On March 13, 2021, borrowing from California Code of Civil Procedure § 2019.210 (which requires a plaintiff to “identify. . . trade secret[s] with reasonable particularity” before it can obtain discovery on those trade secrets), a Northern District of California judge narrowed trade secret claims asserted under the Defend Trade Secrets Act (“DTSA”) due to the plaintiff’s failure to specifically identify most of its asserted trade secrets prior to discovery. Although not an explicit requirement under federal law, the Court reasoned that the disclosure requirement served to prevent plaintiffs from getting discovery and then using that discovery to “cleverly specify whatever happens to be there as having been trade secrets stolen from plaintiff.” The decision could be significant for trade secret litigants going forward.
In Quintara Biosciences, Inc. v. Ruifeng Biztech Inc, et al., No. C 20-04808, 2021 WL 965349 (N.D. Cal. Mar. 13, 2021), the plaintiff, Quintara Biosciences, Inc., claimed that the defendants, prior participants in a joint venture with Quintara, essentially commandeered Quintara’s business for themselves. In doing so, they allegedly raided Quintara’s offices, converted Quintara’s tangible assets, and took trade secrets such as customer databases, new product designs, marketing plans, and software. Quintara sued the defendants, asserting trade secret misappropriation under the DTSA and various state-law claims.
In ruling on a motion to strike, the court acknowledged that California procedure did not govern Quintara’s DTSA claim in federal court, but it nonetheless closely assessed Quintara’s trade secret identification to determine whether Quintara could proceed with discovery on those trade secrets.
The court held that Quintara had adequately identified only two of its 11 asserted trade secrets. It explained that, for the nine trade secret disclosures it found deficient, Quintara had only described categories of information that might be trade secrets, but Quintara had not disclosed the trade secrets themselves. The court therefore only permitted Quintara to move forward with its DTSA claim on the two trade secrets it had specifically identified.
Decisions like this one may alter plaintiffs’ calculus in determining whether to bring trade secret misappropriation claims under the DTSA or state law. The DTSA does not contain an explicit trade secret identification requirement like the one articulated in California Code of Civil Procedure § 2019.210, and the lack of such a requirement provides one benefit to plaintiffs proceeding under the DTSA. But, if federal courts begin to routinely apply the California disclosure rule in DTSA cases, plaintiffs will need to be more detailed and rigorous in their trade secret identifications at an earlier stage in the case, which might compel some plaintiffs to proceed on state-law trade secret claims in state court.
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March 31, 2021 at 11:00PM
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Federal Court Imports California Trade Secret Disclosure Rule and Narrows DTSA Claim - Trade Secrets Trends
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