The Importance of Describing Trade Secrets with Sufficient Particularity

Discerning the line between providing too much information in a trade secrets identification (and therefore potentially publicly revealing some of the proprietary information) and disclosing too little information (thereby risking dismissal or the need to amend a trade secrets disclosure) is more art than science
David A. Sergenian

David A. Sergenian

Co-founder and partner of Sergenian Ashby LLP
Formerly an attorney with Quinn Emanuel Urquhart & Sullivan LLP; Glaser Weil Fink Howard Avchen & Shapiro LLP; and Gradstein, Luskin & Van Dalsem PC
J.D. from the University of Virginia School of Law

In Human Longevity, Inc. v. J. Craig Venter Institute, Inc., 2018 WL 6617633, 18–­cv–­1656­–WHQ–LL (S.D. Cal. Dec. 18, 2018), the district court dismissed a complaint for violation of the Defend Trade Secrets Act and related state-law claims. Part of the ruling was based on the plaintiff’s failure to identify the trade secrets at issue with sufficient particularity, as required by Fed. R. Civ. P. 8.

The court first gave an example of a sufficiently particular identification of trade secrets, from UCAR Tech. (USA) Inc. v. Yan Li, 2017 WL 64056520 (N.D. Cal. Dec. 15, 2017):

[D]etailed proprietary data that [Plaintiff] collected from its network of more than 15,000 cars, which provided valuable insight into vehicle operation and usage; testing data for [Plaintiff’s] applications; software and testing data related to autopiloted cars developed by [Plaintiff] and subsets of the data set usable for work on autopilot technology; [Plaintiff’s] software developed to work with vehicle autopilot technology; [Plaintiff’s] strategic business plans; and the R&D work being done …for [Plaintiff].

By contrast, the court found that the description of trade secrets by plaintiff Human Longevity, Inc. (HLI) was overly expansive and lacking in particularity. HLI alleged that its trade secrets “include, but are not limited to” “processes and data relating to HLI’s development of its Health Nucleus.” The complaint described Health Nucleus as a program that “combines intelligence platform integrating genomics, advanced clinical imaging and machine learning to provide clients with whole body assessment of potential disease and health risks.” HLI further described its alleged trade secrets as including “bi-weekly business development updates, leadership updates, executive summaries, and weekly reports of all Health Nucleus activities.” The complaint also alleged that its trade secrets included:

•  “identity and contact information [for] financing or potential financing sources, including…high-net-worth individuals” and “negotiating terms and strategies for potential transactions,” including “[t]he identity and contact information of clients and potential client[s] … including … high-net-worth individuals such as Hollywood actors and actresses, corporate executives, NFL team owners, philanthropists and politicians”
•  “employee contact and compensation information”
•  “research data, studies, imaging, as well as client results and prognoses”
•  “HLI’s-owned [sic] Lenovo laptop computer”
•  “internal financial reports on HLI’s business operations and future forecasts”
audits and industry reports, “including analysis of market competitors”
•  “plans, projections and negotiations regarding the potential expansion of [HLI’s] business operations”

In the court’s opinion, HLI’s identification of trade secrets was similar to descriptions of alleged trade secrets that courts have found to be insufficiently particular, such as:

•  “design review templates,” “fluidics design files,” or “source code files,” especially when “preceded by the phrases ‘such files included’ and ‘such as’”
•  “methods and procedures for preparing clinical development plans to perform clinical studies,” “methods and procedures in the design, performance, and data analysis of clinical studies,” “methods and procedures for data management and analysis,” and “database design, computer software, and procedures for implementing a database to manage and recruit volunteers for various clinical studies”
•  “data on the environment in the stratosphere” and “data on the propagation of radio signals from stratospheric balloon-based transceivers”
•  “network design and plans; its customer lists; customer pricing and financial information; marketing strategies; existing projects and proposals; and research and development strategies and related material”

Discerning the line between providing too much information in a trade secrets identification (and therefore potentially publicly revealing some of the proprietary information) and disclosing too little information (thereby risking dismissal or the need to amend a trade secrets disclosure) is more art than science. Perhaps a court could have reasonably deemed some of HLI’s descriptions of trade secrets sufficiently particular, especially if they had been shorn of excess language and generalities. However, case law regarding identification of trade secrets suggests some rules of thumb that are useful in crafting an effective trade secrets disclosure:

1.  As many courts have found, it is best to avoid hedging language (e.g., “such as” or “including but not limited to”). These phrases add nothing to a trade secrets disclosure; conversely, they convey to a court that the plaintiff lacks certainty or confidence in the precise delineation of trade secrets.

2.  Descriptions of trade secrets should be as reasonably specific as possible to the particular industry or problem being solved by the technology or method.

3.  Identifications that suggest that the plaintiff is attempting to capture standard documents or data that are generic to any business and have no intrinsic value derived from being kept confidential should be avoided.

4.  Identification of a device (such as a laptop) without more is not, as a matter of law, sufficient to describe a trade secret.

5.  Any description that identifies or suggests why the particular data, document, method, etc., is valuable to the particular plaintiff is preferable to a description that lacks any such information.

6.  Just as in a trial it is preferable to focus on the strongest claims, theories, and facts, and to excise unnecessary, weak, or dubious claims, theories, and facts, with respect to trade secrets identifications, it is preferable to focus on the smallest possible number of sufficiently detailed, unassailable descriptions of trade secrets.

Insufficient identification of trade secrets is not normally a grounds to dismiss a complaint with prejudice, and in this particular case the court left for a later date whether HLI will be permitted to amend its complaint. However, even if an insufficient identification of trade secrets is not fatal, a plaintiff is better off avoiding the delay and expense of having to amend a complaint—and that can often be achieved by using extra care in fashioning a disclosure of trade secrets.