William P. Keane

Timing and Particularity in State Court

Under California law, a plaintiff alleging misappropriation of trade secrets must, subject to an appropriate protective order, "identify the trade secrets with reasonable particularity" before commencing discovery relating to the trade secrets. Cal. C.C.P. 2019(d). While this statute has ended most disputes over which party in discovery must disclose its trade secrets first, disagreements over the meaning and application of the term "reasonable particularity" are commonplace. The statute provides no further clarification. Surprisingly, there is also very little California case law on the issue. In a case decided about twenty years before Section 2019(d) was enacted, the California Court of Appeal required a plaintiff, before embarking on discovery of the defendant's trade secrets, to describe the alleged misappropriated secrets with sufficient particularity "to separate it from matters of general knowledge in the trade or of special knowledge of those persons who are skilled in the trade." Diodes v. Franzen, 260 Cal. App. 2d 244 (1968).

Timing of Trade Secret Disclosures in Federal Court
There is no parallel statute to Section 2019(d) in the Federal Rules of Civil Procedure. Although methods of federal discovery generally can be used in any sequence, the district court maintains wide discretion and authority to order a specific sequence and timing for discovery. See Fed. R. Civ. Proc. 26(d). Judge Richard Posner of the Seventh Circuit has encouraged district judges to take a more active role in controlling discovery: "The power granted by Rule 26(d) to control the sequence and timing of discovery is one of the district court's too little used tools." Marrese v. American Academy of Orthopedic Surgeons, 706 F.2d 1488, 1495 (7th Cir. 1983). The district courts, therefore, have ample authority to order a result equivalent to Section 2019(d).

Likewise, the Federal Rules grant the district courts authority to issue a protective order to allow a trade secret to be "revealed only in a designated way." Fed. R. Civ. Proc. 26(c)(7). As a practical matter, as most litigators in this area are fully aware, the parties usually negotiate and stipulate to a protective order that is then submitted to the court for signature. That there is usually very little, if any, judicial modification to stipulated protective orders highlights the importance of counsel drafting a comprehensive and unambiguous protective order. In reality, many counsel-negotiated protective orders contain poorly drafted, confusing terms and do not contemplate issues that are likely to arise during the litigation. While an in-depth discussion of stipulated protective orders is beyond the scope of this article, a few points on such orders are worth making here.

First, most protective orders suffer simply from a lack of attention when being drafted. When was the last time you actually read the boilerplate protective order you regularly print from your computer? How many times have you signed opposing counsel's proposed protective order after only glancing at it? Of course, the appropriate terms for a protective order will vary depending on the case, but the following issues should be addressed in most standard, two-tier "Confidentiality" and "Attorneys' Eyes Only" ("AEO") orders: (a) What is the deadline, if any, for objecting to a party's designation of a particular tier, usually AEO? (b) Will designated party representatives, in addition to outside litigation counsel, be given access to AEO material? (c) How will material from subpoenaed non-parties be handled when at least one of the parties or the subpoenaed party claims that the subpoenaed material contains trade secrets? (d) Will the parties be required to notify the other side of any proposed expert to whom a party wishes to grant access to AEO material? If expert notification is contemplated, what are the grounds for a legitimate objection? What is the deadline for a motion to deny access to a particular expert and which party bears the burden of filing the motion? If judicial intervention is sought, what standard will the court apply in deciding whether access under the protective order should be granted to the proposed expert? These are all issues upon which many protective orders are silent, resulting in needless delays and haggling.

With a well-crafted protective order in place, the litigants can next turn to the issue of timing of trade secret disclosures: Can the plaintiff in federal court be required to identify expressly the trade secrets at issue? If you have a case or discovery matter pending before U.S. Magistrate Judge Patricia V. Trumbull in San Jose, the Section 2019(d) disclosure statute will apply in trade secret cases governed by California law. In a recent case, Judge Trumbull granted the defendant's motion to compel the plaintiff's compliance with Section 2019(d). Canter v. West Publishing Co., 1999 WL 11701, at *8 (N.D. Cal. Jan. 6, 1999). Judge Trumbull's application of Section 2019(d) in her courtroom dates back at least to 1995. See Calif. Micro Devices v. Universal Semi-Conductor, 1995 WL 705144, at *1 (N.D. Cal. Nov. 21, 1995). There is no other reported decision in the Northern District addressing the timing of trade secret disclosures or the application of Section 2019(d). The Ninth Circuit has also yet to weigh in on the issue.

There is only one other reported decision in the remaining California district courts that addresses the timing issue, and it rules against requiring the plaintiff to identify the trade secrets at issue before commencing discovery. In Upjohn Co. v. Hygieia Biological Laboratories, U.S. Magistrate Judge Gregory G. Hollows of the Eastern District rejected a defense request to require the plaintiff to identify the alleged misappropriated trade secrets before enforcing the plaintiff's subpoena duces tecum directed at a non-party in possession of defense trade secrets. Although Judge Hollows applied California law to the case on other issues, application of Section 2019(d) was not addressed. Judge Hollows noted, however, that the subpoena was limited in scope to a single vaccine that the parties agreed was in dispute. The Judge implied that a different decision on timing might have resulted if the subpoena sought a wider range of documents. Upjohn Co. v. Hygieia Biological Laboratories, 151 F.R.D. 355, 359 (E.D. Cal. 1993).

Given the current lack of definitive Ninth Circuit law on the subject, the issue of the timing of trade secret disclosures remains unsettled in California federal courts (unless, of course, the case is pending before Judge Trumbull). In reliance on Judge Trumbull's per se application of Section 2019(d), defense counsel have a reasonable basis to insist on an initial plaintiff disclosure when their cases are pending in other California federal courtrooms, especially in the Northern District. As a practical matter, defendants can also require a de facto Section 2019(d) disclosure by serving an early interrogatory on the issue. Other federal district courts outside the state have ordered a plaintiff to provide sufficient interrogatory responses identifying the trade secrets at issue before plaintiff discovery has commenced or continued.

In one case, the District of Delaware agreed with the defense that the plaintiff's initial list purporting to identify the allegedly misappropriated trade secrets was lacking in detail. The court granted a motion to compel and gave the defendant two months to conduct discovery of the plaintiff to inquire into the details of the trade secrets before plaintiff could commence discovery against the defendant. See Leucadia v. A.E.T., 755 F. Supp. 635 (D. Del. 1991). In a second case, the Southern District of Mississippi granted a motion to compel the plaintiff to produce a written trade secret disclosure before conducting discovery of the defendant. "[E]xact and specific identification of trade secrets should have been the starting point of discovery." Diversified Technology v. Dublin, 31 U.S.P.Q.2d (BNA) 1692, 1695 (S.D. Miss. 1994) (withdrawn from F.R.D. at the court's request).

For the defense, two policy arguments in favor of an initial plaintiff disclosure are most likely to find acceptance with the court. First, the most common argument is that a plaintiff should not be allowed to engage in a "fishing expedition" through a defendant's trade secrets in an effort to make its case. A person appearing at the "lost and found" claiming to have lost a wallet is first asked to describe the wallet. That person should not be allowed simply to rummage through all of the lost wallets to find the one containing the most money and claim that it is the one supposedly lost. Second, the defense can argue that, without an initial plaintiff disclosure, it is difficult, if not impossible, for the relevancy of the plaintiff's discovery requests to be judged. Until the plaintiff identifies the trade secrets at issue, "neither the court nor the parties can know, with any degree of certainty, whether discovery is relevant or not[.]" Xerox v. I.B.M., 64 F.R.D. 367, 371 (S.D.N.Y. 1974) (a frequently cited case on timing and particularity issues).

Finally, defense counsel should explore the possibility, even if a Section 2019(d) or equivalent disclosure is made, of seeking bifurcated discovery, i.e., a court order under Federal Rule of Civil Procedure 26(c)(7) that limits the parties' initial discovery to non-trade secret issues when those issues might be dispositive. That was the result ordered in the antitrust decision referenced above by Judge Posner. The Seventh Circuit ordered that discovery of the defendant's confidential information should be deferred until after discovery on potentially dispositive issues had been completed. Marrese, 706 F.2d at 1497. In the trade secret context, the Southern District of Iowa has initially limited discovery to a potentially dispositive statute of limitations question and deferred discovery on trade secret misappropriation. See Puritan-Bennett Corp. v. Pruitt, 142 F.R.D. 306, 309-10 (S.D. Iowa 1992).

For plaintiff's counsel arguing against an initial trade secret disclosure, Judge Hollows' decision in Upjohn is the best counter to the Judge Trumbull authority. In Upjohn, the court did not apply Section 2019(d) and did not require the plaintiff to disclose a trade secret list before commencing discovery. Judge Hollows' express acknowledgment that the initial discovery sought by plaintiff was narrowly tailored to the product admittedly at issue suggests a prudent strategy for plaintiffs seeking to avoid initial disclosures.

To the extent possible, the more narrow in scope a plaintiff's initial discovery requests the less susceptible the discovery will be to attack on the grounds that it was not preceded with a trade secret list. A reasonably narrowed discovery request is the best response to defense arguments of a "fishing expedition" and uncertainty over relevance. Discovery requests limited to a particular subject matter or product, or component part of the product, are likely, at a minimum, to withstand "relevancy" attacks given the liberal discovery rules in federal court. See Fed. R. Civ. Proc. 26(b)(i). That is the persuasive lesson of the Upjohn decision.

The policy argument most likely to merit serious judicial consideration against an initial plaintiff disclosure is when a plaintiff can legitimately argue that it is in a "Catch-22" situation: plaintiff filed a complaint in good faith against a party that had access to plaintiff's trade secrets, but plaintiff is without sufficient pre-litigation information about the defendant's business operations to identify specifically what was misappropriated. The success of this argument will likely turn on plaintiff counsel's ability to convince the court that the facts about which plaintiff has knowledge establish its good faith in believing misappropriation occurred.

Particularity of Trade Secret Disclosures in Federal Court
As trade secret litigators know, timing of trade secret disclosures is only one of the first likely flash points to arise after a case is filed. The issue of particularity in the plaintiff's identification of alleged misappropriated trade secrets is often disputed throughout the duration of the litigation. Particularity is likely first to come up if the plaintiff seeks preliminary injunctive relief. In discovery, the parties often dispute the level of detail plaintiff is required to provide, whether it be in a Section 2019(d) disclosure or in answers to interrogatories. Finally, particularity can be a determinative factor in a summary judgment motion or at trial. In the Ninth Circuit and the California district courts, not surprisingly, there is little reported discussion on the particularity required for a Section 2019(d) initial disclosure when the statute is applied in federal court. Both the Ninth Circuit and the district courts, however, have addressed particularity at other stages of litigation.

In deciding an application for a TRO or motion for preliminary injunction, the district court is likely to insist that the plaintiff establish a high level of particularity in its trade secret identification. Judges are reluctant to wield the often-devastating hammer of injunctive relief, especially for a preliminary injunction, unless the plaintiff can specifically identify its trade secrets manifested in the defendant's product. A "Catch-22" plaintiff, as described above, has little chance for injunctive relief unless court-ordered, expedited discovery immediately fills the holes in plaintiff's trade secret identification.

U.S. District Judge Fern Smith of the Northern District recently denied a motion for preliminary injunction after a "Catch-22" plaintiff received in expedited discovery the source code for the defendant's unfinished software program, but did not present to the Court an actual comparison of the architecture of the parties' programs. Judge Smith noted that the plaintiff's failure to identify "specific similarities" between the parties' programs "considerably" undermined the plaintiff's claim. Cinebase Software v. Media Guarantee Trust, 1998 WL 661465, at *9 (N.D. Cal. Sept. 22, 1998). Judge Smith relied in part on a 1991 preliminary injunction denial by U.S. District Judge D. Lowell Jensen, also of the Northern District, who found that the plaintiff's failure to identify "specific confidential information" misappropriated by the defendant resulted in a "failure to link" the alleged trade secrets to a "specific manifestation" in defendant's product. This "failure" was "alone a sufficient basis" for the Court's denial of the preliminary injunction motion. Integral Systems v. PeopleSoft, 1991 WL 498874, at *14 (N.D. Cal. July 19, 1991).

Judge Trumbull, not surprisingly, is the sole source for published discussions on the particularity required for Section 2019(d) disclosures. In the Canter decision, noted above, Judge Trumbull rejected a Section 2019(d) disclosure that consisted primarily of a reference to other discovery materials that the plaintiff claimed contained a description of the secrets at issue. Referring to a related order in the case that required the plaintiff's disclosure to "delineate specifically" the claimed trade secrets, Judge Trumbull rejected the plaintiff's purported disclosure because the statement or designation itself did not expressly list the secrets. Canter, 1999 WL 11701, at *8.

The risk a plaintiff runs by failing to provide sufficient particularity in response to trade-secret-identification interrogatories was highlighted in the Ninth Circuit's most recent decision on particularity. In Imax Corp. v. Cinema Technologies, the Ninth Circuit expressed a detailed approval of San Jose U. S. Magistrate Judge Edward A. Infante's discovery rulings in a trade secret case involving the technology for "rolling loop" movie projector systems. Judge Infante presided over the discovery disputes on the case, while Judge Jensen ultimately decided summary judgment on the trade secret issues in favor of the defense. In response to defense interrogatory Nos. 1 and 2 asking for identification of "the entire content" of the allegedly misappropriated trade secrets, the plaintiff responded by referring to 459 documents pursuant to Federal Rule of Civil Procedure 33(d), which allows a party to respond to an interrogatory by reference to specific business records. Judge Infante, on the defendant's motion to compel, ordered the plaintiff to provide "complete written responses" without reliance on Rule 33(d). On a motion for reconsideration, Judge Infante rejected without comment the plaintiff's argument that its expert deposition provided a complete identification of the trade secrets at issue and that the defense was not entitled to a written description of its trade secrets "to the level of `x feet, y inches.'" Imax Corp. v. Cinema Technologies, 152 F.3d 1161, 1165 (9th Cir. 1998).

In response to Judge Infante's order, the plaintiff in its fourth supplementary responses to interrogatory Nos. 1 and 2 identified 138 and 136 trade secrets, respectively. The plaintiff included an objection that the interrogatories were premature because discovery and investigation were continuing. The plaintiff claimed to "not yet know" all secrets that were misappropriated and reserved the right to supplement or amend its response. Judge Infante upheld these responses, rejecting a second defense motion to compel, but ordered the plaintiff to comply with Federal Rule of Civil Procedure 26(e) by supplementing its trade secret identification by a given date. In its final supplemental responses, the plaintiff narrowed its trade secrets list to 80, but did not include the precise dimensions and tolerances of the components at issue. Instead, the plaintiff referred to the design of specific components with a general qualifier: "including every dimension and tolerance that defines or reflects that design." Id. at 1166.

In affirming Judge Jensen's granting of summary judgment and dismissal of the trade secret claims, the Ninth Circuit in Imax agreed that the plaintiff failed to carry its burden of identifying the misappropriated trade secrets because its fourth supplementary interrogatory responses did not include the exact dimensions and tolerances. The court expressly noted that Judge Infante rejected the plaintiff's contention, in its motion for reconsideration, that such particularity was not required. Summary judgment was proper because the plaintiff's "catch-all" phrase of "including every dimension and tolerance that defines or reflects that design" did not constitute the "reasonable specificity" required, given the technology at issue. Such specificity, according to the Ninth Circuit, could only have been accomplished by identifying "precise numerical dimensions and tolerances as trade secrets." Id. at 1166-67.

In addition to including a good review of discovery practice on the particularity issue in trade secret disclosures, the Imax decision also illustrates the significance that the plaintiff's trade secret disclosures in discovery can have at the summary judgment stage of a case in the Ninth Circuit. In Imax, the focus was on the express identifications made in the plaintiff's interrogatory responses. Judge Jensen's ruling that the plaintiff's failure to provide "sufficient particularity" in its interrogatory responses caused a concomitant effect on summary judgment was upheld. The Ninth Circuit rejected the plaintiff's contention that Judge Jensen erred by not considering any trade secret material that was not specifically listed in the fourth supplemental interrogatory responses. The Ninth Circuit equated the argument to an attempt to modify Judge Infante's discovery orders, which the appellate court would not do. Imax, 152 F.2d at 1167-68.

In the context of an insufficient Section 2019(d) disclosure, Judge Trumbull in Canter also equated the plaintiff's failure on particularity in discovery to the same issue on summary judgment. In granting summary judgment for the defense, Judge Trumbull held that the plaintiff's failure to designate its trade secrets in the Section 2019(d) disclosure resulted in the same failure to carry its burden on summary judgment to identify the misappropriated trade secrets. Canter, 1999 WL 11701, at *8.

Conclusion
While in most California federal courtrooms the timing of trade secret disclosures is an open issue, there is ample Ninth Circuit authority on the particularity required for such disclosures and the significant risks faced by plaintiffs that do not provide sufficient particularity in discovery.

Mr. Keane is Special Counsel with the firm of Farella Braun & Martel LLP.