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.