California Needs New Protections For Trade Secrets

The growth of high technology and biotechnology in the California economy makes protecting intellectual property a matter of statewide interest. Unfortunately, California law is deficient in that it may allow a plaintiff to acquire improperly its competitor’s trade secrets in litigation through discovery.

The discovery statutes promote the liberal disclosure of information. However, if litigation involves the protection of trade secrets, the obligation to disclose destroys the value of the information.

California sought to protect trade secrets when it passed the Uniform Trade Secret Act (UTSA) in 1984. CCP § 2019(d) requires a plaintiff to disclose its trade secrets at the outset of litigation and before it delves into its competitor’s trade secrets.

A fact-finding process is necessary for the trial court to protect the competitor’s trade secrets. However, evidentiary thresholds and procedures are absent from the statute.

For example, the statute has the following deficiencies:

• No specific requirement that the information disclosed by the plaintiff actually be a "trade secret" as that term is defined by the UTSA.
• No guidance as to what level of specificity is required to be disclosed by the plaintiff.
• No requirement that the plaintiff actually be the owner of the trade secret.
• No application to any claim other than one for misappropriation even if the other cause of action is based on trade secret misappropriation.

These deficiencies leave the statute vulnerable to broad, conflicting interpretations by trial courts. No appellate court has provided any guidance. Accordingly, it’s incumbent on the Legislature to address these deficiencies to prevent the unwarranted disclosures of trade secrets that are vital to industries critical to California’s economy.