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July 2011

Is Identifying Trade Secrets with “Reasonable Particularity” Whatever the Court Decides?

By | Trade Secrets - News & Publications

by Andrew Holland

Code of Civil Procedure section 2019.210 requires that a plaintiff alleging misappropriation of trade secrets identify the trade secrets with “reasonable particularity” prior to commencing discovery. Unfortunately, because of the lack of uniformity in published cases and the lack of guidance on the degree of detail necessary to meet the standard, the ambiguity of the phrase “reasonable particularity” often results in discovery disputes. An important decision by the California Court of Appeal, Second Appellate District, Brescia v. Angelin (March 2009) 172 Cal. App.4th 133, provides guidance on this conflict by striking a balance between the level of specificity required depending on the complexity of the alleged trade secrets, while at the same time recognizing that plaintiffs should not have to prove that the information at issue meets the legal definition of a trade secret without the benefit of discovery.
In Brescia, a dispute arose after respondent refused to provide discovery to claimant on the basis that he had not identified his trade secrets with “reasonable particularity”. In his trade secret disclosure statement, the claimant provided a very concise and succinct description of his pudding formula and manufacturing process. While the level of specificity was clearly detailed enough to alert respondent of what formula and process comprised the alleged trade secrets, respondent argued that the description did not meet the “reasonable particularity” standard because it did not permit respondent to ascertain whether and in what way the information is distinguished from matters already known, and to permit the court to fashion appropriate discovery. The Court disagreed and concluded that claimant’s showing was adequate to permit respondents to prepare a defense.
The Brescia Court concluded that Section 2019.210 “does not require in every case that a trade secret claimant explain how the alleged trade secret differs from the general knowledge of skilled persons in the field to which the secret relates. Rather, such an explanation is required only when, given the nature of the alleged secret or the technological field in which it arises, the details provided by the claimant to identify the secret are themselves inadequate to permit the defendant to learn the boundaries of the secret and investigate defenses or to permit the court to understand the designation and fashion discovery.” (Id. at 139.)
A more recent decision by the California Court of Appeal, Fourth Appellate District, Perlan Therapeutics v. Superior Court of San Diego County (November 2009) 178 Cal.App.4th 1333, may promote the lack of uniformity in published cases by highlighting the broad discretion that trial courts have in deciding such disputes. After analyzing the significance of the Brescia decision and an earlier case, Advanced Modular Sputtering, Inc. v. Superior Court, (2005) 132 Cal.App.4th 826, the Perlan Therapeutics Court explained that the Brescia and Advanced Modular courts abused their discretion by applying improper understandings of the legal meaning of “reasonably particular.” Perlan Therapeutics supports the position that plaintiffs must identify their alleged trade secrets with a high level of precision, while it also suggests that plaintiffs may be required to distinguish between information that is confidential as opposed to information that is generally known in a particular industry. Most importantly, Perlan Therapeutics emphasizes that trial courts have broad discretion in determining whether the level of detail in a trade secret disclosure statement is sufficient and that courts of appeal when reviewing such decisions should do so under an “abuse of discretion” standard rather than de novo.
In Perlan Therapeutics, a dispute arose after two of Perlan Therapeutics’ former employees left the company and formed a competing enterprise related to protein based therapeutics for viral infections. At issue in this case was plaintiff’s amended trade secret disclosure statement that the court noted contained highly technical language that was too general in nature and was also publicly available, so it failed to meet the requirements of Section 2019.210. Specifically, plaintiff’s amended trade secret disclosure statement was inadequate because it failed to describe the alleged trade secret with reasonable particularity and failed to demonstrate that the information disclosed was not generally known to the public. In affirming the trial court’s decision, the Perlan Therapeutics Court cited to Brescia recognizing that Section 2019.210 requires an exacting level of specificity, but does not require a trade secret claimant to, in every case, explain how the alleged trade secret differs from information available in the public domain.
The Perlan Therapeutics Court further cited to Advanced Modular Sputtering when explaining its position that trial courts have broad discretion under Section 2019.210 to determine the degree of particularity that is reasonable in each case. In Advance Modular Sputtering, the court observed that “the letter and spirit of section 2019.210 require the plaintiff…to identify or designate the trade secrets at issue with “sufficient particularity” to limit the permissible scope of discovery by distinguishing the trade secrets “from matters of general knowledge in the trade or of special knowledge of those persons..skilled in the trade.”( Id. at 835.)
Perlan Therapeutics does not further clarify what level of specificity is required in a trade secret disclosure statement under Section 2019.210. Instead, it emphasizes the broad discretion that courts have in determining the degree of particularity that is reasonable in each case. The practical effect of Perlan Therapeutics is that to the extent possible, plaintiffs will forum shop for judges who have a history of allowing plaintiffs to commence discovery after serving trade secret disclosure statements with a lower degree of specificity than others, which may result in a wide range of decisions even when the facts of some cases are similar. In some cases, for example, depending on the sophistication of the judge and how he or she perceives the technology at issue, plaintiffs may be forced to distinguish between protected information and information that is publicly available, while other judges may not require the same standards.