The Ninth Circuit recently reaffirmed that the federal Defend Trade Secrets Act requires a plaintiff to describe its alleged trade secret with sufficient particularity. But the Ninth Circuit opened the door to allowing a plaintiff to modify its trade secret identification after discovery. It held that a district court abused its discretion in granting summary judgment to a defendant when a plaintiff identified only “some” of its alleged trade secrets before discovery, reasoning that it was not fatal to the plaintiff’s claim that it included “hedging language” to leave open the “possibility of expanding its identifications later” because the plaintiff’s burden before discovery was “only to identify at least one trade secret with sufficient particularity to create a triable issue.”
InteliClear, LLC (InteliClear) developed a comprehensive securities trading tracking system and licensed that system to ETC Global Holdings, Inc. (ETC). The license agreement acknowledged that “all information InteliClear provided was confidential, proprietary, and copyrighted, and through the agreement, ETC agreed to maintain that information in confidence ‘during and after’ the terms of the agreement.” ETC later terminated the license agreement and built its own securities clearing software. InteliClear suspected that ETC had improperly used InteliClear’s system to develop the competing system. A third party inspected both systems and found “abundant evidence” that parts of ETC’s system were “identical” to parts of InteliClear’s system. InteliClear sued ETC in federal court, alleging that ETC misappropriated its trade secrets under the federal Defend Trade Secrets Act and the California Uniform Trade Secrets Act.
The district court denied ETC’s motion to dismiss InteliClear’s trade secret misappropriation claims, but then granted ETC’s motion for summary judgment just one day after discovery had begun. At that time, no discovery had occurred. The District Court held that InteliClear had failed to “sufficiently identify” the elements of its system that were allegedly trade secrets. The district court also denied InteliClear’s motion to defer ruling on ETC’s motion for summary judgment until after discovery because “discovery would not resolve the underlying deficiencies—i.e., the failure to state the alleged trade secrets with sufficient particularity.”
InteliClear appealed, and the Ninth Circuit reversed. The Ninth Circuit confirmed that, under both the federal Defend Trade Secrets Act and the California Uniform Trade Secrets Act, a plaintiff must prove that it owns a trade secret by identifying the alleged trade secret with “sufficient particularity.” InteliClear had identified “some of the features” of InteliClear’s securities system that it alleged were trade secrets, including “its uniquely-designed tables, columns, account number structures, and methods of populating table data.” The district court held that, by identifying only “some” of its alleged trade secrets, InteliClear had impermissibly left open the possibility that “it might later argue that other unnamed elements” of its system were trade secrets as well. The Ninth Circuit disagreed: “At this stage, particularly where no discovery whatsoever had occurred, it is not fatal to InteliClear’s claim that its hedging language left open the possibility of expanding its identifications later.” The Ninth Circuit held that InteliClear’s burden at this point was “only to identify at least one trade secret with sufficient particularity to create a triable issue,” which it had done. Thus, the Ninth Circuit reversed and remanded to the district court to allow InteliClear to conduct discovery.