Trade-secret litigation poses a problem distinct from other types of intellectual property litigation. In litigation over patents, copyrights and trademarks, the asserted intellectual property is publicly filed and its specific contours are clearly identified. Trade secrets, however, by definition are not publicly available. Therefore, a description of the alleged trade secrets at issue in the litigation must come from the plaintiff.

A plaintiff has an incentive to avoid specifically identifying its trade secrets until late in discovery. A defendant, on the other hand, generally wants the plaintiff to identify the alleged trade secrets as early as possible in the litigation and to remain bound to that description. Early identification provides a defendant with notice of the precise claims against it, allows it to prepare an appropriately tailored defense and, most importantly, frames the scope of discovery.

A plaintiff may contend that it cannot identify its alleged trade secrets with particularity until after conducting discovery of a defendant. Unless ordered by a court to provide a specific and complete identification, the alleged trade secrets can become a moving target as plaintiffs seek to avoid getting locked in on what constitutes the trade secrets for as long as possible. Without clearly defined parameters, the parties are forced to engage in wide-ranging discovery. This scenario is exacerbated in cases involving a large volume of electronically stored information and in cases involving software or other complex technology.

As a matter of judicial economy, courts have an interest in the early identification of trade secrets. It would improve case management by focusing discovery, minimize identification disputes during discovery, and provide an earlier opportunity to assess the merits of trade-secret claims. Yet most courts, including Pennsylvania courts, have not articulated a consistent rule on the timing for trade-secret identification.

Considerations in Favor of Early Identification

With limited exceptions, a court may require a plaintiff to identify its alleged trade secrets with reasonable particularity in the complaint, prior to commencing discovery, following the close of discovery or at trial. Most commentators and recent decisions favor requiring a plaintiff to specifically identify the alleged trade secrets prior to taking discovery of defendant.

The following policy considerations support a threshold rule requiring identification with reasonable particularity by the party alleging misappropriation before it can commence discovery:

• Encourages compliance with Pa. R.C.P. 1023.1 and Fed. R.C.P. 11 obligations.

• Affords an early check against meritless claims and fishing expeditions.

• Establishes appropriate scope for discovery.

• Facilitates agreement regarding ESI production.

• Provides information necessary to run public domain searches and assess whether alleged secrets have become public.

• Presents an opportunity to compare defendant’s technology to alleged trade secrets.

• Reduces ability to tailor description to evidence obtained during discovery.

• Helps a court more efficiently assess merits of whether claimed secrets constitute trade secrets under the law.

Pennsylvania Guidance 
on Timing

State substantive law governs trade-secret claims. In Pennsylvania, as in most jurisdictions, the majority of reported trade-secret opinions come from federal courts applying state law. In 2004, Pennsylvania adopted the Uniform Trade Secret Act, which codified trade-secret protection in Pennsylvania and displaced the prior common law for misappropriation of trade secrets.

Pennsylvania courts are unanimous in granting summary judgment when the alleged trade secrets have not been described with reasonable particularity after discovery has concluded. Examples of this include Hill v. Best Medical International, No. 07-1709, 2011 U.S. Dist. LEXIS 123845 (W.D. Pa. Oct. 25, 2011); Mextel v. Air-Shields, No. 01-cv-7308, 2005 U.S. Dist. LEXIS 1281 (E.D. Pa. Jan. 31, 2005); and Nutrition Management v. Harborside Healthcare, No. 01-cv-0902, 2004 U.S. Dist. LEXIS 6317 (E.D. Pa. Mar. 19, 2004).

Most Pennsylvania decisions find that a plaintiff need not identify trade secrets with particularity in the complaint, as in Gentex v. Crew Systems, 23 Pa. D. & C.5th 99, 120 (Pa. Com. Pl. Ct. 2011), which denied preliminary objections challenging trade-secret allegations that merely tracked statutory language as an improper attempt to challenge the evidence underlying the claims, and Council for Educational Travel v. Agata Czopek, No. 1:11-cv-00672, 2011 U.S. Dist. LEXIS 99230, (M.D. Pa. Sept. 2, 2011), which denied a motion to dismiss.

A handful of courts, however, have granted motions on the pleadings that dismissed trade-secret claims for a lack of specificity, as in AMP v. McGaughey, 38 Pa. D. & C.2d 109, 118 (Pa. Com. Pl. Ct. 1966), in which the court sustained preliminary objections and required greater specificity in pleading trade secrets, and Bioquell v. Feinstein, No. 10-2205, 2010 U.S. Dist. LEXIS 124077 (E.D. Pa. Nov. 23, 2010), in which the court dismissed a trade-secret claim for lack of specificity due to failure to satisfy Twombly pleading requirements.

Courts are increasingly requiring the specific identification of trade secrets during the early stages of discovery. California statutorily requires that “before commencing discovery relating to the trade secret, the party alleging the misappropriation shall identify the trade secret with reasonable particularity,” per Cal. Civ. P. Code § 2019.210. Courts in Delaware, Illinois, Massachusetts and more have similarly imposed a rule requiring identification by a plaintiff prior to allowing discovery from a defendant.

To date, Pennsylvania courts have not established a consistent rule regarding the timing for identification of trade secrets. Recent decisions, however, may signal a trend toward identification early in discovery.

In Hill v. Best Medical International, No. 07-1709, 2010 U.S. Dist. LEXIS 62726 (W.D. Pa. June 24, 2010), the court granted a motion to compel Best Medical to “identify the allegedly misappropriated trade secrets and confidential information with specificity and precision,” and granted a motion for a protective order shielding a defendant from further discovery by Best Medical. The court further determined that the applicable standard for identification of trade secrets was “reasonable particularity,” which it defined as sufficient to “(a) put a defendant on notice of the nature of plaintiff’s claims and (b) enable the defendant to determine the relevancy of any requested discovery concerning its trade secrets.”

In Synygy v. ZS Associates, No. 07-3536, 2013 U.S. Dist. LEXIS 98656 (E.D. Pa. July 15, 2013), the court granted a motion to compel supplemental interrogatory responses identifying claimed trade secrets with “reasonable particularity.” The court noted that the plaintiff knew what its trade secrets were, but defendants did not and should not be required to guess.

Challenge Insufficient Descriptions

Defendants must be vigilant in seeking opportunities to challenge overly vague descriptions of alleged trade secrets. By going on the offensive at any appropriate opportunity, defendants will draw the court’s attention to the problems posed by insufficiently described trade secrets, have an opportunity to limit the scope and expense of discovery, put themselves in a better position to lock in the alleged trade secrets and be better able to appropriately tailor defense strategies.

First, consider a motion to dismiss trade-secret claims for lack of specificity. Vague allegations as to what constitutes the claimed trade secrets may not satisfy Pennsylvania’s fact-pleading requirement, as in AMP. In federal court, such allegations might not be enough to meet the Twombly and Iqbal pleading standards.

Second, if appropriate, seek a protective order preventing discovery from the defendant until the plaintiff has identified its alleged trade secrets with reasonable particularity. In addition to the policy reasons listed above, a party may want to prevent or limit the disclosure of its own trade secrets and confidential business information—especially in cases involving technology or between competitors.

Third, take early discovery to freeze the boundaries of the alleged trade secrets. Immediately propound interrogatories requiring the specific identification of each trade secret that the plaintiff claims was misappropriated. Taking an early deposition of a corporate designee or key executive could also yield valuable testimony that circumscribes the trade secrets and provides a basis for contesting any subsequent attempts to modify the description of the trade secrets.

Fourth, promptly file a motion to compel full and complete responses to interrogatories, requesting specific identification and, if necessary, further testimony as to the trade secrets at issue. Defendants should consider seeking identification that includes citations to documents or affidavits of potential fact witnesses.

Fifth, contest any attempt to change the prior description of the alleged trade secrets. If in the form of an amended pleading, a defendant could contest the motion for leave to amend. If in the form of altered discovery responses or testimony, a defendant may want to consider a motion for sanctions. A change late in discovery can impact the scope of outstanding discovery, trigger additional discovery or otherwise cause a defendant to incur substantially increased costs defending claims that have inappropriately shifted.

Finally, a defendant should file a motion in limine to exclude information outside the boundaries of the then-existing description of the trade secrets.

A Word About Injunctions

Logically, a plaintiff should not be able to obtain a temporary restraining order or preliminary injunction without a precise identification of the alleged trade secrets, because a court would likely have difficulty entering an order restraining the use of vaguely defined trade secrets. If a court enters an injunctive order lacking such reasonable particularity, the restrained party may have grounds for an immediate appeal, and should also move to have its appeal expedited.

Best Defense Is a 
Strong Offense

Unless Pennsylvania passes a statute similar to that in California or a Pennsylvania court conclusively establishes a rule regarding the timing for identification of trade secrets, litigants will continue to dispute the issue. By going on the offensive and challenging insufficiently vague descriptions of the trade secrets at issue, defendants can limit the costs of overbroad discovery and avoid having to defend against a moving target. 

Kenneth Racowski, of counsel in Wilson Elser’s Philadelphia office, is a commercial litigator who focuses his practice on the resolution of complex business disputes. He can be reached at kenneth.racowski@wilsonelser.
com or 215-606-3913.