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Article: Florida Federal Court Adopts Rule Barring Discovery Prior to Particularized Identification of Alleged Trade Secrets

October 01, 2015
Business Litigation Reports

California is the only state with a statutory requirement that plaintiffs pursuing misappropriation claims identify their alleged trade secrets with reasonable particularity “before commencing discovery.” Cal. Civ. Code 2019.210. However, on July 10, 2015, the firm persuaded a Southern District of Florida court to impose this same discovery limitation. Recognizing the underlying policy that if discovery is permitted a plaintiff may simply review a defendant’s files and claim whatever it finds as its own trade secrets, the court barred plaintiffs from seeking any discovery from defendants until first identifying with particularity their alleged trade secrets. The court went further and held that this same requirement applied to the plaintiffs’ common-law claim for misappropriation of a “novel business idea,” becoming the first court to do so.

Applicable Law on Particularized Identification of Trade Secrets or Novel Ideas
Certain state legislatures have imposed statutory requirements that a plaintiff alleging a trade secret claim identify their alleged trade secret with reasonable particularity during discovery. Even in the absence of such a statutory mandate, a number of federal courts across the country have imposed this same requirement. E.g. Del Monte Fresh Produce Co. v. Dole Food Co. Inc., 148 F. Supp. 2d 1322, 1325-26 (S.D. Fla. 2001); Switch Commc’ns Grp. v. Ballard, No. 11- cv-00285, 2012 WL 2342929, at *6 (D. Nev. June 19, 2012); Ikon Office Solutions, Inc. v. Konica Minolta Bus. Solutions, U.S.A., Inc., No. 08-cv-539, 2009 WL 4429156, at *4 (W.D.N.C. Nov. 25, 2009); Dura Global Technologies, Inc. v. Magna Donnelly, Corp., No. 07-cv-10945, 2007 WL 4303294, at *5 (E.D. Mich. Dec. 6, 2007); DeRubeis v. Witten Technologies, Inc., 244 F.R.D. 676, 680–81 (N.D.Ga. 2007); Inc. v. AutoMed Technologies, Eller, 160 F. Supp. 2d 915, 926 (N.D. Ill. 2001); Xerox Corp. v. Int’l Bus. Machines Corp., 64 F.R.D. 367, 371 (S.D.N.Y. 1974). Thus, at the onset of discovery in a suit where the plaintiffs asserted claims for trade secret misappropriation under Florida’s Uniform Trade Secret Act, and misappropriation of a novel business idea under Florida and New York commonlaw, Quinn Emanuel on behalf of the defendants demanded that the plaintiffs identify with reasonable particularity each alleged trade secret and novel idea at issue. In response, the plaintiffs provided a statement that broadly described purported “proprietary analyses” and “insights,” but they did not identify any of the specific analyses or insights to which they were referring.

Notably, California is the only state with a statute holding that until a particularized disclosure is provided, a plaintiff is barred from seeking discovery from defendants. Cal. Civ. Code 2019.210. As California courts have described: “Experience has shown that it is easy to allege theft of trade secrets with vagueness, then take discovery into the defendants’ files, and then cleverly specify what ever happens to be there as having been trade secrets stolen from plaintiff.” Jobscience, Inc. v. CVPartners, Inc., No. 13-cv-04519, 2014 WL 1724763, at *2 (N.D. Cal. May 1, 2014). A handful of other courts outside of California have addressed the impact of trade secret disclosures on the timing of discovery in the absence of an applicable statute, but the results have been inconsistent. Some courts have rejected defendant’s attempts to avoid discovery prior to receiving a particularized statement from the plaintiff. E.g. St. Jude Med. S.C., Inc. v. Janssen-Counotte, __ F.R.D. __, 2015 WL 1299753, at *11 (D. Or. Mar. 23, 2013). Others have found that a defendant need not disclose its own trade secrets prior to receiving a particularized statement, but then note that discovery on claims unrelated to the trade secret dispute may proceed. Switch Commc’ns Grp. v. Ballard, No. 11-cv-00285, 2012 WL 2342929, at *6 (D. Nev. June 19, 2012). No jurisdiction outside of California has a uniform rule like the California statute unequivocally barring discovery prior to the alleged trade secret holder’s particularized disclosure. Further, we have found no case holding that a plaintiff concurrently pursing a common-law claim for misappropriation of a novel business idea—in which the alleged idea need not qualify for trade secret status—must be stayed pending identification of the specific idea at issue.

Florida Court Orders That Discovery Is Stayed Pending Particularized Disclosure
Arguing that the same policy underlying the California statute applied with equal force in Florida, the firm brought a motion to compel a more particularized statement and simultaneously sought a protective order staying all discovery pending its receipt of that disclosure.

Following extensive oral argument, the Southern District of Florida court agreed and granted the motion to compel and a protective order. The court ordered that the plaintiffs identify with reasonable particularity every alleged trade secret and novel business idea at issue, and held that until such disclosure was provided, neither the defendants nor any third party need to respond to discovery requests from plaintiffs. The court ordered that in addition to a written disclosure, the plaintiffs must identify one or more exemplar documents that reference or reflect each alleged trade secret and/or novel business idea. Finally, the court held that if the plaintiffs amended their disclosure after discovery commenced, they would be required to provide a written explanation for the change and allow a deposition to pressure-test the reason behind the amendment.

This Southern District of Florida order shows that courts may be willing to impose common-law discovery stays pending particularized disclosure even in the absence of express statutory or precedential authority on point, based on similar policy grounds underlying the California statute. Defendants should thus consider pursuing a similar strategy in trade secret or novel idea misappropriation litigations in order to prevent plaintiffs from molding their claims based on information received during discovery.