Trade Secrets Pleading Remains ‘Amorphous’ After 9th Cir. Cases

Attorneys are split on whether a pair of Ninth Circuit trade secrets rulings this month provided needed clarity on how specifically plaintiffs must describe what they’re trying to keep secret.

The appeals court on Aug. 14 revived a $72 million jury verdict against Boeing Corp., rejecting a judge’s finding that the secrets were insufficiently fleshed out. The same week, another panel ruled a judge wrongly struck as insufficiently identified DNA sequence-analysis trade secrets before discovery.

Both reversals sided with plaintiffs and centered on the standard for how they must define their secrets in court. Courts seek to balance letting legitimate plaintiffs advance pre-discovery despite limits on what they can know, while blocking frivolous “fishing expeditions” from reaching sensitive and expensive discovery. Statutory requirements for reaching discovery vary by jurisdiction, and it’s an abstract task at any stage of litigation.

That combined with the “amorphous nature” of trade secrets themselves makes crafting a broad standard difficult, IP law professor Elizabeth A. Rowe of the University of Virginia said.

“It’s vagueness upon vagueness,” said Rowe, a former trade secrets litigator. “You’re playing a very expensive game where you’re shooting in the dark.”

IP attorney James Pooley called the pre-discovery ruling over DNA “really useful guidance” in an area where “authority has been all over the map.”

“It does make things more predictable in that you don’t have to worry as much about spending as much time and money” litigating whether something qualifies as a trade secret, he said. “You can put attention and resources on developing the facts.”

But Armin Ghiam of Hunton Andrews Kurth LLP saw the ruling—even if legally correct—as a negative that will primarily spur more costly litigation as plaintiffs see they can advance cases further.

“There will be more trade secrets cases,” Ghiam said. “When the expected value for settlement of any type of case increases, all of a sudden there’s more motivation for plaintiffs to bring that kind of case.”

‘Left Me Wanting’

Trade secrets law protects businesses’ confidential information that has economic value due to its remaining secret. In any lawsuit, plaintiffs must articulate their trade secret so they can demonstrate it qualifies as one. That secrecy creates a tension, as plaintiffs often want to keep sensitive information out of a rival’s counsel’s hands, but defendants also need to know what they’re accused of.

“If you say somebody stole my motorcycle, you have to prove there was a motorcycle—it can’t be a bicycle,” Rowe said.

When that disclosure must happen varies. California, Puerto Rico and Massachusetts law all explicitly require “reasonable particularity” in pleadings to shield defendants from discovery over nebulous claims. But the federal Defend Trade Secrets Act—like most states—lacks an explicit pre-discovery bar, merely requiring “sufficient particularity” to ultimately prevail.

In the DNA-sequencing case remanded Aug. 12, the Ninth Circuit ruled District Judge William Alsup wrongly held Quintara Biosciences Inc. to California’s pre-discovery test as he struck nine of 11 claims against Ruifeng Biztech Inc.

Pooley acknowledged legitimate concern to “closing the courtroom door” for some defendants by forcing them to litigate the identification of secrets before they can fully learn what they’re accused of stealing. But, he said, when parties raise the “fishing expedition” objection, his response is essentially: Yes, of course.

“That’s exactly what it is. You don’t know what’s down there until you throw your line down,” he said. “Misappropriation never happens in broad daylight.”

If a plaintiff appears to be abusing discovery, protective orders have always been a tool to protect material and limit access to a rival’s in-house counsel’s access, he said.

Rowe said the Ninth Circuit opinion “left me wanting” and could have provided more clarity. She questioned whether the California approach legally diverged significantly from standard pleading thresholds, which still require factual allegations that can support a claim.

“Some could argue that the absence of the phrase ‘reasonable particularity’ when it comes to identification, outside of California, is kind of inferred,” Rowe said. “If it’s not good enough for the California standard, why is it good enough for the federal standard?”

‘Know It When I See It’

In the Boeing case, the panel faulted District Judge James L. Robart for requiring plaintiff Zunum Aero Inc. to precisely define the boundaries of each secret. Robart blocked Zunum’s more comprehensive definitions, the panel noted, instead leaving jurors a short, court-created list with short descriptions.

“Judge Robart basically yanked away the controls for the whole case,” said Pooley, who wrote a friend-of-the-court brief for Zunum. “And then he declared it insufficient after the jury verdict.”

Pooley said judges do have a role as a gatekeeper against frivolous claims whose definitions can’t clear a “low bar” before being “off to the races,"and noted Robart found Zunum’s definitions sufficient to reach trial.

But at any stage, evaluating a trade secret definition remains ill fitting to a neat, objective rubric.

“The answer may be that the appropriate definition of a trade secret is like that of obscenity,” Pooley said, referring to a standard laid out by Justice Potter Stewart in 1964: “I know it when I see it.”’

In Zunum’s case, Ghiam said he “felt there wasn’t much of a trade secret,” suggesting Zunum went broke after a potential partnership with Boeing on alternate fuel technology fell through.

“The more illusory and vague, the more likely they’re not strong on the merits,” Ghiam said. “Trade secrets cases can’t be detached from the nature of the secrets.”

Rowe agreed that an “amorphous,” hard-to-define secret is “a tell that something is off.” A plaintiff may not know everything immediately and shouldn’t have unreasonable hurdles, she said, but it bears the burden saying what was stolen, adding it can amend the complaint as more is learned in discovery.

“If you don’t figure out how to define it, how is anybody else supposed to?” she said.

The cases are Quintara Biosciences Inc. v. Ruifeng Biztech Inc., 9th Cir., No. 23-16093 and Zunum Aero Inc. v. The Boeing Co., 9th Cir., No. 24-5212.