A recent opinion issued by a U.S. Magistrate Judge for the District of Colorado with respect to a discovery dispute in a trade secret misappropriation case may please defense counsel, but create headaches for plaintiffs’ lawyers, because the Court set harsh pleadings standards that plaintiffs must meet. The Court seems to have been more sympathetic (a) to the defendants’ and the court’s desire to have identification “with reasonable particularity” of the supposedly misappropriated trade secrets, than to (b) the justifiable reluctance of plaintiffs to disclose detailed confidential information. If the Court’s reasoning becomes generally accepted, plaintiffs may decide that some trade secret misappropriation claims are better left unfiled rather than making disclosures with the requisite specificity.
The Court recognized that “the case law does not provide clear guidance” as to the pleading requirements. However, basing her ruling primarily on unreported (plus a few reported) decisions, she held that before the plaintiffs may compel discovery, they must file a complaint that “describe(s) the actual equipment, methods, software or other information” they claim as trade secrets. Plaintiffs’ “general allegations and generic references to products or information are insufficient to satisfy the reasonable particularity standard.” L-3 Communications Corp. v. Jaxon Eng’r’g Maintenance, Inc., Civ. Ac. No. 10-cv-02868-MSK-KMT (D.Colo., Oct. 12, 2011) (emphasis added).
According to the Court, allegations that defendants misappropriated broad categories, such as “customer lists, pricing templates and labor rates, vendor lists, drawings, designs and processes,” are inadequate. Plaintiffs must identify the actual “parts and vendors, the actual methods by which they use their equipment, or the actual software they use to process the generated raw data.” The Court faulted the plaintiffs in the case before her both for inadequate pleading and for not filing, or at least seeking to file, the requisite disclosures of their trade secrets under seal. Accordingly, the Court determined that the plaintiffs were not entitled to compel discovery responses.