Lawsuits alleging trade secret theft raise challenging discovery concerns, as they almost always arise in the context of an employee leaving to work for a direct competitor. Courts have struggled to balance a trade secret plaintiff’s right to obtain discovery with a competitor’s interest in protecting its own confidential business information.

This balancing is particularly difficult when trade secret plaintiffs allege that broad, non-descriptive categories of information — sometimes seemingly every piece of information a former employee was provided — have been taken. It becomes even more problematic when trade secret plaintiffs do not allege specific acts of misappropriation, but instead rely on the mere fact that a former employee left to compete and therefore will inevitably disclose information.

Two recent decisions from federal courts in Louisiana—Kalencom Corp. v. Shulman, No. 17-5453 (E.D. La. Apr. 17, 2018)  and J.J. Plank Co., LLC v. Bowman, No. 18-00789 (W.D. La. July 23, 2018)—recognized and followed an emerging discovery trend in these types of trade secret cases.

Kalencom v. Shulman. The Eastern District of Louisiana recognized a trend in federal jurisprudence requiring trade secret plaintiffs to identify “with reasonably particularity” the information that forms the basis of a misappropriation claim before allowing discovery into a competitor’s business dealings. The plaintiff, for instance, was ordered to produce “a list identifying the allegedly misappropriated confidential and proprietary information and trade secrets with reasonable particularity and for each item of allegedly misappropriated confidential and proprietary information, describing the basis for its expectation of confidentiality as to that specific piece of information.” That is, meaningful discovery could not proceed until the plaintiff undertook this step.

J.J. Plank Co. v. Bowman. The Western District of Louisiana cited the decision in Kalencom and likewise looked favorably on the trend requiring “pre-discovery identification” of trade secrets. But it cautioned that a fact-intensive inquiry must be undertaken: “[t]he balance of authorities seem to favor the former set of policy considerations [favoring pre-discovery identification of trade secrets]. Thus, requiring pre-discovery identification seems to be the predominate trend. But while a strong consensus may be growing, a mandate has not arisen. This area of litigation is complex, contentious, and fact-intensive. Therefore, a mandate may long elude us. And perhaps it should.”

Take Away. Compelling pre-discovery identification of trade secrets with reasonable particularity is an important step for trade secret defendants to take early in litigation. As this discovery trend continues, trade secret defendants should also consider seeking dismissal of lawsuits that vaguely allege the existence of trade secrets and acts of actual misappropriation. Though courts have yet to squarely adopt a heightened pleading standard for trade secret claims, an argument can be made that trade secret plaintiffs cannot plausibly allege the existence of a trade secret without reasonably identifying it, and there is no reason to delay such identification if discovery cannot proceed without doing so.

A recent Louisiana court of appeal decision provides guidance on two issues that frequently arise in trade secret cases. Southern Marsh Collection, LLC v. State Traditions, LLC, 2017 WL 4985217 (La. App. 1st Cir. 2017) addresses the recurring question of when customer lists qualify as trade secrets and—somewhat surprisingly—holds the Louisiana Uniform Trade Secrets Act does not require a showing of irreparable harm for injunctive relief.

Factual Background. In Southern Marsh Collection, a Louisiana company sold casual clothing to retail outlets. The Louisiana company maintained electronically-stored contact information, including email addresses for individual decision makers, for over 500 different customers in 15 states. In violation of a confidentiality agreement, an employee of the Louisiana company supplied this information via email to a competing Alabama company. The Louisiana company sued for and obtained a preliminary injunction that prohibited the Alabama company from using the customer list or contacting any of the customers on the list with whom the Alabama company did not have a preexisting relationship.

On Appeal.  The Alabama company in Southern Marsh Collection argued that the customer list did not qualify as a trade secret because most of the information was publicly available. In fact, a competitor could obtain most of the information by using the “store locator” feature on the Louisiana company’s own website. In many cases, courts have refused to treat customer lists as trade secrets when the information can be obtained through proper channels.

The appellate court acknowledged all this, but nevertheless affirmed the injunction. The court held that the Louisiana company had proved that the customer list qualified as a trade secret even though much of the information was readily ascertainable. The real value in the list lay in the email addresses. Many buyers or store owners have multiple email addresses, with one being a “public facing” address, while the other is a “private” address where people expect to get “real” information that is not unsolicited mail (i.e. “spam” email). The Louisiana company had accumulated valuable private addresses for its customer contacts that the Alabama company could not readily obtain through proper means.

The Alabama company also argued that the trial court had improperly granted the injunction because the Louisiana company failed to prove that use of the list would cause it irreparable harm; the harm to the Louisiana company, supposedly, could be measured in the form of lost profits. Louisiana’s Code of Civil Procedure, in its article 3601, says that an injunction “shall be issued in cases where irreparable injury, loss, or damage may otherwise result to the applicant.” “Irreparable” harm is that which may not be remedied with a damage award.

Some Louisiana cases before Southern Marsh Collection have suggested that a plaintiff in a trade secret case must prove irreparable harm to obtain an injunction. However, article 3601 also says that a court may issue an injunction “in other cases specifically provided by law.” The court of appeal in Southern Marsh Collection pointed out that the Louisiana Uniform Trade Secrets Act specifically provides for injunctions against “actual or threatened misappropriations,” without saying anything about irreparable harm. In fact, the Trade Secrets Act says that plaintiff may recover damage awards “in addition to or in lieu of injunctive relief.” Thus, according to the court in Southern Marsh Collections, “the possible existence of a damage claim does not preclude the granting of injunctive relief as to a trade secret.”

Take Away. The appellate court’s decision in Southern Marsh Collection diverges from other Louisiana jurisprudence and could provide a useful weapon in the arsenal of businesses who need to protect protect trade secrets. Customer lists represent one of the most frequently litigated types of business information, and this case offers new avenues to demonstrate the independent economic value of these lists—without the need to demonstrate irreparable harm.

Waymo LLC — formerly Google’s self-driving car program and currently a stand-alone company owned by Google’s parent company — is now in fierce competition with Uber to develop and capitalize on driverless technology. This battle intensified on February 23, 2017, when Waymo filed a lawsuit against Uber Technologies, Inc., Ottomotto LLC, and Otto Trucking LLC.

Trade Secret Claims. Waymo’s lawsuit focuses on the actions of one former employee, Anthony Levandowski, who was a manager at Waymo and now leads a parallel self-driving car program for Uber. Mr. Levandowski resigned from Waymo in January 2016, but Waymo alleges that in December 2015 he downloaded more than 14,000 highly confidential business files, which included information on Waymo’s new and unique radar system. To add to the suspicious downloading activity, Waymo alleges that Mr. Levandowski met with Uber executives shortly after acquiring the files.

Waymo’s lawsuit further alleges that Mr. Levandowski went to great lengths to conceal the downloading. According to Waymo, he attached an external hard drive to his laptop and installed a new operating system “to erase any forensic fingerprints that would show” that he copied Waymo’s confidential information. Waymo also alleges that Mr. Lewandowski set up a competing company prior to his departure that later became Otto, and that he told coworkers of his plan. When Mr. Lewandowski resigned, Waymo alleges, other employees joined his new venture and took with them confidential supplier lists, manufacturing details, and highly technical information.

Within months after Mr. Levandowski started his competing business, Uber purchased it for $680 million. Waymo asserts that Uber’s self-driving car program had stalled before its acquisition of Otto, and that shortly after the acquisition, Uber represented to regulatory authorities that it was using an in-house custom built radar system. A Waymo employee was inadvertently copied on an email to Uber employees from a vendor of one of its radar system components. The email included an attachment of an Otto radar system that was similar to Waymo’s design. Waymo’s lawsuit followed.

Uber has not had an opportunity to respond to the allegations, but Waymo’s complaint paints a compelling story that we will continue to monitor and report on.

Take Away. It is no surprise that Uber wants to be on the cutting edge of self-driving car technology: a future with self-driving cars poses a significant challenge to Uber’s current business model. But this case stands as a cautionary tale that competitors — both big and small — can rely on state and federal laws to protect confidential and proprietary information from being exploited by their competitors.

Employers who rely on confidential information to compete should take steps, like Waymo alleges it took, to protect proprietary information. Laws that prohibit trade secrets theft are often unavailable when employers fail to take reasonable measures to protect their secrecy. Some fairly easy steps can be taken, such as restricting access to confidential information accessible to only high-level employees on a “need to know” basis and requiring and enforcing confidentiality and non-compete agreements. On the other hand, employers planning to hire an employee of a competitor (or acquire a business owned by a competitor’s former employee) should be highly vigilant about enforceable non-compete agreements and potential trade secret theft.