Wednesday, August 23, 2006, 8/23/2006 11:53:00 AM

Trade Secrets, In-House Counsel, and Protective Orders

By Todd
Those of you who have ever been involved in a trade secrets case that proceeded into the discovery phase know that the parties usually negotiate a "protective order" before they exchange their trade secret crown jewels with the other side. Oftentimes these protective orders have a "for attorneys' eyes only" provision where certain documents or data are so secret and competitively sensitive that they are not permitted to be disclosed to the client - just the attorney.

What happens, then, with the in-house attorneys for a company in one of these lawsuits? Do they get to see the trade secret crown jewels or not? Well, it depends on what the protective order said. In a recently reported case this was the exact issue Magistrate Judge Jeffrey Cole of the United States District Court for the Northern District of Illinois needed to address.

The plaintiff in the case is an outfit called Autotech Technologies. The defendant is an outfit called Automationdirect.com. Autotech requested that Automationdirect.com disclose the names of customers and prospective customers who have been sold or solicited to purchase products the defendant received from the plaintiff. The defendant objected and the court directed the parties to negotiate a mutually agreeable "for attorney's eyes only" protective order. That would fix the problem - or at least the court thought so.

Automationdirect.com had a problem with Autotech's two in-house attorneys seeing this information. They reasoned that these two guys were so intertwined in the competitive decisionmaking of Autotech that they were a significant risk of disclosure of Automationdirect.com's secrets. Autotech replied that their in-house attorneys were bound by the same rules as their outside attorneys and that it was necessary for its litigation efforts that its in-house team be able to review the documents and information. So - back to the court they go.

In a well-reasoned decision, Magistrate Judge Cole agreed with the defendant and held that the plaintiff's in-house attorneys should not be able to see the secret and competitively sensitive information. As Judge Cole noted: "The ultimate question is whether there is an unacceptable risk of inadvertent disclosure. If that risk exists, a party may be compelled to obtain outside counsel, regardless of whether in-house counsel was playing a lead or subordinate role in the case. That risk is apparent in this case."

The case can be cited as Autotech Technologies Limited Partnership v. Automationdirect.com, Inc., et al., 2006 WL 2411279 (August 21, 2006 N.D.Ill.).

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