PRACTICE TIP: Seeking Summary Judgment in Trade Secrets Cases
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.