Plaintiff Goes First In Trade Secrets Discovery

A classic tension in trade secrets cases lies between plaintiffs' reluctance to identify their trade secrets and defendants' contentions that plaintiffs will tailor their accusations of trade secrets theft to match information produced by the defendants.  Acknowledging this tension, a Nevada magistrate judge has held that a plaintiff had not identified allegedly stolen trade secrets with sufficient particularity, and that the defendant need not respond to discovery requests until the plaintiff had done so.  Switch Communications Group v. Ballard, No. 2:11-cv-00285-KJD-GWF (D. Nev. June 19, 2012).

Ballard, the defendant, had been the plaintiff's chief financial officer for two years prior to being terminated.  Switch, the plaintiff and an operator of computer data centers, alleged that the defendant had possessed its trade secrets, and was planning to use them to build a competing data center.  Ballard admitted involvement in a project to build a competitor's data center, and that he had knowledge of the plaintiff's business.  He denied, however, that this information constituted trade secrets or confidential information, or information that was confidential under his employment agreement with Switch.

After Switch's original interrogatory answers concerning its alleged trade secrets were vague, Ballard brought a successful motion to compel more specific answers.  The plaintiff's supplemental answers were more specific, but still merely listed categories of allegedly misappropriated information.

The court cited copious authority for the proposition that “a party alleging a claim for misappropriation of trade secrets is required to identify its alleged trade secrets with reasonable particularity before it will be allowed to compel discovery of its adversary's trade secrets.”  Policy reasons for this rule focus on ensuring that a defendant has the ability to mount a defense, as well as preventing a plaintiff from undertaking fishing expeditions and “mold[ing] its cause of action around the discovery it receives.”  The requirement to identify trade secrets with “reasonable particularity” means that the defendant must be “put on notice of the nature of plaintiff's claims,” and it must be able to “discern the relevancy of any requested discovery on its trade secrets.”

Here, Switch had generally identified concepts and elements that were clearly not trade secrets, but that apparently were contended to be trade secrets in some combination.  This disclosure did not meet Switch's burden of identifying its trade secrets with reasonable particularity.  To meet this burden, the plaintiff “must 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.”  Therefore, the court would not require Ballard to respond to the plaintiff's discovery requests relating to his alleged misappropriation of trade secrets until the Switch provided “a description of its alleged trade secrets with reasonable particularly.”

The court further held that Ballard did not yet have to respond to discovery related to Switch's claim of copyright infringement, because the plaintiff's discovery requests “broadly encompass, but do not differentiate between, information relevant to the Switch's copyright infringement claim and its misappropriation of trade secrets claims.”