding to discovery while seeking greater details about plaintiffs trade secrets. See Perlan Therapeutics, Inc. v. Super. Ct., 101 Cal. Rptr. 3d 211, 228 (Cal. App. 4th Dist. 2009).

Notably, the DTSA did not codify California s requirement for disclosure of trade secrets with reasonable particularity. Curiously, the DTSA uses the term reasonable particularity when describing the requirements for seeking civil seizure, but even in that context, it is the matter to be seized that must be described with reasonable particularity, not the plaintiff s trade secrets. 18 U.S.C. 1836(b)(2)(A)(ii)(VI). Thus, the DTSA does not on its face require early, particularized disclosure of trade secrets before plaintiffs may commence discovery.

Nevertheless, although the plaintiffs under the DTSA may not need to go first, they may need to describe their trade secrets with some degree of specificity in response to an appropriate interrogatory. At least one court has concluded that to survive a motion for summary judgment, the plaintiff must provide sufficient detail to allow the court to assess whether the purported trade secret meets the statutory requirements. Kuryakyn Holdings, LLC v. Ciro, LLC, Civ. A. No. 15-cv-703, 2017 WL 1026025, *6 (Mar. 15, 2017). In Kuryakyn, the court explained that identifying categories or general topics of information would not suffice. Id. at *7. The court further determined that for descriptions of trade secrets that arguably might be specific enough, summary judgment is appropriate where the plaintiff failed to take the next required step, that is, to demonstrate that this specific information meets the statutory definition of a trade secret. Id. at *7. Relatedly, the court found that although the plaintiff had described certain of its purported trade secret product designs with enough specificity, the plaintiff s claims would not survive summary judgment because the plaintiff failed to rebut the defendants contention that the product designs were readily ascertainable by reverse engineering. Id.

Early discovery from defendants can provide plaintiffs with critical information to help shape the list of misappropriated trade secrets, potentially avoiding the burdensome task of cataloging all trade secrets in the dark. However, courts appear more inclined to grant requests for temporary restraining orders (TRO) than requests for expedited discovery. See, e.g. Henry Schein, Inc. v. Jennifer Cook, Civ. A. No. 16-cv-3166, 2016 WL 3212457, **4-5 (Jun. 20, 2016) (granting TRO and denying expedited discovery); Engility Corp. v. Charles Aaron Daniels, Civ. A. No. 16-cv-2473, 2016 WL 7034976, * (Dec. 2, 2016) (granting TRO and preliminary injunction and denying motion for expedited discovery); see also Earthbound Corp. v. MiTek USA, Inc., Civ. A. No. C16-1150, 2016 WL 4418013, *11 (Aug. 19, 2016) (granting TRO and an unopposed motion for expedited discovery).

DTSA Discovery

  • The DTSA did not codify the requirement that plaintiffs identify trade secrets with reasonable particularity before commencing discovery;

  • In response to an appropriate interrogatory, trade secrets should be identified with sufficient information to allow a fact-finder to conclude all statutory requirements are met;

  • Early discovery of defendants may allow plaintiffs to tailor disclosure of trade secrets to those items actually misappropriated; however, courts appear more inclined to grant TROs than expedited discovery.