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There's a new roadblock for plaintiffs in the Business Court suing over trade secrets. It was imposed last week by Judge Bledsoe in DSM Dyneema, LLC v. Thagard, 2014 NCBC 50, and it bars the plaintiff from proceeding with discovery until the trade secrets allegedly being misused by the defendant are identified with "sufficient particularity." [an enhanced version of this opinion is available to lexis.com subscribers]
There is nothing new in requiring particularity in trade secrets claims. The Business Court has frequently granted motions to dismiss trade secrets claims because the alleged trade secrets were not identified with sufficient particularity, but it had never refused to allow discovery on this basis, at least until the Dyneema decision.
Dyneema had sued its former employee, Thagard, and his new employers, three Honeywell companies, alleging misappropriation of its trade secrets for the development of ballistic fibers for use in enhanced combat helmets ("ECH").
When the Honeywell Defendants were served with discovery, they objected and refused to produce responsive documents relating to their own methods of producing ECH (which they said were their own trade secrets) on the ground that the Plaintiff had not identified with sufficient particularity the trade secrets which it was saying had been misappropriated.
Judge Bledsoe examined a variety of federal court decisions on the point of when discovery is appropriate in a trade secrets case, and he found the "cases requiring pre-discovery disclosure of trade secrets persuasive." ¶21. The reasons supporting this bar to discovery until the plaintiff's trade secrets have been described in sufficient detail included:
The Judge recognized that there are countervailing reasons to allow discovery to proceed, including "the inherent difficulty in certain situations of identifying what portions of trade secrets have been misappropriated prior to receipt of discovery from defendants." Op. ¶19.
So, how "particular" does a trade secrets plaintiff need to be in identifying its trade secrets with "sufficient particularity"? The answer is that there is no clear answer. Judge Bledsoe set an outer boundary, saying that a plaintiff does not need to "define every minute detail of its trade secrets down to the finest detail." Op. ¶23 (quoting Prolifiq Software Inc. v. Veeva Sys. Inc., 2014 U.S. Dist. LEXIS 77493, *5 (N.D. Cal., June 4, 2014) [enhanced version].
Short of that standard, it is hard to say what would meet the Court's approval in the future. What Dyneema did offer fell short, notwithstanding a full single spaced page describing its claimed trade secrets. Op. ¶8. Court found this description, despite its length, to "simply identify features that are common to all ballistic materials or common to the development and manufacture of ballistic materials." Op. ¶22.
Judge Bledsoe held that Dyneema had to:
specifically describe “what particular combination of components renders each of its designs novel or unique, how the components are combined, and how they operate in unique combination”
before it could go forward with discovery of the Defendants’ trade secrets. Op. ¶24 (quoting Switch Commc’ns Grp. v. Ballard, 2012 U.S. Dist. LEXIS 85148 (D. Nev. June 19, 2012) [enhanced version].
So, if you are representing a trade secrets plaintiff in the Business Court, plan on disclosing more about your client's trade secrets than your client would prefer. Not every "minute detail," but a lot of details.
Read other articles on the North Carolina Business Litigation Report, a blog for lawyers focusing on issues of North Carolina business law and the day-to-day practice of business litigation in North Carolina courts.
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