The Trade Secrets Dilemma – Sue and Disclose

An interesting article from Thomon Reuters News & Insight on an age-old problem in trade secrets, the fact that bringing suit often requires disclosing the trade secrets.

The article concerns a case in New York state court, MSCI v. Jacob and Axoma. MCSI, a software maker, claimed that its former employee, Jacob, misappropriated trade secrets in its software on behalf of his new employer, Axoma.

The judge overseeing the case made a critical ruling in a discovery dispute requiring the plaintiff to identify “with reasonable particularity” the trade secrets it contends were misappropriated. Only this, the judge ruled would allow the court to distinguish “between the general knowledge in their field and trade secrets.”

An earlier ruling, now changed, had allowed the plaintiff to identify only those portions of its computer source code that were not trade secrets. That, defendants contended, was unfair since it essentially required them to deduce which trade secrets were at issue, possibly from millions of lines of computer source code.

The judge came around to defendants’ point of view:

Plaintiffs who have brought this action, bear the burden of proving their allegations. Merely providing defendants with plaintiffs' "reference library" to establish what portions of their source code are in the public domain shifts the burden to defendants to clarify plaintiffs' claim.

One of the defense lawyers claimed that to do otherwise would be like allowing a person to claim that he had been robbed by a suspect and then walk around the suspect’s apartment to identify what was taken.

Before bringing any trade secrets case, it's always necessary to consider what disclosure may be required and its implications for the business and the trade secrets themselves.