Northern District of Texas Court Requires Plaintiffs’ Pre-Discovery Identification of Trade Secrets

The pre-discovery of a plaintiff's alleged trade secrets is like separating the wheat from the chaff.
Separating the wheat from the chaff

A federal court in the Northern District of Texas ordered the plaintiffs to identify the trade secrets they accused the defendants of misappropriating before the parties began discovery.

In this case the plaintiffs sued the defendants alleging they had misappropriated their trade secret information. Before the parties began discovery in the case, the defendants filed a Motion for Order Requiring Pre-Discovery Identification of Trade Secrets asking the court to require the plaintiffs to identify specifically what they were claiming to be their trade secrets before permitting them to engage in discovery. 

DOWNLOAD: Texas Business Guide for Identifying and Protecting Trade Secrets Under the (New) Texas Uniform Trade Secrets Act (TUTSA)

Defendants’ Arguments for Requiring Pre-Discovery Identification of Trade Secrets

The defendants argued they were unable to properly prepare their case, or even develop the scope of their discovery, without a more defined list of specifically what trade secrets plaintiffs claimed they had misappropriated. The defendants asked the court to order plaintiffs to provide defendants a list that:

  1. separately breaks out each of the individual alleged trade secrets that Plaintiffs claim Defendants have misappropriated;
  2. identifies all such claims with sufficient particularity so that the reader understands how each such claim differs from public domain information – including the plaintiffs’ public patent filings; and
  3. to the extent that one Defendant is accused of misappropriating information different from the other, lists which trade secrets each defendant allegedly had misappropriated.

The defendants explained 3 reasons for why they were entitled to this information:

  1. gives Defendants fair notice of the specific charges against them;
  2. allows the Court and the parties to set an appropriate scope of discovery and to determine whether particular discovery disputes fall within that scope; and
  3. avoids allowing a plaintiff to mold its claims around whatever it may find in a defendant’s discovery responses in order to prolong a case.

In this Case of First Impression, the Court Orders the Pre-Discovery Identification of Trade Secrets

This was a case of first impression for the United States District Court for the Northern District of Texas and only the second court in the Fifth Circuit to address such a request. The court acknowledged, however, that requiring the pre-discovery identification of trade secrets did represent a growing trend and cited cases from district courts in other circuits in which the plaintiffs were required to do so after balancing the respective interests of the parties. In granting the motion, the court found it had sufficient authority under Rule 16(c)(2)(L) of the Federal Rules of Civil Procedure, which sets forth “a mechanism for fostering the same goals of facilitating discovery in unique cases” by “provid[ing] the district court with broad discretion to adopt [ ] special procedures for managing potentially difficult legal questions, or unusual proof problems.”

The court ordered plaintiffs to describe their alleged trade secrets with reasonable particularity — what does that mean? The court offered several guidelines:

What is Not Reasonable Particularity

The court provided examples of what is not considered reasonable particularity:

Courts have not specifically defined what constitutes “reasonable particularity” but have been descriptive about what will not satisfy the requirement: a laundry list of general categories of alleged “trade secret” information, see Ikon, 2009 WL 4429156, at *3; lengthy, descriptive, but non-specific, paragraphs, see id. at *3 n.3; generally listing software, data processing algorithms, and processes that a plaintiff developed, owned, or licensed; see DeRubeis, 244 F.R.D. at 679, disclosures that only reveal the end results of, or functions performed by, the claimed trade secrets, see id.; and various concepts, elements, or components that make up designs, see Switch, 2012 WL 2342929 at *5.

What May Be Reasonable Particularity

It also provided examples of what other courts have found to be reasonable particularity:

Some courts have also suggested what might constitute reasonable particularity: a list that separately breaks out each of the individual alleged trade secrets and identifies each claim so that the reader understands how each claim differs from public domain filings, see USAA, 289 F.R.D. at 249, or a response in which a plaintiff “specifically describe[s] what particular combination of components renders each of its
designs novel or unique, how the components are combined, and how they operate in unique combination,” see Switch, 2012 WL 2342929 at *5.

What the Court Found Helpful

The court explained what reasoning it found to be helpful in reaching its conclusion:

The undersigned finds instructive the guidelines set forth in those cases attempting to provide guidance as to what “reasonable particularity” means. Specifically, USAA’s holding is helpful and similar to what Defendants propose here. Requiring a list that separately breaks out each individually alleged trade secret would help Defendants craft their discovery responses, provide relevant documents, and limit objections. Requiring Plaintiffs to describe how the claimed trade secret is unique from that which is found in the public domain will be helpful for the same reasons, especially in light of the fact that the processes at issue may also be found in Plaintiffs’ public patent filings. Because the information would be public information and by its nature could not be a trade secret, see 37 C.F.R. § 1.11(a), eliminating those alleged trade secrets would be helpful.

Requiring Plaintiffs to provide a list of trade secrets at issue, defined with reasonable particularity, would be helpful to Plaintiffs as well. Doing so could help Plaintiffs avoid a situation in which they are not entitled to certain discovery because their trade secrets claims are too broad, see Avaya, Inc. v. Cisco Sys., Inc., No. 10-5881, 2011 WL 4962817, at *2-3 (D.N.J. Oct. 18, 2011), or where they are ordered to produce
something that they argue is not relevant. Moreover, this Order will not prevent Plaintiffs from seeking to amend or supplement their list in the future, should the circumstances warrant doing so. See FED. R. CIV. P. 26(e).

What the Court Ordered

The court ordered the plaintiffs to identify the trade secrets they alleged had been misappropriated, with reasonable particularity, before the parties began discovery in the case.

Plaintiffs are ORDERED to provide to Defendants by June 25, 2013, a list of alleged trade secrets that Plaintiffs contend that Defendants misappropriated. The list should identify each alleged trade secret and shoud

(1) separately break out each of the individual alleged trade secrets that Plaintiffs claim Defendants have misappropriated;

(2) identify all such claims with sufficient particularity so that the reader understands how each such claim differs from public domain information – including Plaintiffs’ public patent filings; and

(3), to the extent that one Defendant is accused of misappropriating information different from the other, include a list of which trade secrets each Defendant allegedly misappropriated.

Shawn Tuma was lead counsel for the defense team on this case. If you would like a copy of the court’s Order, the Motion or the Response, please feel free to contact Shawn directly.

About the author

Shawn Tuma is a lawyer who is experienced in advising clients on complex intellectual property issues such as trade secrets litigation and misappropriation of trade secrets (under common law and the Texas Uniform Trade Secrets Act), unfair competition, and cyber crimes such as the Computer Fraud and Abuse Act. He is a partner at BrittonTuma, a boutique business law firm with offices near the border of Frisco and Plano, Texas which is located minutes from the District Courts of Collin County, Texas and the Plano Court of the United States District Court, Eastern District of Texas. He represents clients in lawsuits across the Dallas / Fort Worth Metroplex including state and federal courts in Collin County, Denton County, Dallas County, and Tarrant County, which are all courts in which he regularly handles cases (as well as across the nation pro hac vice ). Tuma regularly serves as a consultant to other lawyers on issues within his area of expertise and also serves as local counsel for attorneys with cases in the District Courts of Collin County, Texas, the United States District Court, Eastern District of Texas, and the United States District Court, Northern District of Texas.

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