Trade secret litigation often involves deep levels of distrust, heated emotional exchanges, suspicion, anger, and outrage on the part of parties and counsel. One source of the problem lies at the heart of a trade secret misappropriation claim: the allegation that a “theft” has occurred, and each party’s perception of the other party resulting from that allegation. The plaintiff alleges its property has been stolen by the defendant. If the plaintiff desires to avoid the time and expense of trial, the victim must now negotiate with the thief, adding insult to injury. The defendant, on the other hand, may express outrage at being accused of theft, and suspect the litigation is merely a “fishing expedition” by the plaintiff to uncover the defendant’s own trade secrets. The allegation of theft sets the parties on a course of distrust, suspicion and lack of cooperation, which can affect the likelihood of reaching a settlement during a trade secret mediation session.
Trade secret disputes can result in extremely contentious and difficult mediation sessions, with settlement being a thorny undertaking. How then, can the parties overcome these issues and reach agreement during mediation? The following tips may be helpful when mediating trade secret disputes.
Know the Definition of “Trade Secret” in the Relevant Jurisdiction. Counsel sometimes approach trade secret mediations with an incorrect definition of what a “trade secret” is within the relevant jurisdiction. One example is the “customer list.” Plaintiff’s counsel will sometimes argue that customer names and addresses, without more, is sufficient for trade secret protection. However, courts have held that certain customer information, such as names of contact persons that can easily be obtained by a phone call and addresses that are obtainable via the internet and directories, are not trade secrets. Defense counsel may take the position that customer names and information are not trade secrets, without making sure the information is easily obtainable, in the public domain or otherwise qualifies as a trade secret. The lack of a clear definition can lead to disputes as to the level of protection afforded. Counsel should review the trade secret laws and cases within the relevant jurisdiction to determine what a “trade secret” is and what it isn’t, and advise the mediator ahead of time if the issue is disputed, so that it may be addressed during the mediation (and so that counsel does not argue an unsupportable position to the detriment of the client).
Respond to Communications From Opposing Counsel. Very often an overlooked email, the failure to return a phone call or a rude or disrespectful comment may be interpreted by opposing counsel as a sign of disrespect, which can fan the flames in an already emotionally charged situation and affect a party’s willingness to cooperate during the mediation. Resist the temptation to lobby a rude or disrespectful comment in response to one received from opposing counsel. Promptly respond to communications in a professional manner to reduce the chance of misunderstandings, and to keep the channels of communication open.
Try to Develop Some Level of Trust and Cooperation, If At All Possible. Trade secret mediations often turn on the level of trust and cooperation between the parties prior to and during the mediation. It is extremely helpful to establish good faith and cooperation during the session. If Plaintiff’s counsel has any sense the defendant is playing “hide the ball,” or defendant’s counsel feels plaintiff is seeking to engage in a “fishing expedition,” it will be difficult to obtain concessions from a party or reach settlement terms. The more open, honest, transparent and authentic each party is (or each party appears to be), the less contentious the mediation will be and the more likely a settlement can be reached. Even if the parties cannot develop a level of trust, it is helpful to reach some level of cooperation acceptable to all involved and necessary for a settlement to occur.
Conduct a Thorough Investigation The First Time Around. Counsel (both in-house and firm) who do not have experience with trade secret disputes and litigation or who are not familiar with the internal workings of computer systems, networks, IT departments and staff, should promptly seek the advice of trade secret counsel or a consultant. This will help to ensure that employees and contractors are properly instructed on how to search computer systems/networks; to properly interview witnesses by asking the right questions; to ensure the investigation is complete so there are no surprises later on; and to avoid spoliation of evidence. An incomplete or faulty investigation, especially if discovered during the mediation session, may require suspension of the session so that a supplemental investigation can be performed, which can result in increased time, expense and frustration for all involved.
Accept That You May Never Get all the Answers. Trade secret cases often involve a substantive investigation into a party’s computers, networks, systems and personnel to discover if trade secrets have been wrongfully misappropriated. Depending on the manner in which systems/software are configured, whether relevant company policies are or were in place and the availability of witnesses, it may not be possible to develop a full picture of whether trade secrets may have been accessed, misappropriated or used. There usually comes a time when counsel and client must accept this fact, and decisions must be made based on the information available at the time. It may not be worth the time and cost to continue an investigation or conduct additional discovery. The difficulty is knowing when to “stop,” and convincing the client that point has been reached. Emotions and distrust may impede a party’s ability to think clearly and make a rational decision on the matter, but it must be done, especially when it is in the best interest of the client to reach a settlement during the mediation session.
Make Sure Expert Reports are Easy to Understand. Sometimes a party will introduce an expert’s forensic computer analysis during the mediation for the participants to review. Reports such as this are extremely helpful in determining what information resided in the defendant’s computer systems, and whether that information constituted plaintiff’s trade secrets. On occasion, however, the report is such a maze of jumbled, unintelligible graphs, charts, data and technical speak that the report itself requires an instructional manual. Explaining difficult reports during mediation can waste precious time that could be better used for settlement discussions. Counsel should make sure the graphs, charts legends and data in expert reports are clear and easy to understand; the explanatory text is written in laymen’s terms, not industry speak; and the results and implications are clear. Simple expert reports will minimize the time spent reviewing and explaining the report, and maximize the time spent on negotiating settlement terms.
Trade secret litigation often involves high levels of distrust, incomplete information and a lack of communication and cooperation. This can set the tone of the mediation session, and impede the parties’ ability to cooperate and reach settlement terms. Overcoming these obstacles can be an uphill battle for the parties and the mediator. The key to successful trade secret mediations is working through, and in spite of, a lack of trust and incomplete information; finding areas of cooperation; keeping the lines of communication open; and working in the client’s best interest so that the dispute can be resolved, and the client can get “back to business.” Counsel and clients must commit to the process in order to overcome the barriers to settlement and achieve success in trade secret mediations.