Federal courts hearing trade secret claims have long held that at some point during discovery plaintiffs must identify the misappropriated trade secrets with particularity or risk dismissal on summary judgment. See, e.g., Imax Corp. v. Cinema Techs., Inc., 152 F.3d 1161, (9th Cir. 1998); IDX Sys. Corp. v. Epic Sys. Corp., 285 F.3d 581, (7th Cir. 2002). Motion practice in the federal courts regularly arises about the timing of this identification. Defendants demand disclosure of the trade secrets in sufficient detail at the beginning of the case to narrow the scope of plaintiff’s claims and to reduce discovery expense. Plaintiffs often respond that defendants know this information already and requesting this as simply an excuse to hide documents and delay discovery indefinitely.
Some state courts, including California, require plaintiffs identify trade secrets with “reasonable particularity” before discovery relating to the trade secrets begins. See, e.g., Cal. Civ. Code § 2019.210. Although the Federal Rules of Civil Procedure do not expressly require the same, a growing number of federal courts have effectively adopted this rule. Federal district courts in several states, including California, Arizona, Colorado, Connecticut, Georgia, Michigan, Nevada, North Carolina, Pennsylvania, and Texas, have recently issued orders staying discovery responses by defendants until plaintiffs identify with sufficient specificity the trade secrets at issue. See United Servs. Auto. Ass’n v. Mitek Sys., Inc., 289 F.R.D. 244, (W.D. Tex. 2013) (listing opinions).
In a more recent trend, federal courts have dismissed trade secret claims on summary judgment after a plaintiff was ordered before discovery to disclose their asserted trade secrets with particularity and then failed to comply. For example, in Jobscience, Inc. v. CVPartners, Inc., No. C 13-04519, 2014 U.S. Dist. LEXIS 26371 (N.D. Cal. Feb. 28, 2014), Judge Alsup ordered plaintiffs to file and serve a sealed statement providing a summary of each specific trade secret, the basis for it being a trade secret, and providing “each of the precise claimed trade secrets, numbered, with a list of the specific elements for each, as claims would appear at the end of a patent.” Plaintiff failed to comply with the order, and Judge Alsup summarily dismissed the trade secret misappropriation claims. Jobscience, Inc. v. CVPartners, Inc., 2014 U.S. Dist. LEXIS 64350 (N.D. Cal. May 1, 2014) (“Jobscience promised it could disclose trade secrets, but when it came time to show us the money, its wallet was empty… . This experience has been nothing more than a fishing expedition.”).
Similarly, in Purchasing Power, LLC v. Bluestem Brands, Inc., 22 F. Supp. 3d 1305, (N.D. Ga. 2014), the U.S. district court dismissed trade secret claims on summary judgment after plaintiff had been ordered at the beginning of discovery to identify with particularity the asserted trade secrets. The district court held that plaintiff’s mere assertion of general categories of trade secrets, especially in light of the court’s order months earlier, “preclude[d] Defendant and the Court from evaluating whether a ‘trade secret’ exists and, if so, whether it was misappropriated.”
Given the trend in federal courts of applying state court trade secret disclosure requiring and ordering early and specific identification of the trade secrets underlying a plaintiff’s claim, plaintiffs should prepare detailed descriptions of their asserted trade secrets prior to filing suit and certainly before discovery begins. As part of that exercise, Plaintiffs should also evaluate whether the misappropriated information is, in fact, a trade secret under the statutory definition. Defendants should insist upon a particularized list of trade secrets as soon as they receive notice of the lawsuit and ask the district court to include these conditions and deadlines in the case scheduling order.