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Trading Secrets A Law Blog on Trade Secrets, Non-Competes, and Computer Fraud

California Federal Court Holds That Trade Secret Misappropriation Defendant Need Not Respond To Plaintiff’s Discovery Requests Until Provided With Identification Of Information Claimed To Have Been Stolen

Posted in Trade Secrets

The trend of some recent judicial decisions seems to reflect an increasing concern by courts that, notwithstanding trade secret misappropriation plaintiffs’ understandable reluctance to disclose proprietary information in more detail than absolutely necessary, they must describe with considerable specificity whatever is alleged to have been purloined. For example, a California district court ruled recently that “Whatever [the plaintiff] wishes to claim as trade secrets that [the defendant] misappropriated, it must identify each particular composition, formula, technology and manufacturing techniques, application and manufacture of [the applicable product] without further delay.” Delphon Industries, LLC v. International Test Solutions, Inc., Case No. C 11-01338 PSG (N.D. Cal., Jan. 4, 2012).

Plaintiff Delphon develops and manufactures gel products used in safely transporting delicate technology devices within and between laboratories. The gels are polymers created using proprietary formulas consisting of mixtures, blends and balances of specific chemical elements. In response to an interrogatory from Defendant ITS seeking identification of the trade secrets that allegedly were misappropriated, Delphon stated that it “customizes the composition of its gel materials to its customers’ needs” and that the trade secrets are “The ‘recipe’ for its different gel materials – including the amount of each ingredient used, the process . . . [and] methods of combining the ingredients, the use of solvents with gel materials, and the blending, mixing and dispersion of additives into the gel material.” ITS told Magistrate Judge Paul Grewal that Delphon had not identified its trade secrets with the specificity required by Section 2019.210 of the California Code of Civil Procedure, and he agreed. 

Section 2019.210 provides that, before commencing discovery relating to a trade secret allegedly misappropriated, the alleging party must “identify the trade secret with reasonable particularity.” According to Judge Grewal, the statute provides a “flexible standard” which does not require “every minute detail” of the claimed trade secrets but must be adequate “to permit the defendant to learn the limits of the secret and develop defenses [and] to permit the court to understand the secret and fashion discovery.” He held that Delphon had fallen short. First, it had admitted that its depiction of the trade secret was imprecise; the court added that “In fact, the description is so general that Delphon did not even bother to protect the description under the terms of the Stipulated Protective Order.” Second, Delphon’s Director of Materials Technology conceded at her deposition that the disclosures were “conceptual” and lacked specific details even though Delphon has this information. Third, the court explained that Delphon had offered “no credible expert testimony suggesting that those in the field would be able to review Delphon’s designations and distinguish the alleged trade secrets from information in the field.”

The lessons learned from this case are that a trade secret misappropriation plaintiff should 1) insist on the entry of a protective order; 2) should state that the description of the confidential information is covered by that order, and 3) should avoid referring to the disclosed information as “general” or simply “conceptual.” Finally, the plaintiff should consider seeking to retain a qualified expert witness to the extent necessary to testify that the unique characteristics of the trade secrets have been described sufficiently to differentiate the trade secrets from public information.