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Obvious, Within General Knowledge, and … Trade Secret? An Update To The Disclosure Requirement of CCP 2019.210.

Posted in Trade Secrets

By Scott Cameron

California Code of Civil Procedure Section 2019.210 requires a plaintiff in a trade secret case to identify “with reasonable particularity” the trade secret it claims was misappropriated before commencing discovery. This usually leads to the first dispute in such a lawsuit – whether the plaintiff has adequately identified the trade secret. In a recent case, Brescia v. Angelin, (2nd Dist. Mar. 17, 2009) — Cal.Rptr.3d —, 2009 WL 684744, the California Court of Appeal provided additional guidance for settling this dispute. 

The California Uniform Trade Secrets Act (“CUTSA”), Civil Code Section 3426 et seq., creates statutory protection for a company’s trade secrets. The CUTSA defines a trade secret as information, including a formula, pattern, compilation, program, device, method, technique, or process, that (1) derives independent economic value from not being generally known, and (2) is protected from disclosure by reasonable means. The classic example of trade secret is the formula for Coke or Pepsi. 

The California Legislature enacted section 2019.210 at the same time the CUTSA was enacted. The Legislature intended to ensure that “before a trade secret defendant must submit to potentially costly litigation and discovery, the complainant should describe the subject matter of the trade secret with sufficient particularity to separate it from matters of general knowledge in the trade or in the special knowledge of those persons who are skilled in the trade, and to permit the defendant to ascertain at least the boundaries within which the secret lies.” The purpose of this section was to supply sufficient data to give both the court and the defendant reasonable notice of the issues which must be met and provide reasonable guidance in ascertaining the scope of appropriate discovery.

The leading case construing section 2019.210 is Advanced Modular Sputtering, Inc. v. Superior Court (Sputtered Films, Inc.) (2nd Dist. 2005) 132 Cal.App.4th 826. The Advanced Modular court explained the four goals of section 2019.210: (1) to dissuade the filing of meritless trade secret complaints, (2) to prevent plaintiffs from using the discovery process as a means to obtain the defendant’s trade secrets, (3) to assist the court in framing the appropriate scope of discovery, and (4) to enable defendants to form complete and well-reasoned defenses before the eve of trial. As part of the challenge to the trade secret designation in Advanced Modular, the parties submitted expert declarations opining as to whether the designation was sufficient to distinguish the trade secret from information generally known in the trade. The court held that in order to satisfy the requirement of “sufficient particularity” a plaintiff must describe the trade secrets so as to distinguish the claimed trade secrets from matters of general knowledge in the trade or of special knowledge of those persons skilled in the trade. Courts since Advanced Modular have interpreted this requirement rather strictly. 

In Brescia v. Angelin, the Court of Appeal took the opportunity to examine Advanced ModularBrescia concerned a plaintiff who claimed trade secrets in a formula for high-protein, low-carbohydrate pudding and a process for manufacturing the pudding. The defendant challenged the sufficiency of the designation, and citied a patent application he had filed with the US Patent and Trademark Office for the same formula. The USPTO denied the patent application because the formula was obvious to persons of ordinary skill in the food science industry when the formula was developed. The defendant argued, and the trial court agreed, that the plaintiff could not show that the claimed trade secret was anything other than information generally known to persons skilled in the field. 

The Brescia court explained that the court in Advanced Modular was not creating a requirement for all cases, divorced from the particularity requirement itself, of explaining how the trade secret differs from prior art. The court noted that section 2019.210 itself does not require such a showing, and stated that “the essential lesson of Advanced Modular is the flexibility of the reasonable particularity standard. It ‘means that the plaintiff must make some showing that is reasonable, i.e., fair, proper, just and rational, under all of the circumstances to identify its alleged trade secret in a manner that will allow the trial court to control the scope of subsequent discovery, protect all parties’ proprietary information, and allow them a fair opportunity to prepare and present their best case or defense at a trial on the merits.’ (Advanced Modular, supra, 132 Cal.App.4th at p. 836.) Further, the designation should be liberally construed, and reasonable doubts about its sufficiency resolved in favor of allowing discovery to go forward. Under this flexible standard, absent a showing that the identification of the alleged trade secret alone lacks the particularity necessary to serve the statutory purposes, the trade secret claimant need not specify how the secret or its elements are distinguishable from matters known to skilled persons in the field.” Indeed, the court found that section 2019.210 should not be read as requiring the trial court to litigate the ultimate merits of the case, specifically whether the claimed trade secret was actually a trade secret, at this early stage of the case. 

The court held that it was not required in every case for a trade secret plaintiff to specify how its claimed trade secrets are distinguished from matters of general knowledge in the trade. The court emphasize that when the nature of the alleged trade secret or the technical field in which it arises makes a detailed description alone inadequate to permit the defendant to learn the limits of the secret and develop defenses or to permit the court to understand the secret and fashion discovery, the court may require an explanation of how the alleged trade secret differs from matters known to skilled persons in the field as necessary to satisfy those needs.  But absent such necessity, requiring such an explanation in every case is unreasonable.

Thus, the court eased somewhat the burden on a trade secret plaintiff before she can begin discovery in the case. What it did not explain is why trade secret defendants are deserving of this protection while defendants in the ordinary case are not. Indeed, if the complaint survives demurrer, what reason is there to justify requiring this additional showing before discovery can be had. Perhaps a better safeguard, if the Legislature truly believed one was necessary, would have been to adopt more rigorous pleading standards to a trade secret misappropriation claims. For now, we are left with section 2019.210, which requires the plaintiff to identify the trade secret prior to conducting discovery. And the inevitable fight about whether the designation is adequate. For a device that was designed to reduce the expense of discovery, it is quite possible that the expense was just shifted to the cost of bringing and defending motions regarding the sufficiency of the designation.

Scott Cameron is an associate with Weintraub Genshlea Chediak Tobin & Tobin practicing in the Litigation section. Scott focuses his practice on general business and intellectual property litigation in both state and federal courts. His experience includes cases involving general tort and breach of contract, fraud, trademark and copyright infringement.