Trade Secrets

By: Ted Babbitt
Published February 2015

In almost every products liability case and in many other types of cases, defendants often insist upon a confidentiality order based upon the assertion that each and every document that has been requested constitutes a trade secret.  Very often the plaintiff accedes to the request for such an order for the sake of expediency.  Rarely do the defendants meet their burden of establishing that documents constitute trade secret.  The recent opinion of the Florida Supreme Court in Bainter v. League of Women Voters of Florida, 39 Fla. L. Weekly S689 (Fla. Nov. 13, 2014) highlights the nature of the defendant’s burden.

This case related to the failure to produce documents from a political consulting firm, based on a challenge to the constitutional validity of the Florida Legislature’s 2012 Congressional Redistricting Plan.  The trial court rejected the nonparties’ objection on the basis of an alleged trade secret privilege.  The First District held the matter to be of great public importance requiring immediate resolution by the Supreme Court.  The Supreme Court accepted jurisdiction.

The term trade secret is defined by Fla. Stat. 688.002(4) as

 (4)       “Trade secret” means information, including a
formula, pattern, compilation, program, device,
method, technique, or process that:
(a) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and
(b) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy

Unfortunately, the determination of whether requested documents constitute a trade secret is dependent upon the labor intensive job of a trial court doing an in camera review of all of the disputed documents.  An in camera review is mandated virtually every time the trade secret privilege is raised.  See American Express Travel Related Servs., Inc. v Cruz, 761 So. 2d 1206 at 1210 (Fla. 4th DCA 2000) and Salick Health Care, Inc. v. Spunberg, 722 So. 2d 944, at 947 (Fla. 4th DCA 1998).  The Court quotes from American Express Travel Related Servs., supra, that “The burden is on the party resisting discovery to show ‘good cause’ for protecting or limiting discovery by demonstrating that the information sought is a trade secret or confidential business information and that disclosure may be harmful.”

The burden to depart from normal discovery rules is substantial.   When an order of confidentiality is issued, the trial court must make natural findings supporting its conclusions.  See eg., KPMG LLP v. State Dep’t. of Ins., 833 So. 2d 285, 286 (Fla. 1st DCA 2002).

Lovell Farms, Inc. v. Levy, 641 So. 2d 103 (Fla. 3rd DCA 1994) p. 104 – 105 holds that in order to prove that the documents they are shielding are, in fact, trade secrets, defendants

must establish  . . .
(a) [that] the process is a secret;
(b)the extent to which the information is known outside of the owner’s business;
(c) the extent to which it is known by employees and others involved in the owner’s business;
(d) the extent of measures taken by the owner to guard the secrecy of the information;
(e) the value of the information to the owner and to his competitors;
(f) the amount of effort or money expended by the owner in developing the information, and
(g) the ease or difficulty with which the information could be properly acquired or duplicated by others.

It makes no sense to issue a protective order to prevent a plaintiff from sharing documents with counsel in other litigation.  To the contrary, judicial economy would be served by sharing information among counsel.

See Marcus, Myth and Reality in Protective Order Litigation, 59 Cornell L. Rev. I, 41 (1983);  see also Cipollone v. Liggett Group, Inc., 106 F.R.D. 573 (D.N.J. 1985) at Page 585-586.

The court cannot ignore the might and power of the
tobacco industry and its ability to resist the individual
claims asserted against it and its individual members.
There may be some claimants who do not have the
resources or such able and dedicated counsel as in
this case to pursue the thorough investigation which
these cases require.  To require that each and every
plaintiff go through the identical long and expensive
process would be ludicrous.  Even from the point of
view of the defendants (though they resist), it
would seem that they would benefit by avoiding
repetition of the same discovery in each and
every case.  Cipollone, 106 F.R.D. at 577.

It could also be argued that allowing the public to know when documents show that a product is dangerous promotes safety.  United States v. Hooker Chemicals & Plastics Corp., 90 F.R.D. 421 (W.D.N.Y. 1981).  (The Court “must consider the need for public dissemination, in order to alert other consumers to potential dangers posed by the product”).

In affirming the trial court’s order requiring the production of the documents, the Supreme Court rejected the claim of privilege on the basis of an alleged trade secret.  The Court concluded

We simply do not countenance and will not tolerate actions during litigation that are not forthright and that are designed to delay and obfuscate the discovery process.  As this Court has long stated, full and fair discovery is essential to the truth- finding function of our justice system, and parties and non-parties alike must comply not only with the “technical provisions of the discovery rules,” but also with “the purpose and spirit of those rules in both the criminal and civil context.”  Scipio v. State, 928 So. 2d 1138, 1144 (Fla. 2006) (citing Binger v. King Pest Control, 401 So. 2d 1310, 1314 (Fla. 1981).

This opinion is consistent with the statutory and case law requiring a defendant to show that documents alleged to be trade secrets are, in fact, privileged and that the Court’s in camera inspection supports a deviation from full and open discovery.

NOTE:  BECAUSE A NUMBER OF PEOPLE HAVE REQUESTED COPIES OF PAST ARTICLES, A COMPILATION OF THESE ARTICLES IS NOW AVAILABLE TO MEMBERS OF THE PALM BEACH COUNTY BAR ASSOCIATION, FREE OF CHARGE, BY CALLING (561) 684-2500.