Defending Trade Secrets In The E-Discovery Era

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1 Portfolio Media. Inc. 860 Broadway, 6th Floor New York, NY Phone: Fax: Defending Trade Secrets In The E-Discovery Era Law360, New York (November 01, 2011, 12:03 PM ET) -- Any company that finds itself the defendant in a trade secrets case probably understands the following conflict: The defendant wants the plaintiff to identify its allegedly stolen trade secrets immediately and to stay bound to that description, while the plaintiff often resists identifying its trade secrets until it reviews the defendant s internal documents. This conflict is even more pronounced in the e-discovery era. The hopeful plaintiff may argue that by performing key-word searches across thousands or millions of the defendant s s it can find some evidence that the defendant used technology similar to its alleged trade secrets. The defendant, in turn, is loath to let the plaintiff go on such a broad search, particularly before the plaintiff has identified its trade secrets conclusively, for fear that the plaintiff may try to manufacture trade secrets to match the defendants internal technology. To address these concerns, many jurisdictions require a plaintiff to describe its trade secrets with at least some degree of specificity, often in the form of an interrogatory answer, before accessing the defendant s internal documents. See, e.g., Cal. Code. Civ. Proc ; Automed Techs. v. Eller, 160 F. Supp. 2d 915, 926 (N.D. Ill. 2001); Silicon Knights Inc. v. Epic Games Inc., 2008 U.S. Dist., at *25 (E.D.N.C. June 13, 2008); L-3 Commc ns. Corp. v. Reveal Imaging Techs. Inc., 18 Mass. L. Rep. 512, 2004 Mass. Super., at *34 (Mass. Super. Dec. 2, 2004). Thus, it is rare that an assertive defendant will have to turn over sensitive documents without being given some idea of what it is accused of having misappropriated. Yet early identification of trade secrets is only partial protection because the innovative plaintiff treats its initial description of trade secrets as a living document. The document evolves as discovery progresses, to tailor the asserted trade secrets to the defendant s technology during discovery. For example, a sophisticated plaintiff will use electronic search tools to scour the defendant s documents in a quest for language that can be used to suggest the defendant employed technology similar to the trade secrets the plaintiff wants to assert (and perhaps try to amend its trade secret description to match that technology).

2 While at least one court has refused to allow a plaintiff to amend its initial description of trade secrets later in the case Pixion Inc. v. Placeware Inc., 421 F. Supp. 2d 1233, 1242 (N.D. Cal. 2005) most courts are likely to find that a prediscovery description need not contain every minute detail of the plaintiff s trade secrets. These courts give the plaintiff leeway to refine its trade description after accessing the defendant s internal documents. E.g., M.A. Mobile Ltd. v. Indian Inst. of Tech., 2011 U.S. Dist., at *4 (N.D. Cal. Jan. 10, 2011); see also Norbrook Labs. Ltd. v. Hanford Mfg. Co., 2003 U.S. Dist. (N.D.N.Y 2003). In most cases, therefore, it is wishful thinking to imagine a plaintiff will be forced to agree to a fully binding description of its trade secrets before discovery begins. The defendant s challenge, therefore, is to force the plaintiff to commit to as fulsome and specific a description of its trade secrets as possible, as early as possible, and in a form that adequately protects the defendant against later-manufactured claims. The defendant also wants to limit the scope of discovery. A plaintiff who has not defined its trade secrets, or who has been permitted to define them broadly, will seek to compel the defendant to search and produce its entire universe of electronically stored information in search of fodder for its claims; a plaintiff who has been forced to define its trade secrets narrowly can only reasonably ask the defendant to search for specific categories of documents. The diligent defendant has several tools at its disposal to limit e-discovery and prevent later-manufactured trade secret claims. Refuse To Accept An Open-Ended Description Of Trade Secrets The plaintiff is required under Fed. R. Civ. P. 26(e) to supplement its discovery responses based on information learned during the course of litigation. A trade secrets plaintiff may try to capitalize on this provision by claiming, after reviewing the defendant s documents, that the defendant stole trade secrets beyond those identified in the plaintiff s initial description. Yet Rule 26(e) does not give the plaintiff an excuse for failing to provide complete answers based on the information presently available. Switch Commc ns. v. Ballard, 2011 U.S. Dist., at *23 (D. Nev. Sept. 7, 2011). That is, the plaintiff must have given a complete description based on the information reasonably known at the time that description was served. A defendant should serve an interrogatory asking a plaintiff to identify its trade secrets at the very outset of the case, before the plaintiff has the time to scrutinize a defendant s documents. In response, the plaintiff may still describe its trade secrets using modifiers such as including, leaving open the possibility of trade secrets beyond those identified. Though common, this tactic is prohibited by the federal rules. If the plaintiff is aware of additional trade secrets, it must identify those at the time it first responds to the defendant s interrogatory. A plaintiff is not entitled to include broad, 'catch-all language as a tactic to preserve an unrestricted, unilateral right to subsequently amend its trade secret statement. Perlan Therapeutics Inc. v. Super. Ct. of San Diego County, 178 Cal. App. 4th 1333, 1350 (Cal. App. Div. 2009).

3 Not only does this broad language inadequately put a defendant on notice of the plaintiff s claims; it makes it difficult for the defendant reasonably to limit discovery and/or determine which of its multiple electronic document repositories contains responsive information. A defendant should therefore insist that the plaintiff s initial trade secrets description be specific and devoid of open-ended qualifiers. A plaintiff that then seeks to amend that description later in discovery may be required to show good cause for amending at that point. See id. If it can be shown that the plaintiff simply wishes to add trade secrets it could have included at the outset, the plaintiff may not be allowed to amend. See Pixion, 421 F. Supp. at Make The Plaintiff Cite Documents To further lock the plaintiff into its initial description of trade secrets, a defendant should ask the plaintiff to identify its documents that contained the trade secrets. The plaintiff may initially identify a huge number of documents, sufficient to capture any trade secret the plaintiff could conceivably assert. For example, plaintiffs may produce thousands of internal technical documents from their own vast electronic reserves. However, courts have held that a plaintiff may not satisfy its obligation to identify its trade secrets simply by reference to thousands of pages in which trade secrets may be buried. Dura Global Techs. v. Magna Donnelly, Corp., 2007 U.S. Dist., at *12 (E.D. Mich. Dec. 6, 2007). A plaintiff may be required to point to specific documents (and even better portions of documents) describing the trade secrets it asserts, which will better define the trade secrets and make it difficult to modify them later. If the plaintiff does attempt to add or modify the trade secrets later, good cause may not exist unless the plaintiff can show that new internal documents have suddenly come into its possession. See Ballard, 2011 U.S. Dist., at *23. Moreover, the original documentary descriptions may be used to impeach later changes to the trade secrets. Do Not Let The Plaintiff Hijack The Deposition The plaintiff may also try to alter trade secrets descriptions based on its deposition testimony. Depositions normally take place after the plaintiff or it s counsel have reviewed a substantial portion of the defendant s documents. It is in the plaintiff s interest to attempt to hone its trade secrets to encompass technology shown in the defendant s documents. Unfortunately for defendants, some courts allow such amendment. For instance, in Fast Food Gourmet Inc. v. Little Lady Foods Inc., 2007 U.S. Dist., at *3 (N.D. Ill. Oct. 18, 2007), plaintiff s employee testified that its initial identification of trade secrets was incomplete, and went on to describe the trade secrets in greater detail. Id. The court found the deposition testimony sufficient to put defendants on notice of the additional trade secrets, and permitted the plaintiff to rely on the trade secrets as modified during the deposition. Id at *2-3.

4 To thwart this result, the defendant should of course restrict the plaintiff s fact witnesses from reviewing the defendant s internal documents. Nevertheless, the defendant may still be tempted not to ask the plaintiff about its trade secrets during depositions. However, a defendant risks prejudice with such a strategy. In one case, for example, the plaintiff described its trade secrets differently in summary judgment declarations than it had during discovery. During a key deposition, however, the defendant had declined to press the plaintiff to describe its trade secrets in detail. The court found the plaintiff should not be faulted *for the defendant s+ failure to ask more detailed questions, and refused to strike the plaintiff s modified trade secret declaration. Cacique Inc. v. V&V Supremo Foods Inc., 2004 U.S. Dist., at *14-15 (N.D. Ill. Sept. 30, 2004). Rather than ignore a plaintiff s trade secrets during deposition, the defendant may be advised to commit the plaintiff even further to a final and binding description of its trade secrets. If the witness changes its description, the defendant can use the deposition to elicit evidence the plaintiff should have known of its modified description when it first described its trade secrets. The defendant may then argue the plaintiff lacks good cause to amend them, or impeach the plaintiff for omitting the trade secrets in the first instance. If a defendant can establish that a plaintiff lacks a valid reason for modifying its description of trade secrets, or if the defendant can show that the plaintiff introduced new trade secrets for the first time during a deposition, the defendant may be able to strike the deposition testimony entirely or effectively impeach it. Object Promptly To A Plaintiff s Trade Secret Descriptions During discovery, a defendant may be tempted not to object to a poor trade secret description on the theory that the plaintiff might respond by improving it and making it more enforceable. Since courts are less likely to permit a plaintiff to change its description of trade secrets after discovery has closed, the defendant may consider waiting until then to challenge the description. Fast Food Gourmet, 2007 U.S. Dist., at *11; Hickory Specialties Inc. v. Forest Flavors Int l Inc., 12 F. Supp. 2d 760, 770 (M.D. Tenn. 1998). For example, the defendant may feel the plaintiff s description is not specific enough to survive summary judgment, and that if the defendant waits until then to challenge the description the plaintiff will not be permitted to change the description once discovery has closed and summary judgment motions have been filed. A defendant who takes this approach, however, risks waiving its rights. In one case, the court found the plaintiff s interrogatory responses were utterly devoid of any facts sufficient to identify its trade secret. However, the defendant had failed to object to the interrogatory responses during discovery and so the court found that the defendant had waived its objections. The court gave the plaintiff the opportunity to amend its trade secrets description in order to survive summary judgment. VFD Consulting Inc. v. 21st Servs., 425 F. Supp. 2d 1037, 1048 n. 6 (N.D. Cal. 2006). A defendant should thus be aware that if it does not force a plaintiff to commit to a specific description of trade secrets during discovery, it could find itself surprised by a new description thereafter.

5 Conclusion Many courts are sympathetic to the position of a trade secrets plaintiff that argues it cannot articulate a complete set of its misappropriated trade secrets until it sees the defendant s documents. These documents could include vast amounts of electronic discovery, which is both burdensome and costly to produce. However, courts are increasingly wary that (1) a plaintiff may alter its alleged trade secrets to match the technology shown in the defendants internal documents produced during discovery; and (2) that e- discovery has become overly burdensome and needs to be controlled. The trade secrets defendant is therefore advised to be unrelenting in its demands that a plaintiff provide a complete description of its trade secrets early, that the plaintiff support those trade secrets with documentation, that good cause be shown for any subsequent change, and that discovery be limited to documents relevant to the described trade secrets. In sum, the defendant s discovery strategy should be tailored in large part to locking down the plaintiff s trade secrets, limiting the scope of electronic discovery and preventing any alterations without good cause. --By Daniel Winston and Matthew Barrett, Choate Hall & Stewart LLP Daniel Winston is a partner in Choate's intellectual property litigation group in Boston. Matthew Barrett is an associate in the firm's Boston office. The opinions expressed are those of the authors and do not necessarily reflect the views of the firm, its clients, or Portfolio Media, publisher of Law360. This article is for general information purposes and is not intended to be and should not be taken as legal advice. All Content , Portfolio Media, Inc.