Trade Secret Sparks Beer Brawl in the Ninth Circuit: When is Your Word Enough?

On September 13, the Ninth Circuit heard oral arguments on an issue of first impression in Anheuser-Busch Cos. v. James Clark, No. 17-15591 (9th Cir. 2015).

Anheuser-Busch filed a complaint in the Eastern District of California against former employee James Clark, alleging that he violated California’s Uniform Trade Secrets Act (CUTSA) by unlawfully disseminating a document containing its beer recipe for use in a separate class action suit. To support its allegations, the company submitted a declaration stating that the leaked document contained “confidential information related to Plaintiffs’ brewing processes, including but not limited to, information regarding a variety of analytical characteristics for each of [Plaintiffs’] products.”

James Clark moved to toss Anheuser-Busch’s allegations under California’s Anti-SLAPP statute, arguing that Anheuser-Busch failed to submit any admissible evidence showing a reasonable probability that it will prevail on its claims as the statute requires. Specifically, Mr. Clark argued that the declaration could not be used to show the existence of a trade secret because it was inadmissible hearsay and did not identify the trade secrets with “reasonable particularity” as required by the CUTSA. Mr. Clark also argued that Plaintiffs had not made reasonable efforts to maintain the document’s confidentiality because it was posted on bulletin boards throughout the company’s facility where visitors could easily view it. The District Court disagreed, finding that Mr. Clark had failed to point to any authority that a declaration was impermissible to prove trade secrets, and that it was not the court’s job to weigh evidence of confidentiality at such an early stage.

Mr. Clark appealed to the Ninth Circuit Court of Appeals, arguing that Anheuser-Busch cannot rely on the declaration, but must submit the sealed document in question to the Court to establish the trade secret. During oral arguments, the Ninth Circuit Justices questioned why admitting a declaration in this case would be different than the Federal Rules of Evidence hearsay exception allowing a custodian to testify to a document kept in the ordinary course of business. Mr. Clark argued that such an exception does not permit the custodian to testify as to the contents of the documents. The Justices then questioned whether the Anti-SLAPP statute requires Anheuser-Busch to prove the contents of the trade secrets rather than just the existence of the trade secrets at such an early stage. Mr. Clark responded by stressing that to permit the use of the declaration to establish the existence of a trade secret would create a new and large exception to the hearsay rule, effectively undermining the purpose of the rule entirely.

It is unclear when the Court will rule on the underlying issues or what the scope of their opinion will mean for trade secrets litigation moving forward but as always, we will be sure to keep you updated!