Article October 23, 2019
Unlocking California’s Trade Secret Identification Requirement Under California Code of Civil Procedure Sec. 2019.210 – Part 2
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California trade secret law presents a unique statutory framework among state and federal trade secret laws that requires plaintiffs to identify the misappropriated trade secrets before discovery commences. A previous post explored the genesis and purpose of California Code of Civil Procedure § 2019.210. This post explores three leading California appellate court opinions interpreting the requirements of § 2019.210. Guidance is somewhat limited as the sufficiency of a trade secret identification is largely up to the discretion of trial courts. The analysis of these three cases below seeks to provide some guidance.
Advanced Modular Sputtering
The leading appellate decision interpreting the requirement statute is Advanced Modular Sputtering v. Superior Court (2005) 132 Cal. App. 4th 826 (“AMS”). The complaint alleged breach of contract and trade secret theft alleging that former employees used trade secrets to develop competing sputtering machinery used to deposit thin films onto silicon wafers. Plaintiff served multiple trade secret identifications, and defendant objected to each one, submitting declarations of expert witnesses to support its contention that the claimed trade secrets were described too vaguely to distinguish them from information generally known in that industry. A discovery referee rejected the third identification as insufficiently particular and recommended that discovery be stayed as to the trade secret claims but permitted discovery to start on the breach of contract and other claims. On writ petition, defendant AMS challenged the trial court’s order permitting discovery on the non-trade secret claims, and plaintiff Sputtering Films challenged the court’s rejection of its third trade secret identification.
The Court of Appeal first addressed whether the trial court erred in allowing discovery into the non-trade secret claims. It held that all claims related to the trade secret allegation, and, as a result, all claims should be stayed until service of an adequate trade secret identification. “Where, as here, every cause of action is factually dependent on the misappropriation allegation, discovery can commence only after the allegedly misappropriated trade secrets have been identified with reasonable particularity, as required by section 2019.210.”
The court then addressed the trade secret designation and overturned the discovery referee’s rejection of that designation. The panel stated that the statute’s requirement of “reasonable particularity” does not mean that the party alleging misappropriation “has to define every minute detail of its claimed trade secret,” nor does it require a “miniature trial on the merits.” Plaintiffs instead must “make some showing that is reasonable, i.e., fair, proper, just and rational under all of the circumstances.” Where more complex technologies are at issue, “a more exacting level of particularity may be required to distinguish the alleged trade secrets from matters already known to persons skilled in the field.” The court noted that nothing precludes trial courts from considering relevant evidence, including expert declarations, on the adequacy of the designation.
Brescia v. Angelin
In Brescia v. Angelin (2009) 172 Cal. App. 4th 133, decided a few years after AMS, the appellate court considered a designation of trade secrets related to a protein pudding. Plaintiff alleged that Sylvester Stallone and other defendants stole Brescia’s high protein, low carbohydrate pudding. Plaintiff Brescia first sought to identify the trade secret by referring to a large set of documents attached to the complaint. This was found inadequate, and Brescia served a new statement in which he grouped the alleged secrets into the categories of “marketing strategies,” “budgets and finance,” “formula,” and “manufacturing process.” Each category referred to attached documents totaling 305 pages. The trial court again found this inadequate because “by citing voluminous documents, it obscured rather than refined the description.” The court further objected to the use of “surplusage” and “essentially hiding the alleged trade secret in plain view by putting lots of clutter around it.” Brescia then served another designation where he identified 15 ingredients, their relative percentages, and the manufacturing process, including each step in the mixing, testing, and code marking of the pudding. The trial court again rejected the statement.
The appellate court overturned the trial court’s rejection of the final designation. The appellate court clarified that plaintiffs need not distinguish the secrets from the prior art in every instance. The court distinguished AMS as involving complex technology, and explained that such distinction over the prior art is useful but not always necessary. Section 2019.210 “does not create a procedural device to litigate the ultimate merits of the case—that is, to determine as a matter of law on the basis of evidence presented whether the trade secret actually exists.” The court clarified in dicta that Brescia’s earlier attempts to obfuscate by including generic descriptions, surplusage, and voluminous documents were improper but, ultimately, identification of the recipe and manufacturing process was sufficient.
In Perlan Therapeutics v. Superior Court (2009) 178 Cal. App. 4th 1333, the court addressed trade secrets of various drugs for treatment of the common cold and the flu. Perlan alleged that former employees took these trade secrets when they left to form a new pharmaceutical company. Perlan’s trade secret identification included the following:
- A page of text consisting of a “preliminary statement” and “general objections” similar to the “boilerplate reservation of right and objections often appearing in written discovery responses”;
- Four pages of text that repeated the allegations of the complaint or provided technical detail that was publicly available;
- Hundreds of pages from other documents; and
- A conclusion stating “[a]ll related research, development, advancements, improvements and process related thereto, constitute trade secrets owned by Perlan.”
Though the identification purported to include technical detail, it failed to identify the chemicals used in the processes and treatments described.
Defendants moved for a protective order, arguing that rather than identify the alleged trade secrets, the statement merely identified related information. In response, Perlan submitted multiple expert declarations that restated generally the format of the identification and concluded that the ideas were “novel” and that they were “identified with reasonable particularity.” Perlan also argued that providing “specific details” would limit it at trial.
The appellate court rejected the identification, noting that Perlan had “the ability (but not the inclination) to provide clearer, more specific information.” The Court contrasted Perlan’s obtuse designation with Brescia’s transparent identification. Because “Perlan did not identify its trade secrets with absolute precision, (the ‘recipe’ or ‘equations’),” the trial court was not required to accept Perlan’s submissions “as sufficient as a matter of law.” The court further explained that the particularity requirement does not prejudice the plaintiff because it will generally be required to provide more detail through discovery responses as the case progresses.
In our next post, we will apply guidance from these cases to provide some general tips for trade secret litigants as they draft trade secret identifications.
More questions? Contact the authors or visit Fish’s Intellectual Property Law Essentials.
Authors: Seth Sproul, Tucker Terhufen
The opinions expressed are those of the authors on the date noted above and do not necessarily reflect the views of Fish & Richardson P.C., any other of its lawyers, its clients, or any of its or their respective affiliates. This post is for general information purposes only and is not intended to be and should not be taken as legal advice. No attorney-client relationship is formed.