Although it is a basic premise, it is worth emphasizing that at the beginning of any trade secret dispute in California, the plaintiff must disclose exactly what trade secrets are alleged to be at issue with “reasonable particularity.” Cal. Civ. Code § 2019.210. The exercise, while it sounds simple enough, can prove to be challenging for both the novice and experienced litigator. The trade secret disclosure statement creates the metes and bounds of the issues at stake in the lawsuit, operates to limit the scope of later discovery from the onset, and binds the plaintiff similar to an admission. Advanced Molecular Sputtering, Inc. v. Sup. Ct. (2005) 132 Cal.App.4th 826, 834. If you put too much information in the trade secret disclosure statement, you could “poison the well” with items that are later shown not to be trade secrets damaging the entire claim. Painting the trade secret in general terms can be just as troubling as it may later limit the boundaries of the case.
The requirement of early disclosure is unique to trade secret disputes -- with good reason. The purpose of the trade secret disclosure statement is to (1) dissuade lawsuits by individuals who do not possess trade secrets; (2) prevent the plaintiff from using discovery as open season on its competitor’s trade secrets; (3) accordingly assist the court and parties in framing the appropriate scope of discovery in what is likely to be a competitively sensitive area; and (4) enable the defendant to develop its defenses at the outset. Computer Economics, Inc. v. Garner Group, Inc., 50 F.Supp.2d 980, 985 (S.D. Cal.1999). Without the early disclosure defendants would be required to engage in discovery before knowing exactly what they allegedly misappropriated.
To meet the four identified purposes, California courts have held that the plaintiff must disclose the trade secrets at issue in a non-evasive manner, without including unnecessary surplusage or broad catch-all language, so as to either “hide the ball” or as a tactic to preserve an unrestricted right to later amend its alleged trade secrets. See Perlan Therapeutics, Inc. v. Sup. Ct. (2009) 178 Cal.App.4th 1333. “Reasonable particularity” requires a “more exacting level of particularity” for highly specialized fields. Id. For example, biopharmaceutical components are going to necessarily be more complex than secret pricing schemes.
When all is said and done, the plaintiff will be responsible for applying the California Uniform Trade Secrets Act to prove up the alleged theft of whatever material or information is disclosed in the trade secret statement. So the plaintiff must include in the disclosure every trade secret, and every component therein, that the plaintiff wishes to put at issue. The failure to disclose an actual trade secret is proper ground for summary judgment. See Imax Corp. v. Cinema Technologies, Inc., 152 F.3d 1161, 1164. (9th Cir.1998) (applying California law). Summary judgment cannot be avoided by disclosing additional information omitted in the trade secret statement. See Pixon, Inc. v. Placeware, Inc., 421 F.Supp.2d 1233 (N.D. Cal. 2005) (applying California law).
The limit to the four corners of the document, coupled with no guarantee of right to amend to incorporate new trade secrets, makes the trade secret statement one of the most powerful binding mechanism available to the litigator. Moreover, the significance goes beyond defending the misappropriation allegations given the broad preemption application of California Uniform Trade Secrets Act to tort causes of action. See, e.g., K.C. Multimedia, Inc. v. Bank of America Technology & Operations, Inc. (2009) 171 Cal.App.4th 939, 958 [holding that CUTSA preempts claims for breach of confidence, unfair competition, and interference with contract when based upon “the same nucleus of facts” as a misappropriation of trade secret even if the trade secret fails]. Consequently, while the concept is straightforward on its face, plaintiffs should give considerable thought to identifying the trade secrets at issue in litigation.