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Getting Down to the Particulars

Applying the Reasonable Particularity Standard to trade secret disclosures.

By Alex Harrell


A threshold issue that arises in many misappropriation of trade secrets actions is whether the plaintiff has adequately described its alleged trade secrets, as that disclosure will largely frame the scope of discovery and, ultimately, trial. While identifying the allegedly misappropriated information may seem simple enough, “[t]rade secret cases pose special problems distinct from other intellectual property lawsuits because alleged trade secrets are rarely defined in advance of litigation.”1 Defendants typically seek detailed descriptions of the alleged trade secrets early in discovery and—cognizant that any specifics they provide will cabin the scope of their claims—plaintiffs are generally loathe to provide much meaningful information.2

Courts in many states have balanced these competing interests by ordering plaintiffs to identify their alleged trade secrets with “reasonable particularity” at the outset of the litigation,3 a requirement that has been codified in California.4 The Texas Uniform Trade Secrets Act, though, imposes no such obligation, and no Texas appellate court has adopted or rejected this approach. Thus, trial courts are left to decide on a case-by-case basis whether or not to apply the Reasonable Particularity Standard.

 

Defining the Reasonable Particularity Standard
“‘Reasonable particularity’ has been defined as a description of trade secrets at issue that is sufficient to (a) put a defendant on notice of the nature of the plaintiff’s claims and (b) enable the defendant to determine the relevancy of any requested discovery concerning its trade secrets.”5 The analysis is flexible; it necessarily implicates a fact-specific inquiry6 and “[t]he degree of ‘particularity’ that is ‘reasonable’ will differ, depending on the alleged trade secrets at issue in each case.”7 Perhaps the best way to explain the Reasonable Particularity Standard is to consider what it is not:

“Reasonable particularity” . . . does not mean that the party alleging misappropriation has to define every minute detail of its claimed trade secret at the outset of the litigation. Nor does it require a discovery referee or trial court to conduct a miniature trial on the merits of a misappropriation claim before discovery may commence.8

Accordingly, the standard does not bind the proponent of the alleged trade secret “to describe it with the greatest degree of particularity possible . . . .”9 But “general allegations and generic references to products or information” will not pass muster.10

 

The Basis for the Reasonable Particularity Standard
The origins of the Reasonable Particularity Standard can be traced back more than four decades. In a 1974 case, for example, a New York federal court ordered the plaintiff to “identify in detail all trade secrets and confidential information” that formed the basis of its misappropriation claim, reasoning that “a defendant is entitled to know the bases for the plaintiff’s charges against it” and “[t]he burden is upon the plaintiff to specify those charges, not upon the defendant to guess at what they are.”11 Explaining further, the court remarked that absent a description of the alleged trade secrets, “neither the court nor the parties can know, with any degree of certainty, whether discovery is relevant or not. . . .”12 By the 1990s, “[o]rdering the listing of trade secrets at the outset of the litigation” had become “a common requirement.”13

While a number of rationales have been offered in support of the standard,14 courts have principally cited to four of its purported benefits:

1. It serves a notice function, since “[i]t is difficult, if not impossible for the defendant to mount a defense until it has some indication of the trade secrets allegedly misappropriated.”15
2. It comports with good public policy in that “if discovery on the defendant’s trade secrets were automatically permitted [before the plaintiff identifies its allegedly misappropriated trade secrets], lawsuits might regularly be filed as ‘fishing expeditions’ to discover the trade secrets of a competitor.”16
3. Without an identification of the alleged trade secrets, a court cannot “evaluate the relevance of [a] plaintiff’s discovery and address any objections.”17
4. “[R]equiring the plaintiff to state its claimed trade secrets prior to engaging in discovery ensures that it will not mold its cause of action around the discovery it receives.”18

 

The Arguments Against the Reasonable Particularity Standard
The Reasonable Particularity Standard, though, is not without its detractors.19 Critics argue that “[r]equiring plaintiffs to disclose their trade secrets early in litigation could bring the litigation to a premature end before plaintiffs get the benefit of broad discovery to ascertain the scope of the misappropriation.”20 Others contend that “‘process’ trade secrets and ‘combination’ trade secrets, the former derived from extensive trial and error and the latter consisting of a new arrangement of previously known information, are so difficult to identify that broad descriptions should suffice.”21 It has also been suggested that the Reasonable Particularity Standard “forces the plaintiff into a precarious position: disclose too much and reveal new trade secrets, or disclose too little and fail to capture trade secrets that the defendant has misappropriated.”22

But the attack perhaps most frequently leveled at the standard is that it is subject to abuse by defendants who may use it as a sword rather than a shield, spurring satellite litigation about the sufficiency of the trade secret disclosure that results in unnecessary delay and increased costs. Indeed, “parties often engage in protracted correspondence and motion practice at the beginning of a trade secret case, arguing over whether the trade secrets have been described with ‘reasonable particularity’ or as otherwise required by law.”23 As one court rejecting the standard succinctly stated: “a listing of every trade secret would draw an objection from Defendant that they must be narrowed, leading to additional discovery disputes and delays. . . .”24

 

Applying the Reasonable Particularity Standard in Texas
The Texas Supreme Court recently had an opportunity to weigh in on this debate in a mandamus action, In re Terra Energy Partners, LLC, but it declined.25 The alleged trade secrets in Terra Energy consisted of processes to drill and complete new oil and gas wells more efficiently and value potential land acquisitions more accurately.26 The defendant, Terra, served interrogatories asking the plaintiff, Sanchez, to describe in detail the trade secrets it alleged Terra had misappropriated.27 Dissatisfied with Sanchez’s answers, Terra filed a motion to compel, and the trial court ordered Sanchez to provide more than “generic descriptions of the type of data” comprising its alleged trade secrets.28

In response, Sanchez served a “Supplemental Disclosure of Misappropriated Trade Secrets.”29 The new disclosure was still unsatisfactory to Terra, however, which complained that it did not reveal the elements of any of the processes at issue and instead referred to 7,500 documents totaling nearly 170,000 pages that Sanchez had designated as “information regarding” its alleged trade secrets.30 Sanchez defended its disclosure, emphasizing that it had delineated 16 different subcategories of trade secrets—each with a narrative description of what the information was, how it was developed, and why it was valuable—and identified by Bates label the documents containing the relevant information.31 The trial court determined the disclosure was adequate and denied Terra’s motion to compel.32

Terra filed a petition for writ of mandamus in the 1st Court of Appeals in Houston, which was denied.33 In its per curiam opinion, the court noted only that “reviewing the mandamus record,” Terra had failed to show the trial court abused its discretion.34 Terra then re-filed its mandamus action in the Supreme Court,35 but the Supreme Court denied the petition without issuing any opinion.36 Thus, it is unclear whether the Supreme Court disapproves of the Reasonable Particularity Standard, or if it concluded that Sanchez’s disclosure was sufficiently particular, or if it simply found—as the appellate court did—that Terra had failed to show the trial court abused its discretion such as would warrant the extraordinary remedy of mandamus.

While the Texas Supreme Court and appellate courts have not yet taken a stance,37 several Texas federal district courts have addressed the Reasonable Particularity Standard. In United Services Automobile Association v. Mitek Systems, Inc., for example, a federal magistrate judge acknowledged that “neither Texas nor Fifth Circuit law requires Pre-Discovery Identification” of alleged trade secrets but nevertheless ordered the plaintiff to provide a more particularized trade secret description.38 In so ruling, the court cited to the wealth of precedent from courts outside of Texas that have adopted the Reasonable Particularity Standard.39

Even among the Texas federal district courts, though, the caselaw is not uniform.40 In fact, one such court that recently declined to order a more particularized identification of the plaintiff’s alleged trade secrets cited the Texas Supreme Court’s denial of the petition for writ of mandamus in Terra Energy.41 Even that court cautioned, however, that “at some point” it would require the plaintiffs “to specifically identify the alleged trade secrets with greater particularity” to prevent “a trial by surprise.”42

 

Conclusion
Plaintiffs and defendants will no doubt continue to fight this battle in Texas trial courts with defendants arguing for application of the Reasonable Particularity Standard, or something akin to it, and plaintiffs resisting as much as possible. Since there are reasonable arguments on both sides, the results will likely depend on the facts and circumstances of each action and the trial court’s view as to whether trade secrets cases merit special discovery procedures.TBJ

 

Notes
1. Charles Tait Graves & Brian D. Range, Identification of Trade Secret Claims in Litigation: Solutions for a Ubiquitous Dispute, 5 Nw. J. Tech. & Intell. Prop. 68 (Fall 2006).
2. Id. (“Trade secret plaintiffs rarely provide a precise and complete identification of the alleged trade secrets at issue without a court order requiring them to do so.”); Richard F. Dole Jr., Identifying the Trade Secrets at Issue in Litigation Under the Uniform Trade Secrets Act and the Federal Defend Trade Secrets Act, 33 Santa Clara High Tech. L.J. 470, 494-95 (2016-2017) (“It is common for interrogatories to request specific and precise identification of the trade secrets considered to have been misappropriated.”).
3. See, e.g., Automed Techs., Inc. v. Eller, 160 F. Supp. 2d 915, 926 (N.D. Ill. 2001) (noting that the plaintiff “will normally be required first to identify with reasonable particularity the matter which it claims constitutes a trade secret, before it will be allowed (given a proper showing of need) to compel discovery of its adversary’s trade secrets”); GT Crystal Sys., LLC v. Khattak, No. 226-2011-CV-332, 2012 N.H. Super. LEXIS 4, *4 (Sup. Ct. N.H. March 30, 2012) (describing the Reasonable Particularity Standard as the “majority rule”); United Servs. Auto. Ass’n v. Mitek Sys., Inc., 289 F.R.D. 244, 248 (W.D. Tex. 2013) (Primomo, Mag. J.) (“A number of states have enacted procedures requiring that trade secrets be identified before discovery commences.”) (collecting cases).
4. Cal. Civ. Proc. Code § 2019.210.
5. Hill v. Best Med. Int’l, Inc., Nos. 07-1709, 08-1404, 09-1194, 2010 U.S. Dist. LEXIS 62726, *10 (W.D. Penn. June 24, 2010).
6. Gentex Corp. v. Sutter, No. 96188, 2008 U.S. Dist. LEXIS 96188, *3 (M.D. Pa. Nov. 25, 2008) (noting that whether the plaintiff has met the Reasonable Particularity Standard is “ a fact-specific question to be decided on a case-by-case basis”).
7. Advanced Modular Sputtering, Inc. v. Superior Court, 132 Cal. App. 4th 826, 836 (Cal. Ct. App. 2005).
8. Id. at 835-36 (internal citations omitted).
9. Id. at 836.
10. L-3 Communications Corp. v. Jaxon Eng’g & Maint., Inc., No. 10-CV-02868-MSK-KMT, 2011 U.S. Dist. LEXIS 117757, *5 (D. Colo. Oct. 12, 2011) (Tafoya, Mag. J.).
11. Xerox Corp. v. Int’l Bus. Machs. Corp., 64 F.R.D. 367, 371-72 (S.D.N.Y. 1974).
12. Id.
13. Porous Media Corp. v. Midland Brake, Inc., 187 F.R.D 598, 600 (D. Minn. 1999).
14. Graves & Range, supra n. 1, at 73-76 (identifying 12 public policy considerations courts have cited in support of the Reasonable Particularity Standard).
15. DeRubeis v. Witten Techs., Inc., 244 F.R.D. 676, 680 (N.D. Ga. 2007).
16. Id.; see also L-3, 2011 U.S. Dist. LEXIS 117757, at *3 (noting that “disclosure of trade secrets that were not misappropriated by the defendant” would “giv[e] the plaintiff access to trade secret information that it would otherwise be illegal for the plaintiff to misappropriate”).
17. Automed. Techs., 160 F. Supp. 2d at 926.
18. DeRubeis, 244 F.R.D at 681.
19. A&P Tech., Inc. v. Lariveiere, No. 1:17-cv-534, 2017 U.S. Dist. LEXIS 211822, *21 (S.D. Ohio Dec. 27, 2017) (“[S]ome federal courts in recent years have declined to require the plaintiff to identify its alleged trade secrets before being allowed to conduct discovery”).
20. Brittany S. Bruns, Criticism of the Defend Trade Secrets Act of 2016: Failure to Preempt, 32 Berkeley Tech. L.J. 469, 478 (2017).
21. Dole, supra n. 2, at 488 (citing James Pooley, Trade Secrets § 11.02[2] (2016)).
22. Bruns, supra n. 20, at 478.
23. Benjamin K. Riley, Three Pitfalls for Trade Secret Plaintiffs, 15 Business Torts Journal, at 14 (Am. Bar Ass’n, eds., Spring/Summer 2008).
24. Global Advanced Metals USA, Inc. v. Kelmet Blue Powder Corp., No. 3:11-cv-007983-RCJ-VPC, 2012 U.S. Dist. LEXIS 126550, **17-18 (D. Nev. Sept. 6, 2012).
25. No. 01-17-00137-CV, 2017 Tex. App. LEXIS 9935 (Tex. App.—Houston [1st Dist.] Oct. 24, 2017, orig. proceeding [mand. denied]) (per curiam).
26. In re Terra Energy Partners, LLC, Case No. 01-17-00137-CV, Petition for Writ of Mandamus, at 5. Terra’s petition for writ of mandamus in the Supreme Court is not publicly available and thus all citations herein are to the parties’ mandamus briefing in the 1st Court of Appeals in Houston, found at http://www.search.txcourts.gov/Case.aspx?cn=01-17-00137-CV&coa=coa01.
27. Id. at 14-17.
28. Response of Real Parties in Interest to Petition for Writ of Mandamus, at 10-11.
29. Id. at 11.
30. Petition for Writ of Mandamus, at 18.
31. Response of Real Parties in Interest to Petition for Writ of Mandamus, at 11-12. In Texas, litigants may in certain instances refer to records in answering interrogatories. Tex. R. Civ. P. 197.2(c). But courts and commentators alike have criticized the practice of identifying alleged trade secrets strictly by reference to documents. See, e.g., Safety Today, Inc. v . Roy, No. 2:12-cv-510, 2014 U.S. Dist. LEXIS 17116, *10 (S.D. Ohio Feb. 11, 2014) (finding that “[o]nly the employer will know what portion of that myriad of information known to its employees can legitimately be claimed as a trade secret, and no amount of record production . . . can provide the appropriate answer to the question”); Tait & Graves, supra n. 1, at 92 (admonishing that “[c]ourts should not allow trade secret plaintiffs to point to documents in which trade secrets are said to reside as a substitute for detailed identification” because documents “may contain far more information than what is claimed as trade secrets, and reading a complex document may not inform the reader what precisely is being asserted as secret”).
32. Response of Real Parties in Interest to Petition for Writ of Mandamus, at 15.
33. In re Terra Energy Partners, LLC, No. 01-17-00137-CV, 2017 Tex. App. LEXIS 9935 (Tex. App.—Houston [1st Dist.] Oct. 24, 2017, orig. proceeding [mand. denied]) (per curiam).
34. Id.
35. In re Terra Energy Partners, LLC, Case No. 18-0120. The docket sheet for Terra’s mandamus action in the Supreme Court is found at http://www.search.txcourts.gov/Case.aspx?cn=18-0120&coa=cossup.
36. Id. (March 30, 2018 Notice Denying Petition for Writ of Mandamus).
37. Some Texas appellate courts, though, have considered whether a plaintiff’s trade secret description meets the specificity requirements for injunctive relief. See, e.g., Cooper Valves, LLC v. ValvTechnologies, Inc., 531 S.W.3d 254, 266 (Tex. App.—Houston [14th Dist.] 2017, no pet.) (concluding that the trial court’s injunction, which prohibited the defendant from “‘possessing, selling, disclosing, or using’” the plaintiff’s “‘Confidential and Trade Secret Information” including but not limited to a two-page list of items, was impermissibly value); Super Starr Int’l, LLC v. Fresh Tex Produce, LLC, 531 S.W.3d 829, 850-851 (Tex. App.—Corpus Christi 2017, no pet.) (finding the trial court’s injunction void for vagueness because it prohibited the defendant from using the plaintiff’s trade secrets and confidential information, which the injunction defined as the plaintiff’s “customer lists, shipper lists, carrier lists, grower lists, contact names and information, preferred services, rates, revenues, profits and other confidential information”) (emphasis original).
38. 289 F.R.D at 248-49.
39. Id. at 248 (collecting cases).
40. Compare StoneEagle Servs., Inc. v. Valentine, No. 3:12-cv-1687-P, 2013 U.S. Dist. LEXIS 188512, **13-14 (N.D. Tex. June 5, 2013) (Horan, Mag. J.) (ordering the plaintiffs to provide a list of trade secrets defined with reasonable particularity) and Zenimax Media, Inc. v. Oculus VR, Inc., No. 3:14-cv-1849-P (BF), 2015 U.S. Dist. LEXIS 179923, **4-5, 10-11 (N.D. Tex. Feb. 13, 2015) (Stickney, Mag. J.) (same) with Polydyne Software, Inc. v. Celestica Int’l, Inc., No. A-14-CV-797 LY, 2014 U.S. Dist. LEXIS 188703, **6-8 (W.D. Tex. Dec. 31, 2014) (Lane, Mag. J.) (declining to order the plaintiff to provide a more particularized identification of its alleged trade secrets because the defendant “made no showing that ordinary discovery procedures [would] prove inadequate to the task . . .” and the plaintiff “appear[ed] to have adequately and clearly described the trade secrets . . .”).
41. Huawei Techs. Co., Ltd. v. Huang, No. 4:17-CV-00893, 2018 U.S. Dist. LEXIS 136929, *9 (E.D. Tex. Aug. 14, 2018).
42. Id. at *11.

 

BrowningALEX HARRELL
is an associate in the Dallas office of Drinker Biddle & Reath. He has extensive experience handling trade secrets cases and serves on the Trade Secrets Committee of the State Bar of Texas Intellectual Property Law Section, which actively monitors federal and state statutes and judicial decisions relating to the protection and misappropriation of trade secrets.

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