Leveling the Playing Field: Due Process and Trade Secret Misappropriation Cal. Civ. Proc. Code § 2019.210

by Bay Oak Law
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The Fifth Amendment to the US Constitution guarantees due process of law. One type of due process is knowing the details of the accusations in a court of law against you. But in trade secret misappropriation cases, the trade secret owner has a good reason not to put the details of the trade secret in the complaint: as a public document, anyone can see it. Some trade secret owners use this secrecy as a way of bashing former employees, by preventing the trade secret defendants from knowing what they are alleged to have stolen. How do courts balance the interests of the trade secret owner in preventing the trade secret from being generally known, and the interest of the defendants in knowing what they are being accused of taking?

In California, Cal. Civ. Proc. Code § 2019.210

“was enacted to curb unsupported trade secret lawsuits routinely commenced to harass competitors and former employees. The California legislature understood that plaintiffs in trade secret cases are often unable to identify any trade secrets, even after months of extensive discovery. Trade secret claims are especially prone to discovery abuse since neither the court nor the defendant can delineate the scope of permissible discovery without an identification of plaintiff's alleged trade secrets. By restricting a plaintiff's ability to engage in discovery until it identifies its trade secrets “with reasonable particularity,”[Cal. Civ. Proc. Code § 2019.210] strikes a balance between a plaintiff's right to protect its trade secrets and a defendant's right to be free from the burdens associated with unsupported trade secrets claims.” Computer Economics, Inc. v. Gartner Group, Inc., 50 F. Supp. 2d 980, 992 (S.D. Cal. 1999).

“Reasonable Particularity.” Cal. Civ. Proc. Code § 2019.210 requires that plaintiffs disclose with “reasonable particularity” the trade secrets defendants are alleged to have misappropriated. Until this occurs, plaintiffs cannot start discovery – including written interrogatories, requests for documents, and depositions. Defendants can use this Cal. Civ. Proc. Code § 2019.210 as a shield to slow down the blitzkrieg that trade secret cases often start with.

Background. The roots of what is now Cal. Civ. Proc. Code § 2019.210 date back almost 50 years. In Diodes, Inc. v. Franzen, 260 Cal. App. 2d 244, 253 (1968), the appellate court recognized the due process rights of the defendant, and held that a plaintiff must “describe the subject matter of the trade secret with sufficient particularity to separate it from matters of general knowledge of those persons who are skilled in the trade, and to permit the defendant to ascertain the boundaries within which the secret lies.”

The trend in California is far greater particularity than ever before. It is not enough to claim general categories: a Cal. Civ. Proc. Code § 2019.210 designation requires identifying the exact trade secret misappropriated. The case of Perlan Therapeutics, Inc. v. Superior Court, 178 Cal. App. 4th 1333 (2009) squarely rejects the typical trade secret plaintiff move of making a tremendously overbroad attempt to designate everything a trade secret. In Perlan, plaintiff provided four pages of “trade secrets,” but “[m]uch of the text simply repeats the narrative available in the publicly filed second amended complaint and provides additional technical detail that is nonetheless publicly available. . . . Despite the highly technical language used, it is apparent that this description does not provide specific identifications of the peptides or reagents used in the process.” Id. at 1338-1339.

While Cal. Civ. Proc. Code § 2019.210 is a California state discovery statute, federal district courts have substantively applied the statue in federal actions dealing with misappropriation of trade secrets. See, e.g., Advante Int'l Corp v. Mintel Learning Tech., No. C-05-01022, 2006 WL 3371576, at * 3 n. 4 (N.D. Cal. Nov. 21, 2006) (Cal. Civ. Proc. Code § 2019.210 “provides an appropriate guide in the absence of specific provisions in the federal rules governing trade secret discovery.”)

In Computer Economics, above, the Southern District of California held that federal courts cannot carve Cal. Civ. Proc. Code § 2019.210 out of the California Uniform Trade Secrets Act (“CUTSA”) “without frustrating the legislature's legitimate goals and disregarding the purposes of [Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938)].” Computer Economics, 50 F. Supp. 2d at 992. Failing to apply Cal. Civ. Proc. Code § 2019.210 “would entitle a plaintiff to virtually unlimited discovery, enhancing its settlement leverage and allowing it to conform

misappropriation claims to the evidence produced by the defendant in discovery.” Prohibiting these tactical abuses is the precise reason that Cal. Civ. Proc. Code § 2019.210 requires identification of the alleged trade secrets with particularity before discovery of the alleged misappropriator can commence.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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