The CH Trade Secrets Review, 2020 Part I
With the emergence of technology as an invaluable resource for businesses, large and small, theft of trade secrets has evolved into an incredibly challenging thorn in the business world. Technology makes it easier for competitors, employees, insiders, and others to access and acquire highly confidential and proprietary information which can be used to unfairly compete against the owner of trade secrets. This trend has also been accompanied by another, employers and businesses who sometimes overreach in charging former employees and others with misappropriation of trade secrets, raising concerns about restraint of trade, unlawful in many states, or increasingly on the radar of courts and legislative bodies.
The COVID-19 pandemic has increased litigation over misappropriation of trade secrets, as working from home became the norm. Furloughs and layoffs created perverse financial incentives to steal data despite cybersecurity measures. Innocent access or use of electronic data in the ordinary course of business is too often misconstrued as misappropriation. With remote working expected to play a larger role even after the pandemic subsides, misappropriation of trade secrets will continue to be an active area in litigation.
We at Clark Hill are committed to monitoring significant developments, cases, and verdicts to stay abreast of the trends in this arena. With this inaugural newsletter, we review 2020 in a multi-part series and will examine 2021 with frequent newsletters throughout the year.
We hope you find this newsletter informative and invite you to submit any notable cases or developments.
Identifying Trade Secrets
A procedural hurdle under California and other state trade secret laws is that the plaintiff, in order to proceed with discovery, must identify its trade secrets with “reasonable particularity.” Cal. Code Civ. Proc. §2019.210. Plaintiff InteliClear pursued claims under both California’s Uniform Trade Secrets Act and the federal Defend Trade Secrets Act of 2016. The Ninth Circuit Court of Appeals, recognizing that other federal circuits and district courts have followed this procedural standard, ruled that the district court abused its discretion under Rule 56(d) of the Federal Rules of Civil Procedure by issuing summary judgment before discovery occurred. Defendant ETC Global Holdings, Inc. had filed a motion for summary judgment a day after discovery commenced. While litigants routinely emphasize that a plaintiff filing a claim for misappropriation of trade secrets is in the best position to understand and know what information it possesses that constitutes a trade secret, the Ninth Circuit nevertheless found persuasive that “. . . discovery provides an iterative process where requests between parties lead to a refined and sufficiently particularized trade secret identification.” Under the facts of the case before it, the InteliClear Court ruled that there was a triable issue of fact whether plaintiff had sufficiently described its alleged trade secrets with particularity. InteliClear v. ETC Global Holdings (9th Cir. 2020)
If you have any questions about this Newsletter, please contact Dave Shenian, email@example.com, 213-417-5102.