A common claim that is raised between competitors in the business world are claims for misappropriation of trade secrets. This typically occurs when an employee jumps from one company to the next and brings along his or her customers to the new company. While competition is encouraged in California, employers have an expectation that their trade secret information would not be divulged, and their kneejerk reaction is to protect themselves against such an offense.
One common mistake that companies make in trying to protect themselves is that they assume they can obtain all of the information they need through the discovery process without thinking through what specific trade secrets have been misappropriated. However, California Code of Civil Procedure section 2019.210 states that in any action alleging misappropriation of trade secrets under the Uniform Trade Secret Act, “before commencing discovery relating to the trade secret[s], the party alleging misappropriation shall identify the trade secret[s] with reasonable particularity.” (emphasis added)
This requirement serves four important and interrelated goals: (1) to promote well investigated claims and to dissuade the filing of meritless trade secret complaints; (2) to prevent plaintiff from using the discovery process to obtain the defendants’ trade secrets; (3) to assist the court in framing the scope of discovery; and (4) to enable defendants to form complete and well-reasoned defenses, ensuring that they need not wait until the eve of trial to effectively defend against charges of trade secret misappropriation. Perlan Therapeutics, Inc. v. Superior Court, 178 Cal. App. 4th 1333, 1343 (2009).
To meet the “reasonable particularity” requirement, it is not sufficient for a plaintiff to provide a list of high-level, generic categories in which its alleged secrets are said to reside. Perlan, 178 Cal. App. 4th at 1343-1344. Rather, the disclosures must be detailed enough to permit the defendants to ascertain whether and in what way the information is distinguished from matters already known, and to permit the court to fashion appropriate discovery. Brescia v. Angelin, 172 Cal. App. 4th 133, 143 (2009).
As a result, courts have rejected trade secret descriptions that contain “broad, catch-all language as a tactic to preserve an unrestricted, unilateral right to subsequently amend [a] trade secret statement.” Perlan, 178 Cal. App. 4th at 1350. It is also insufficient for a party to identify alleged trade secrets by citing to voluminous documents. Brescia, 172 Cal. App. 4th at 140.
Thus, if a competitor brings a claim of misappropriation of trade secrets against you, you have no obligation to comply with any of the rules of discovery until the other side first discloses “with reasonable particularity” the trade secrets that are at issue. If the party fails to do so but still seeks discovery, then you can bring a motion for protective order to stop the other side until it complies with its trade secret disclosure requirement. This provides a huge benefit to the party being sued because the party can proceed with its discovery and obtain vital information before having to disclose anything to the other side until the trade secret disclosure requirement is met.
If you are contemplating bringing a claim for misappropriation of trade secrets, make sure you have your ducks in a row and be ready to make the appropriate trade secret disclosures at the outset of the case. Otherwise, the other side will be able to draw first blood in discovery and gain the advantage in the litigation. If you are being sued for misappropriation of trade secrets, hold the other side’s feet to the fire and insist on receiving the trade secret disclosures before complying with discovery. By forcing the other side to show its hand, you can narrow the scope of discovery and prevent a fishing expedition.
