AIPLA Trade Secrets
Committee
Educational Program
April 17, 2014
Kenneth J. Vanko © 2014
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Key Procedural Issues
O Topic 1: Identification of trade secrets (35
minutes)
O Topic 2: Form and scope of injunction
orders (15 minutes)
O Questions (10 minutes)
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Trade Secrets Identification
O Basic Problem:
O How can a court determine whether an item is
a trade secret without first determining what
it is the plaintiff claims as a secret?
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Trade Secrets Identification
O Identification considerations for the
plaintiff
O Finding most knowledgeable persons/key
witnesses to address the identification
problem
O Assessing the potential value of secrets
O Determining what the trade secrets list will
look like
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Trade Secrets Identification
O Identification considerations for the
defendant
O Evaluating scope of trade secrets from the
complaint
O Initial pleading strategy – answer or
dismiss?
O Pre-discovery identification motion
O Appropriately tailor discovery to get solid
list of secrets
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Trade Secrets Identification
O When does the identification issue arise?
O Pleading stage
O Pre-discovery
O Discovery (throughout the case)
O Summary judgment
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Trade Secrets Identification
O Principle 1: A trade secret plaintiff must
identify its alleged trade secrets “with a
reasonable degree of precision and
specificity” that is “particular enough as
to separate the trade secret from matters
of general knowledge in the trade or of
special knowledge of persons skilled in
the trade.” Dow Chem. Canada, Inc. v. HRD
Corp., 909 F. Supp. 2d 340, 346 (D. Del.
2012).
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Trade Secrets Identification
O Principle 2: “[G]eneral allegations and
generic references to products or
information are insufficient to satisfy the
reasonable particularity standard.” L-3
Comms. Corp. v. Jaxon Eng’g & Maint., Inc.,
2011 U.S. Dist. LEXIS 117757 at *5 (D.
Colo. Oct. 12, 2011).
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Trade Secrets Information
O Principle 3: Courts routinely obligate
plaintiffs identifying their trade secrets to
define them with more particularity
before trial on a misappropriation claim.
Synygy, Inc. v. ZS Assocs., Inc., 2013 U.S.
Dist. LEXIS 98656 (E.D. Pa. July 15, 2013).
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Trade Secrets Identification
O Complaint
O General rules
O General references to trade secrets usually
permitted (Rule 12(b)(6) motions)
O Twombly and Iqbal require claim to meet
“plausibility” standard
O Acceptable: Generalized descriptions of actual
secrets
O Unacceptable: Broad categories of information
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Trade Secrets Identification
O Example of basis for dismissal order (non-
published case)
O Trade secrets defined as information about
1,000-plus customers including “pricing,
product line profit and loss, material
costing, proprietary product designs, part
weights, substrate detail, financial data,
human resources information, and key
customer financials.”
O Basis for granting motion to dismiss
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Trade Secrets Identification
O Recent example of sufficient identification
in a complaint
O nexTune, Inc. v. McKinney, 2013 U.S. Dist.
LEXIS 133003 (W.D. Wash. Sept. 17, 2013).
O Description of specific information the
plaintiff provided in confidence related to
digital music services
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Trade Secrets Identification
O Pre-Discovery Identification
O When is it required?
O Frequently litigated in “buckshot” trade
secrets cases
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Trade Secrets Identification
O Plaintiffs – Policy Rationales Limiting
Obligation to Disclose Early in Case
O Liberal discovery rules (Rule 26)
O Inability to know what defendant has or
how it is operating
O Catch-22: “Too general” or “too specific”
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Trade Secrets Identification
O Defendants – Policy Rationales Favoring
Disclosure Before Discovery
O Encourages broad “fishing expedition”
O Ensures discovery requests are relevant
O Allows defendant to mount a factual
defense
O Prevents plaintiff from “molding” its claim
around the defendants’ own secrets
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Trade Secrets Identification
O Resources for policy discussions
O DeRubeis v. Witten Techs., Inc., 244 F.R.D.
676 (N.D. Ga. 2007): “…there is no
talismanic procedure the court may apply
in order to obtain the best result in any
given case.”
O Charles Tait Graves and Brian D. Range,
Identification of Trade Secrets Claims in
Litigation: Solutions for a Ubiquitous Dispute,
5 Northwestern J. of Tech. and Intell. Prop.
68 (Fall 2006).
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Trade Secrets Identification
O Jurisdictions requiring (?) pre-discovery
identification
O California Code of Civil Procedure Section
2019.210.
O Delaware – Engelhard Corp. v. Savin Corp., 505
A.2d 30 (Del. Ch. 1986).
O Minnesota – Porous Media Corp. v. Midland
Brake, Inc., 187 F.R.D. 598 (D. Minn. 1999).
O Other states (Illinois, New Jersey) suggest, but
do not seem to require, immediate disclosure
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Trade Secrets Identification
O Pending changes to Federal Rules of Civil
O
O
O
O
Procedure
Emphasis on “proportionality” of written
discovery
Could lead to more pre-discovery motions
May impact willingness of courts to let
identification slide too far into discovery
Proportionality seems consistent with
early identification and case focus
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Trade Secrets Identification
O When should a defendant seek pre-
discovery identification?
O Complaint lists categories of information
that may be in public domain
O Suit appears anti-competitive
O Need to slow down a runaway train
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Trade Secrets Identification
O Defendants’ discovery
O Identification Interrogatory:
O “Identify with precision and specificity each and every
alleged trade secret that plaintiff contends the
defendant misappropriated.”
O Related: “Identify with precision and specificity each
and every item of confidential information that plaintiff
contends the defendant misappropriated.”
O Other Requests:
O
O
O
O
Individual who created trade secret
Third-party disclosures of the trade secret
Each alleged improper use of the trade secret
Documents reflecting or summarizing the identified
trade secret
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Trade Secrets Identification
O Examples of deficient identifications
O DeRubeis v. Witten Techs, Inc., 244 F.R.D. 676 (N.D.
Ga. 2007)
“Software developed, owned and/or licensed
to [Witten] that it uses to create its final deliverables
from the raw positioning and radar data collected from
a radar array positioning system, such as a ‘total station’
or Global Positioning System.”
Problem: Reveals functions performed by
software, not actual secrets that enable those functions.
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Trade Secrets Identification
O Dura Global Techs. v. Magna Donnelly Corp.,
2007 U.S. Dist. LEXIS 86950 (E.D. Mich.
Dec. 6, 2007)
“Valid and subsisting trade secrets
relating to our sliding window assemblies for
motor vehicles.”
Problem: Shouldn’t it be obvious?
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Trade Secrets Identification
O Switch Communications Group v. Ballard, 2012
U.S. Dist. LEXIS 85148 (D. Nev. June 19, 2012)
“[Plaintiff’s] electrical line designs and
HVAC designs.”
Problem: Claimed trade secret could only be
a compilation of known concepts, but plaintiff failed
to describe how these concepts formed a unique and
protectable combination trade secret.
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Trade Secrets Identification
O Safety Today, Inc. v. Roy, 2014 U.S. Dist. LEXIS 17116 (S.D.
Ohio Feb. 11, 2014)
Interrogatory: Identify “with precision and
specificity each alleged Safety Today trade secret” that
Defendants used or misappropriated.
“…the answer to this interrogatory may be
determined by examining, auditing, abstracting, or
summarizing certain of Safety Today’s business records, and
the burden of deriving or ascertaining the answer would be
substantially the same for Safety Today and Safeware.”
Problem: Only rarely can a party answer a
contention interrogatory with a push to Rule 33(d).
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Trade Secrets Identification
O Safety Today (cont’d):
O Court differentiates “typical case” involving ex-
employees: “Only the employer will know
what portion of that myriad 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.”
O Court distinguished the “typical case” from
one where the entire trade secret is an
engineering drawing or (surprise!) the formula
for Coca-Cola.
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Trade Secrets Identification
O Elements of strong identification
O Specific customer list (with name, date of file, location of file)
O Particular documents e-mailed, copied, or downloaded
O Chemical formulas, lines of source code, engineering drawings
O Elements of weak identification
O High-level concepts
O General categories of business information (e.g., marketing
materials, human resources information, financial statements)
O Description of features and functions in software package
O Use of “including, but not limited to…” language
O Refers to voluminous, undifferentiated documents, or attempts
to use Rule 33(d) language (Safety Today)
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Trade Secrets Identification
O Sample of defendants’ initial trade secrets
interrogatories
O United States Automobile Ass’n v. Mitek
Systems, Inc., 289 F.R.D. 244 (W.D. Tex.
2013) (granting defendant’s motion for prediscovery identification of trade secrets).
O See also Safety Today, 2014 U.S. Dist. LEXIS
17116 at *4.
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Trade Secrets Identification
O Special problems with compilation secrets
O More specificity usually required
O Inclusion of information within public domain does not
preclude claim
O Identification must describe how combination works as
a whole to constitute a trade secret
O Illustrative cases on compilations:
O SL Montevideo Tech., Inc. v. Eaton Aerospace, LLC, 2006
U.S. Dist. LEXIS 100119 (D. Minn. May 26, 2006)
(granting judgment as a matter of law based on lack of
particularity in identified secrets).
O 3M Co. v. Pribyl, 259 F.3d 587 (7th Cir. 2001) (affirming
jury verdict; trade secrets over operating procedures for
making resin sheeting contained elements of public
domain information).
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Trade Secrets Identification
O Consequences of Failing to Identify:
O Summary Judgment
O Givaudan Fragrances Corp. v. Krivda, 2013 U.S.
Dist. LEXIS 153437 (D.N.J. Oct. 25, 2013).
O Case involved 616 fragrance formulas
O Plaintiff only disclosed 34 formulas to
defendants
O Plaintiff implemented “peculiar safeguards”
over all formulas
O Summary judgment granted as to all trade
secrets but 34
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Trade secrets identification
O Consequences of Failing to Identify:
O Sanctions
O Plaintiffs can be liable for fees if they
maintain a claim in bad faith.
O Automated Packaging Systems, Inc. v. Sharp
Packaging, Inc., 1989 U.S. Dist. LEXIS 17090
(E.D. Wis. Mar. 17, 1989) – granting bad
faith fee petition for failure to identify
trade secrets through preliminary
injunction trial.
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Form and Scope of Orders
O Federal Rule of Civil Procedure 65(d)(1)
O Injunction order must:
O State the reasons the court is issuing it
O State its terms specifically
O Describe in “reasonable detail” the acts
that the court is enjoining
O Must be self-contained
O Possible exception for trade secrets
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Form and Scope of Orders
O What kind of injunction do you want?
O “Use or Disclose” Order
O Production (or Employment) Order
O Practical Considerations
O Judges will be looking for form orders
O Submit a draft or proposed order with an
injunction/TRO petition
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Form and Scope of Orders
O What is a “use or disclose” order?
O Example: “The Defendant is enjoined from
using for its own benefit or disclosing to any
third-party the Plaintiff’s Master Customer List
(including any derivatives or reproductions of
the list).”
O Problems
O A plaintiff typically seeks broader relief.
O It’s difficult to monitor and enforce.
O How does this impact reverse-engineering or
use of general skills and knowledge?
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Form and Scope of Orders
O Examples of Orders
O Hal Wagner Studios, Inc. v. Elliott, 2009 U.S.
Dist. LEXIS 12453 (S.D. Ill. Feb. 19, 2009).
O Terms of “use” injunction
O “The Defendant is enjoined from using or
disclosing all business information of
Wagner, or using or disclosing any copies of
Wagner’s documents.”
O Accompanied by employment injunction
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Form and Scope of Orders
O Examples of Orders (cont’d)
O Patriot Homes, Inc. v. Forest River Housing, Inc.,
512 F.3d 412 (7th Cir. 2008).
O Terms of “use” injunction
O Defendant enjoined from “using, copying,
disclosing…or otherwise exploiting Patriot’s
copyrights, confidential information, trade
secrets, or computer files.”
O Vacates preliminary injunction for violating
Rule 65(d)
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Form and Scope of Orders
O What is a production or employment order?
O More objective
O Prophylactic
O Tougher sell to the court
O “The Defendant is enjoined from working for
PepsiCo for a period of 5 months.”
O “The Defendant is enjoined from producing
any para-aramid fiber for 20 years.”
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Form and Scope of Orders
O Rationale for broader injunction beyond
mere “use or disclosure” of trade secret
O Inevitable disclosure in the employment
context, as described in PepsiCo, Inc. v.
Redmond, 54 F.3d 1262 (7th Cir. 1995).
O Inability to manufacture a product
independently without relying on
misappropriated trade secrets, as described
in E.I. duPont v. Kolon Indus., Inc., 894 F.
Supp. 2d 691 (E.D. Va. 2012) (jury verdict
vacated by Fourth Circuit)
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Form and Scope of Orders
O Employment context
O Inevitability factors
O Similarity of positions
O Contractual restrictions
O Degree of competition between OldCo and
NewCo
O Steps taken by NewCo to guard against
disclosure (e.g., limitations on job duties, terms
of employment contract)
O Indicia of bad faith
O Showing of inevitability may require broader
employment injunction akin to non-compete
enforcement
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Form and Scope of Orders
O Manufacturing context
O Are trade secrets inextricably connected to the
defendant’s manufacture of the product?
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Form and Scope of Orders
O E.I. duPont v. Kolon Indus., Inc., 894 F. Supp. 2d 691
(E.D. Va. 2012).
O 20-year permanent injunction prohibiting
defendant from manufacturing Heracron,
competing product of Kevlar®
O Key factors to assess whether to issue production
injunction
O Can defendant divorce knowledge of trade secrets
from a future production of the good?
O Likelihood of complying with use injunction
O Defendant’s conduct during litigation
O Did the defendant have a pre-existing design of
its own?
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Form and Scope of Orders
O Other cases like Kolon Industries
O Head Ski Co., Inc. v. Kam Ski Co., Inc., 158 F.
Supp. 919 (D. Md. 1958) – enjoins
manufacture of adhesively bonded metal
skis; finds all elements of secret production
process incorporated into defendant’s
work.
O Monovis, Inc. v. Aquino, 905 F. Supp. 1205
(W.D.N.Y. 1994) – permanent injunction
over manufacture of single-screw
compressors.
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Form and Scope of Orders
O Agreed Injunctions or Consent Orders
O Rule 65(d) provides more flexibility
O Motorola, Inc. v. Computer Displays Int’l, Inc., 739
F.2d 1149 (7th Cir. 1984).
O Use of Appendix
O May be necessary with “use” injunction
O Filed under seal
O Provides specificity
O Does not violate Rule 65(d)(1)(C) – prohibition
on reference to other document
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Thank you!
Kenneth J. Vanko
Clingen Callow & McLean, LLC
Wheaton, Illinois
(630) 871-2609
vanko@ccmlawyer.com
www.non-competes.com
@KenVanko
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