It’s no secret that trade secret litigation can be expensive. Whether you are bringing a lawsuit to protect your crown jewels or defending against alleged trade secret misappropriation, we offer some useful strategies for managing and mitigating costs in trade secret litigation:
- Get Ready, Go! Identifying trade secret misappropriation is only the beginning of the story. Well before filing a trade secret lawsuit, plaintiffs must work to locate relevant documents, interview witnesses with knowledge, identify the trade secrets at issue, and explore strategic considerations including the appropriate venue, the applicable law, and legal claims including related breach of contract and common law claims. Defending against a trade secret case requires getting up to speed quickly, identifying key defenses, and often rapidly preparing oppositions to requests for injunctive relief or expedited discovery.
- Budget Wisely. Trade secret litigation can move quickly from complaint to emergency injunctive relief or stretch on for years when mired in contentious discovery disputes or debates over the nature and contour of often technical or complex trade secrets. Budgeting clearly from the start ensures that litigation goals are met and cost expectations are understood. Proposed budgets should include breakdowns of (1) staffing, including level, location, years of experience, expected work, hourly rate, and projected hours for each team member; (2) forecasting fees and costs at each phase and expected milestone throughout the life of a trade secrets litigation, (3) regular interim updates in addition to year-to-date or matter-to-date costs and fees, and (4) assumptions or limitations built into the budget. Electronic task management systems can collect data on billing unique to each phase of the litigation or milestones such as resolution of initial injunctive relief or preparing trade secret identification to stay on track with budgeted goals. Planning for unexpected budget excesses, which may occur due to early disputes over trade secret identification or early expedited discovery, help manage expectations and avoid rejection of invoices. We provide tips for creating and maintaining a budget in Crowell’s Legal Practice Management Guidebook.
- Don’t Lose Sight of Discovery Costs. Discovery can be the single most expensive phase of any litigation so keeping a close eye on these costs can lead to big savings.
- Break Discovery Into Phases: While there is often a rush to seek all discovery at once, there are strategic benefits to considering early targeted discovery in trade secret cases on issues like the extent of trade secret misappropriation when seeking injunctive relief or early particularized identification of trade secrets when defending against trade secret misappropriation which we explored in detail here and here. Narrowing the relevant issues and deferring more broad searching discovery can help manage costs and tailor to desired litigation outcomes. Evaluating the applicable law governing the case or the location of the relevant documents (e.g., data held outside of the U.S. or in less easily accessible repositories) may warrant a cost-benefit analysis for obtaining the potentially relevant information.
- Tailor Agreements to Your Case: Considerable effort and expense may be avoided by squarely confronting and deciding upon discovery scope, processes and protections early in a trade secrets litigation and tailoring to the needs of your case. Many courts have model orders and preferred forms of process that set deposition limits, outline protocols for the exchange of information, and provide guidance on the unintended disclosure of privileged information. See, e.g., N.D. Cal. E-Discovery (ESI) Guidelines. Parties should use these guidelines as a starting point and adjust based on the particulars of their matters, including identification of custodians and sources, search processes, and privilege logs.
- Use Technology to Your Advantage: Technology is a helpful tool that can significantly mitigate discovery burdens and risks. Early case assessment can accelerate understanding of the key sources of documents relevant to the trade secret dispute and identify the scale of available data and propose proportionality guidelines accordingly. For example, large scale bet-the-company litigations may warrant using advanced analytics software such as technology assisted review to help uncover valuable documents and assist with reviewing large volumes of data which is explored in greater detail in Crowell’s Technology Assisted Review Guidelines.
- Financing Litigation. Trade secret litigation can vary widely in terms of the financial stakes or relief sought. Companies exploring how to effectively manage litigation costs should consider Alternative Fee Arrangements (“AFA”) or value-based billing arrangements tailored to their goals and appropriately allocating risks and rewards. Sample AFAs include (1) fixed or flat fees (including certain discovery expenses); (2) fixed fees with collars (a percentage of the fixed fee); (3) reverse contingent fees (based on amount saved vs. recovery amount); (4) success fees; and (5) performance-based holdbacks (a non-traditional method of incentivizing a law firm to meets certain performance metrics). We outline these and other AFAs in Crowell’s Handbook for Value-Based Billing Engagements. In addition, litigation financing is another increasingly popular option to cover litigation costs that relies on third party funding in exchange for a percentage of any settlement or judgment.
- Communicate, Communicate, Communicate. Trade secret litigations can move quickly given the often expedited nature of the relief or discovery so maintaining constant communication with counsel ensures that information needed to defend or bring a case is readily available. Avoiding surprises by clearly defining expectations for the frequency, type, and detail level of communications sets up relationships for success and helps teams function more efficiently and more effectively.
There are always unknowns in litigation, but employing these strategies can help tame the rapidly growing costs of trade secret litigation while protecting valuable intellectual property in the process.