Vondran Legal® - California Trade Secrets Litigation - California CUTSA disclosure requirement.  We represent Plaintiff and Defendants in California DTSA/CUTSA cases.  Call us at (877) 276-5084.

Introduction

Disclosure of trade secrets by a plaintiff in litigation is crucial.  This allows a defendant to know what is being claimed as a trade secret and allows them to prepare a defense, including hiring experts.  However, many plaintiffs relish in "sandbagging" this requirement and instead trying to disclose a virtually meaningless list of vague, ambiguous, or conclusory terms or concepts.  This blog discusses what happens in federal court (Central District in California is our focus here) when a Plaintiff sues under both DTSA and CUTSA. Many times, a Plaintiff may argue that CUTSA requirements do not apply.  This is not necessarily true, as noted below.  There has to be a sense of fair play in discovery, as opposed to "trial by ambush."  In the appropriate case, the defendant may need to file either motions to compel or a motion for summary judgment were the plaintiff utterly fails to disclose with reasonable particularity BEFORE serving its discovery.

California Federal Court Relevant Law re CUTSA disclosure requirement.

Here is one case that discussed the disclosure requirement in a California Central District Court case where the Plaintiff filed a lawsuit for trade secret theft under both DTSA and CUTSA.  The Court ultimately found Plaintiff's disclosure adequate, but the case sets down some good general guidelines.

4. Section 2019.210 requires a litigant to "identify or designate the trade secrets at issue with sufficient particularity." Advanced Modular Sputtering, Inc. v. Superior Court, 132 Cal. App. 4th 826, 835, 33 Cal. Rptr. 3d 901 (2005) (quotation omitted). The "two most important goals" of the disclosure are "to help the court shape discovery, and to give the defendant the opportunity to develop defenses." Brescia v. Angelin, 172 Cal. App. 4th 133, 149, 90 Cal. Rptr. 3d 842 (2009). A proper disclosure "distinguishes the trade secrets from matters of general knowledge in the trade or of special knowledge of those persons skilled in the trade." Advanced Modular, 132 Cal. App. 4th at 835 (cleaned up).

5. The standard of disclosure under Section 2019.210 is "flexible." Phoenix Technologies, Ltd. v. DeviceVM, Inc., 2010 U.S. Dist. LEXIS 24884, 2010 WL 8590525 at *2 (N.D. Cal. 2010). Put another way, "there is no bright-line rule governing the level of particularity required by section 2019.210." Loop AI Labs, Inc. v. Gatti, 195 F. Supp. 3d 1107, 1111 (N.D. Cal. 2016). Rather, a district court "must exercise its sound discretion in determining how much disclosure is necessary to comply with section 2019.210 under the circumstances of the case." Perlan Therapeutics, Inc. v. Superior Court, 178 Cal. App. 4th 1333, 1349, 101 Cal. Rptr. 3d 211 (2009); Proofpoint, Inc. v. Vade Secure, Inc., 2020 U.S. Dist. LEXIS 69048, 2020 WL 1911195 at *7 (N.D. Cal. 2020) (same). Appellate review of this discovery-related determination is for abuse of discretion. Stevens v. Corelogic, Inc., 899 F.3d 666, 667 (9th Cir. 2018).

6. Certain principles of disclosure are clear. Vague terms, "catchall" phrasing, and "designations that are not sufficiently concrete, leaving room for the designating party to change the meaning of a trade secret after the completion of discovery are inadequate." M/A-COM Tech. Solutions, Inc. v. Litriniura, Inc., No. SA CV 19-220 JVS (JDEx), 2019 U.S. Dist. LEXIS 171453, 2019 WL 4284523 at *2 (C.D. Cal. 2019). Similarly, merely listing "concepts," "categories of alleged trade secrets in broad terms," or "know-how that could potentially have value to the company" fails to meet the "reasonable particularity" standard of disclosure. Loop AI Labs, Inc. v. Gatti, 105 F. Supp. 3d 1107, 1114 N.D. Cal. 2016).

7. However, a litigant is not required to provide "every minute detail of its claimed trade secret at the outset of the litigation. Nor does [the statute] require a discovery referee or trial court to conduct a miniature trial on the merits of a misappropriation claim before discovery may commence." Advanced Modular, 132 Cal. App. 4th at 835-36. The reasonableness of a party's disclosure may take into account whether the trade secrets at issue "consist of incremental variations on, or advances in, the state of the art in a highly specialized technical field." 

8. State appellate courts note that the disclosure occurs at a "very preliminary state of the litigation." Brescia, 172 Cal. App. 4th at 146 (quoting Advanced Modular). To that end, the trade secret designation should be "liberally construed, and reasonable doubts regarding its adequacy are to be resolved in favor of allowing discovery to go forward." Id. at 149. A litigant "need not prove at the discovery stage that each trade secret qualifies for trade secret protection. If the defendant contends that the plaintiff has identified a trade secret which the undisputed facts show is not secret, then the defendant should file a motion for summary judgment." Bal Seal Engineering, Inc. v. Nelson Products, Inc., No. SA CV 13-1880 JLS (KESx), 2017 U.S. Dist. LEXIS 232297, 2017 WL 10543565 at *6 (C.D. Cal. 2017).

Analysis

9. Defendants contend that two aspects of Plaintiffs' disclosure are inadequate and prevent discovery from proceeding. 

a. Disclosure # 1 (use of solid flavoring) - Defendants contend that the solid flavoring disclosure (a) states basic information recognized by the industry, and (b) tracks Plaintiffs' own public statements in its patent in the related case. Defendants rhetorically ask what "could conceivably be secret" about the use of solid flavoring as disclosed. 

b. Disclosure # 5 (equipment used in process) - For the equipment disclosure, Defendants complain that the statement "does not describe specific types of equipment" used in various steps of the process, nor does it lay out details such as the time needed for certain procedures or the sizing of various components.

10. The Court easily concludes that no supplemental disclosure is warranted regarding the first trade secret statement. There is nothing vague, wishy-washy, or slippery about Plaintiffs' disclosure. Loop AI Labs, 105 F. Supp. 3d at 1114. To the contrary. Defendants seem to have quite a good handle on Plaintiffs' contentions; they just dispute whether Plaintiffs have identified a true trade secret worthy of legal protection. Advanced Modular, 132 Cal. App. 4th at 835. No further disclosure is warranted to advance discovery. Defendants will be able to present their argument that Plaintiffs' trade secrets do not fall within the statute in a renewed dismissal motion, at summary judgment, or during trial. Bal Seal Engineering, 2017 U.S. Dist. LEXIS 232297, 2017 WL 10543565 at *6.

11. The second trade secret statement presents a marginally closer call. The introductory phrase to Disclosure # 5 broadly refers to "specific types of equipment" without a great deal of further detail. However, after that preamble, the statement provides considerably more information about production requirements (both in terms of describing machinery and actual manufacturing technique). Not all aspects of the processes discussed in this section are analyzed at a level necessary to replicate or build a production assembly line, though.

12. But that's not required at this phase of the litigation. Brescia, 172 F.3d at 138. The terms that describe various pieces of industrial equipment and their use in production are reasonably specific enough to allow Defendants to conduct discovery to get more precise information.  M/A-COM Tech. Solutions, 2019 U.S. Dist. LEXIS 171453, 2019 WL 4284523 at *2. In an [*7]  exercise of discretion and in liberally construing the disclosures with an eye toward allowing discovery to proceed, the Court concludes that it does not have a factual basis to state that Plaintiffs' disclosures are inadequate or defective.3 Perlan Therapeutics, 178 Cal. App. 4th at 1349; Brescia, 172 Cal. App. 4th at 148.

13. The defense motion for a more definite disclosure is therefore DENIED.   See Pinkerton Tobacco v. Kretek Int'l (C.D.Cal. July 14, 2021, No. CV 20-8729 SB (MRWx)) 2021 U.S.Dist.LEXIS 206362, at *3-7.).

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Attorney Steve® Tip: As you can see, there are many things to think about in determining whether a trade secret disclosure is valid, but the key point is there should be some fairly defined trade secrets so the defendant knows what is at issue and how to defend (for example, how to focus discovery on whether the information is already public, readily available to the public, whether there were adequate steps taken to protect their secrecy of the trade secret (ex. non-disclosure agreements, policy handbooks, training/memoranda to employees, reasonable security, need to know access, etc.).  Without a fair disclosure, how can a defendant fairly defend?  How can defense counsel know if Defendant actually used or disclosed the alleged trade secret to a new company, or used it in a new competing business if it is not clear what the trade secret is?  This may also warrant a summary judgment motion where the plaintiff has not disclosed and has no triable issue of fact.

Contact a California Trade Secret Lawyer

Our firm has litigated hundreds of IP related cases since our founding in 2004.  From Copyright and Trademark infringement, to trade secret misappropriation and right of publicity misappropriation. For more information, contact us at (877) 276-5084 or fill out our contact information on the right side of this page.