No early exit in federal trade secrets misappropriation cases

In an important clarification of federal trade secret litigation, the Ninth Circuit in Quintara Biosciences, Inc. v. Ruifeng Biztech, Inc. recently rejected the argument that a plaintiff suing under the federal law (DTSA) must identify its trade secrets with the same degree of “reasonable particularity” that California law requires under its (CUTSA) at the outset of a case.

CUTSA requires a plaintiff to separately identify its trade secrets with “reasonable particularity” before discovery can begin, often with a detailed identification of the claimed trade secrets at issue. CUTSA’s early identification requirement, codified in CCP §2019.210, serves as a procedural gatekeeping mechanism.

The DTSA does not contain a similar requirement. Instead, a plaintiff suing under the DTSA must prove that its trade secrets are described with “sufficient particularity” to distinguish them from general industry knowledge. In practical terms, CUTSA front-loads a plaintiff’s identification obligations, while the DTSA allows the identification to evolve through the normal course of litigation.

The Quintara case

Quintara involved two California DNA-sequencing companies with a former business relationship that soured amid allegations that Ruifeng locked Quintara out of its offices, took its equipment, and hired away key employees. Quintara sued in federal court under DTSA, claiming misappropriation of 11 categories of trade secrets, including customer databases, marketing plans, proprietary lab protocols, and software code. Quintara did not allege any claims under CUTSA.

At the outset of discovery, Ruifeng moved to dismiss Quintara’s claims, arguing that it should be required to meet CUTSA’s “reasonable particularity” standard before discovery could proceed. Ruifeng contended Quintara’s initial descriptions were too vague to distinguish the claimed secrets from general knowledge in the industry. This dispute led to motion practice about whether to halt discovery until Quintara provided a more detailed description of its trade secrets.

The lower court’s ruling

District Court Judge William Alsup, drawing on CUTSA’s approach, ordered Quintara to identify each alleged trade secret with detailed specificity. The court required Quintara to delineate its secrets into numbered “claims” with specific elements – similar to the way patent claims are structured.

Judge Alsup also found the majority of Quintara’s expanded identification did not meet the CUTSA standard and struck nine of Quintara’s 11 claimed trade secrets. Quintara then abandoned one of the two that remained, and a jury returned a defense verdict for Ruifeng on the single trade secret claim still at issue. The district court’s order thus functionally dismissed most of the Quintara case before any meaningful discovery had occurred.

The Ninth Circuit’s reversal

On appeal, the Ninth Circuit reversed, holding that federal trade secret litigation under the DTSA is not subject to California’s heightened pre-discovery identification requirement. While the DTSA requires plaintiffs to eventually prove their trade secrets are described with “sufficient particularity” to distinguish them from general industry knowledge, this is a factual question for resolution later in the case, not a preliminary hurdle to clear before discovery even begins. The court emphasized that the DTSA does not incorporate CUTSA’s early identification rule, and that adequacy of identification should generally be resolved through summary judgment or at trial, after discovery allows both sides to refine and fully articulate their positions.

This ruling reflects a broader understanding of the “delicate problem” courts face in trade secret cases between competitors: balancing the need for a defendant to know what information plaintiff claims as trade secrets, against the plaintiff’s risk of exposing sensitive and potentially irrelevant information without first learning what the defendant actually accessed or used. The difference in the timing of trade secret identification in the state and federal trade secrets statutes can seriously affect the outcome of a case and requires an early and important strategic choice by the plaintiff. Decisions about forum and claim selection—balancing the protection of proprietary information against the advantages and disadvantages of early identification.

This publication is intended for general informational purposes only and does not constitute legal advice or a solicitation to provide legal services. The information in this publication is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this information without seeking professional legal counsel. The views and opinions expressed herein represent those of the individual author only and are not necessarily the views of Clark Hill PLC. Although we attempt to ensure that postings on our website are complete, accurate, and up to date, we assume no responsibility for their completeness, accuracy, or timeliness.