Protecting Trade Secrets at Trial
 
January 10, 2003
 

Protecting your trade secrets is not simply a matter of making sure your employees do not sneak off with your intellectual property in their laptop computers or that your competitors are not stealing your assets.  If your products are challenged at trial and you must file documents that are otherwise classified as trade secrets, you will have to engage in creative steps to protect those secrets in the “open courtroom.”

Trade secrets generally consist of any formula, pattern, device, or compilation of information used in business that gives the owner an advantage, or the ability to gain an advantage, over competitors. A substantial element of secrecy must exist for the information to be considered a trade secret.  However, a party may disclose trade secret information under certain circumstances without destroying its trade secret status.  For example, disclosure in litigation pursuant to a protective order or disclosure to employees pursuant to a confidentiality agreement generally will not destroy trade secret status. As a practical matter, a party’s trade secrets and confidential information are generally protected during discovery in product liability cases through the use of protective orders that limit the method of disclosure and to whom disclosure may be made.

A protective order or confidentiality agreement will not adequately protect a party’s trade secrets at trial since trade secret information is likely to be elicited in open court through testimony or the introduction of trade secret documents. This most likely will result in the waiver of trade secret status because the information will be available to the public and will no longer contain the required element of secrecy. Thus, in determining the measures to employ to protect a party’s trade secrets at trial, the court must weigh the public’s right of access to judicial records against a party’s right to protect its trade secrets. 

The United States Supreme Court has recognized that the right of public access to judicial records may be restricted to protect a party’s trade secrets.  There are several measures that a party can ask the trial court to employ to protect its trade secrets at trial.  These include sealing parts of the record containing trade secret documents and testimony, sealing the courtroom during testimony and argument concerning trade secrets, and the use of spectator confidentiality agreements. 

When evaluating how to adequately protect its trade secrets at trial, a party must first determine whether there is a state statute that sets forth a procedure for sealing judicial records.  If the state in which the case is pending has such a statute, the party should strictly follow the statute’s requirements in order to properly seal court records. 

In addition to sealing parts of the record, a party also may endeavor to have the courtroom sealed during testimony or argument concerning trade secrets.  Several courts use a two-part test to determine whether the courtroom should be sealed to protect a party’s trade secrets.  The test requires the court to first determine whether the trade secret owner would be damaged if the courtroom is not sealed, and if so, whether there are any reasonable alternatives to closing the courtroom. 

A less restrictive measure that the parties should consider is the use of a spectator confidentiality agreement in which the trial court would enter a confidentiality order requiring any spectator who remained in the courtroom during testimony or argument concerning trade secrets to sign a confidentiality agreement promising not to disclose the trade secrets at issue.  If the spectator refuses to sign the confidentiality agreement, he or she would not be permitted to enter or remain in the courtroom during testimony or argument concerning the trade secrets.  Another possible benefit of using the spectator confidentiality agreement instead of moving to have the courtroom sealed is that the use of a spectator confidentiality agreement could generate less resistance from the media, and possibly less media exposure.

For more information, contact Kristi Wallace, toll free, at 1-888-688-8500, or via e-mail at kristi.wallace@hklaw.com.