United States:
Seeking Summary Judgment In Trade Secrets Cases
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Trade secrets cases often involve intrigue and juicy facts, like
departing employees downloading thousands of computer files under
cover of darkness. But given that such claims often turn on
disputed facts, we wondered: How successful are summary
judgment motions in trade secrets cases?
For the non-lawyers out there, a motion for summary judgment is
basically a request that a court throw out a case before trial on
the theory that no reasonable jury could find in favor of the other
party. Are these types of requests worth the often significant time
and cost needed to prepare and decide them? We've seen some
courts say "No," and refuse to entertain any summary judgment
procedure at all.
While each case is unique, Trade Secrets Watch sifted
through publicly-available judicial opinions for trends. We reviewed 40 of the most recent state and
federal trial court orders in California, one of the states with
the most trade secret litigation. And we were specifically looking
at motions for summary judgment and/or summary adjudication (MSJs)
of claims for trade secret misappropriation. Based on our review,
we found:
SUCCESS RATE = 30-40% |
Motions for summary judgment in trade secrets cases tend to be
granted about 40 percent of the time. This trend applies equally at
the state and federal level. However, the success rate drops to
about 30 percent when you exclude motions based on the statute of
limitations and the focus is on the merits. |
MOST LIKELY TO BE GRANTED |
Motions for summary judgment tend to be granted based on three
types of arguments:
- Claim Brought Too Late: MSJs were granted in
four of the five cases in which the motion turned on the statute of
limitations — i.e., whether the plaintiff discovered
the alleged misappropriation more than three years prior to the
filing of the claim. This defense seems to present a ripe issue for
summary adjudication if the facts are favorable.
- Not Enough Evidence: In 12 of the 40 cases we
reviewed, courts granted MSJs where the plaintiff simply did not
have enough evidence to go to trial. These included cases where
there wasn't enough evidence: (i) that the trade secrets were
sufficiently valuable (one case); (ii) that the trade secret owner
didn't take reasonable steps to protect the secrecy of the
information (four cases); or (iii) that the defendant
misappropriated the secrets (four cases – including the
well-known Silvaco v. Intel case). Even though they
have less than a 50 percent grant rate, such motions may be worth
the effort and expense and should be given careful consideration.
Given the track record of cases where MSJs were granted, it may be
more fruitful to attack the plaintiff's evidence of
misappropriation and/or the adequacy of its efforts to maintain the
secrecy of the alleged trade secret than to challenge whether the
information was sufficiently valuable.
- Procedural Rules Not Followed: In a subset of
the above cases, the MSJ was granted because the plaintiff did not
comply with all applicable rules of evidence and/or civil procedure
in opposing the motion. For example, in one case an MSJ was granted
in part because the plaintiff relied on inadmissible hearsay. The
likelihood of success here is hard to predict until the plaintiff
responds to the motion, but if the plaintiff's evidence seems
thin or its counsel has a track record of sloppiness, prospects for
victory on this ground grow. A side benefit of this approach is
that the defendant may be able to craft a successful motion that
focuses on the plaintiff's lack of evidence without revealing
too much about the defendant's own strategy and evidence.
|
LEAST LIKELY TO BE GRANTED |
Motions for summary judgment tended to be denied in three types of
situations:
- Enough Evidence to Go to Trial: The most
common reason for denial of MSJs on trade secret misappropriation
claims was the existence of at least one triable issue of
material fact. This is not surprising given the fact-intensive
nature of these claims. When multiple trade secrets are alleged,
the existence of a triable issue as to any of the trade secrets may
require that the motion be denied. The plaintiff's burden here
is relatively low: as one court put it, "[t]he misappropriation
claim may indeed rest on a particularly thin reed, but...sufficient
inferences arise to support the existence of triable issues of
fact. The Court has not ruled that the trade secret claim will
succeed, only that it does not fail as a matter of law on
undisputed facts."
- Filed by the Plaintiff: Only two of the MSJs
in our review set were filed by the plaintiff, and both were denied
on the ground that there were triable issues of material fact.
- Procedural Deficiencies: California state
courts take very seriously the procedural requirements applicable
to MSJs, and it is essential to follow California Code of Civil Procedure § 437c
to the letter. For example, at least one MSJ was denied in part
because the moving party failed to submit a procedurally-compliant
separate statement of undisputed facts. In another case, a court denied the MSJ because
the defendant did not show that the plaintiff could not succeed on
alternative theories of misappropriation. The defendant argued
there was no showing that it had "used" the
plaintiff's trade secret, but did not address whether it
"acquired" or "disclosed" the secrets. The
court denied the motion without requiring that the plaintiff
produce any evidence of misappropriation.
|
Overall, our sample confirms that motions for summary judgment
are not guaranteed to succeed. And in addition to the time and
expense involved, there are certainly downsides such as providing
your adversary with a preview of your trial strategy and evidence.
That said, these motions seem to be granted with enough frequency
(at least in California) that the procedure merits serious
consideration in most cases. This is particularly so if the
plaintiff's evidence of misappropriation is thin or the
defendant has a strong statute of limitations defense.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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