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
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
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
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
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
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.