Exploring the Pre-Discovery Trade Secret Identification Requirement in Massachusetts and Across the Country
Massachusetts recently adopted a version of the Uniform Trade Secrets Act (UTSA) that became effective on Oct. 1, 2018. While similar to the UTSA in nearly every respect, the Commonwealth's new trade secret act additionally requires that plaintiffs must, before discovery begins, "identify the trade secret with sufficient particularity under the circumstances of the case to allow the court to determine the appropriate parameters of discovery and to enable reasonably other parties to prepare their defense."1 Massachusetts becomes only the second state after California to enact such a requirement by statute, and many other jurisdictions have similar identification requirements under common law.
Section 42D(b) represents a substantial change in Massachusetts trade secret litigation. Previously, there was no specific procedure requiring plaintiffs to identify their alleged trade secrets with particularity. Without such a requirement, defendants turned to interrogatories and other discovery devices to learn the boundaries of the plaintiff's alleged trade secret. Slippery plaintiffs could adapt and refine their trade secret definition as the case progressed – presenting a definition in broad terms at the pleading stage, then providing particularity only when forced to do so during discovery and expert disclosure. This "evolving" trade secret strategy also afforded plaintiffs the unfair advantage to adapt their trade secret's definition during discovery – as they uncovered greater detail regarding the allegedly misappropriated material in the hands of defendants.
With the enactment of Section 42D(b), plaintiffs will be required to identify the alleged trade secrets upfront and likely be bound to that description throughout the case. This new, early disclosure of the trade secret should also afford the defendant enough time to develop its defenses and discovery strategies.
History of the Particularity Requirement
While the particularity requirement found in Section 42D(b) is not a part of the UTSA, other jurisdictions have adopted similar procedural requirements. At least in the near future, Massachusetts courts will likely look to those jurisdictions for guidance in applying Section 42D(b).
California common law established the particularity requirement for trade secret identification.2 The Diodes court stated that the purpose of the particularity requirement was to "give both the court and the defendant reasonable notice of the issues which must be met at the time of trial and to provide reasonable guidance in ascertaining the scope of appropriate discovery."3 Courts following Diodes identified additional goals of the requirement: "promot[ing] well-investigated claims and dissuad[ing] the filing of meritless trade secret complaints" and "prevent[ing] plaintiffs from using the discovery process as a means to obtain the defendant's trade secrets."4
California has since codified the rule set forth in Diodes in Cal. Civ. Proc. Code § 2019.210: "before commencing discovery relating to the trade secret, the party alleging the misappropriation shall identify the trade secret with reasonable particularity." Massachusetts becomes only the second state after California to enact such a requirement by statute.
Other state courts have adopted similar requirements in common law, though case law is scarce in most of those states.5
Case Law From Other Jurisdictions May Provide Early Guidance Regarding What Disclosure Is "Sufficient" Under Section 42D(b)
California provides the most developed body of case law regarding the particularity requirement, and therefore may provide guidance as Massachusetts courts begin to interpret Section 42(D)(b). While California cases offer no bright line rule to determine when trade secret identifications are sufficiently particular,6 some guidance can be gleaned from the cases. At a minimum, trade secret identification under California law that consists of "general concepts or categories of information" would be insufficient.7 Mere references to pleadings or voluminous documents are likewise not enough.8 On the other end, "absolute precision" and "every minute detail" are not required.9
As a general rule, California courts tend to construe trade secret identifications liberally, and reasonable doubts of adequacy are resolved in favor of allowing discovery to proceed.10 The opinions emphasize that each case must be analyzed based on the alleged trade secrets at issue while keeping in mind the purposes of the particularity requirement.11 For example, in highly technical fields, where the alleged trade secrets consists of incremental variations or improvements, a higher level of particularity may be required, including a description of how the trade secret is different from publicly available knowledge.12
Finally, plaintiffs may be bound by their initial, pre-discovery descriptions of their trade secrets. Although neither the Massachusetts statute nor the California statute provide such a rule, a few California courts have shown a reluctance to allow amendments of trade secret descriptions, and have held that any amendment will only be allowed upon a showing of good cause.13 One court suggested that good cause may be shown when a plaintiff later learns during discovery that a defendant misappropriated additional trade secrets other than those identified.14
Below is a survey of case law showing when courts found disclosures adequate or insufficient15:
- A list of fifteen ingredients, by common name and brand name, and their percentages in product formula as well as a description of each step in the mixing, testing, and code marking of the product were adequate to allow preparation of defense.16
- Descriptions such as "[p]ricing of Schlage's products sold to its customers," "[t]he Home Depot Line Review Documents," "Schlage's market research data," "[a]dvertising strategy plans for calendar year 2000," "[c]omposite material process technologies (i.e., the unique composite materials used by Schlage in its products and the processes applied to those composite materials)" and "Schlage's personnel information" were sufficiently particular and defendant had no difficulty understanding the scope of the alleged secrets.17 A 37-page document describing the secret production process step-by-step was sufficient.
- "[K]ey contact information . . . at a large Japanese technology company," "key contacts at a major telephone company" and "confidential target partner, client, investor, supplier, employee, consultant, advisor information" were not specific enough to allow defendant to identify whose contact information was at issue.18
- "Application of Plaintiff's technology to the analysis of big data generally owned by medium to large companies and governmental entities (including the target customers and partners from among those types of entities) with large volumes of structured and unstructured data from multiple sources and in need of quickly performing analyses of the data and obtain actionable inputs or results that can quickly be used for a variety of applications in various fields including customer relationship management, customer experience needs" was held to be a listing of concepts and insufficient.19
- "All information stored in Plaintiff's Apple MacBook Air computer . . . assigned to Anna Gatti in 2012 for use in conjunction with Plaintiff's business" and "[a]ll information stored in Plaintiff's data accounts used by Gatti while she purported to work as Plaintiff's CEO and President" were too vague and unspecific.20
- "Information about Schlage's new products" was insufficient because it failed to separate secret information and information about the products which were publicly disclosed.21
- "[O]riginal ideas and concepts for dance productions, marketing strategies and tactics, as well as student, client and customer lists and their contact information" failed to describe specific ideas or plans and failed to allege that the customer lists included information not readily accessible to defendants.22
Practice Tips for Massachusetts Litigants
For trade secret plaintiffs in Massachusetts, a Section 42D(b) disclosure presents what could be a pivotal event in the case.23 Plaintiffs should pay careful attention to define their trade secrets in such a manner that matches what the defendant allegedly misappropriated as well as meets the sufficiency requirement. Although it is tempting to keep the initial disclosure vague, plaintiffs should carefully draft the identification and make sure that the initial disclosure covers what they need, in case that later amendments will be denied. Also, it goes (nearly) without saying that any description of a trade secret's substance should only be filed under seal.
For trade secret defendants in Massachusetts, it is imperative that the plaintiff's Section 42D(b) disclosure meet the sufficiency requirement so that defendants can adequately develop their defenses. As a result, defendants should be prepared to force plaintiffs to take a precise position on what their trade secrets are before discovery begins.
1 M.G.L. c. 93 § 42D(b).
2 Diodes, Inc. v. Franzen, 260 Cal. App. 2d 244 (1968).
3 Diodes, 260 Cal. App. 2d at 143. Echoing these goals, section 42D(b) of the Massachusetts Act provides that the trade secret identification must be sufficient “to allow the court to determine the appropriate parameters of discovery and to enable reasonably other parties to prepare their defense.”
4 Advanced Modular Sputtering, Inc. v. Sup. Ct., 132 Cal. App. 4th 826, 833-34 (2005).
5 Delaware and North Carolina provide additional examples of states applying the particularity requirement. See; Krawiec v. Manly, 370 N.C. 602 (2018).
6 Loop AI Labs Inc. v. Gatti, 195 F. Supp. 3d 1107, 1111 (N.D. Cal. 2016).
7 Loop AI, 195 F. Supp. 3d at 1114.
8 Id. at 1113-13; Brescia v. Angelin, 172 Cal. App. 4th 133, 150 (2009).
9 Loop AI, 195 F. Supp. 3d at 1111.
10 Brescia, 172 Cal. App. 4th at 143.
11 Loop AI, 195 F. Supp. 3d at 1112.
12 Advanced Modular, 132 Cal. App. 4th at 836.
13 Loop AI Labs Inc v. Gatti (Loop AI II), 2015 WL 9269758 at *4 (N.D. Cal. December 21, 2015); see also Pixion, Inc. v. PlaceWare, Inc., 421 F. Supp. 2d 1233 (N.D. Cal. 2005) (denying amendment of trade secret identification where plaintiff previously represented that it was "a complete statement of the secrets," because amendment would defeat the purposes of the particularity requirement).
14 Perlan Therapeutics, Inc. v. Sup. Ct., 178 Cal. App. 4th 1333, 1351 (2009) (citing Charles Tait Graves & Brian D. Range, Identification of Trade Secret Claims in Litigation: Solutions for a Ubiquitous Dispute, 5 Nw. J. Tech. & Intell. Prop. 68, 99 (2006)).
15 This is intended to be exemplary and not an exhaustive list.
16 Brescia, 172 Cal. App. 4th at 151.
17 Whyte, 101 Cal. App. 4th at 1453.
18 Loop AI, 195 F. Supp. 3d at 1115.
19 Id. at 1114.
20 Id. at 1115.
21 Whyte v. Schlage Lock Co., 101 Cal. App. 4th 1443, 1454 (2002).
22 Krawiec v. Manly, 370 N.C. 602, 611 (2018).
23 Plaintiffs should also consider whether it is favorable to avoid Section 42D(b) by instead bringing a claim under the Defend Trade Secrets Act (DTSA). DTSA has no analog to Section 42D(b). To bring a claim under DTSA, however, plaintiffs must bring a claim that is "related to a product or service used in, or intended for use in, interstate or foreign commerce." 18 U.S.C. § 1836(b)(1).