The Written Description of a Trade Secret

By Dennis Crouch

New Castle Beverage, Inc. v. Spicy Beer Mix, Inc. (California App. Ct. 2014)

New Castle sells a “spice cup” known as the “Micheladas Antojitos.” The Styrofoam cups are factory-dipped in a secret spice blend that is “carefully selected to enhance the flavor of your favorite beer or cocktail .” While an employee of New Castle, Robert Montiel learned the “secrets” behind the spicy-mix-cup and later sold that information to Greg Murkijanian who began to develop a competing product known as Cheveladas. New Castle then sued for trade secret misappropriation under California law and demanded preliminary injunctive relief. (New Castle did not have any patent rights).

The trial court rejected the claim for preliminary relief and here the California appellate court affirms – finding that the trade secret mix was has not been sufficiently described in order to warrant protection.

Unlike patent rights, trade secrets need not be expressly defined on paper prior to the establishment of those rights. Rather, it is enough that a valuable and protectable secret exist. However, the law does typically require trade secret owners to provide some written description of its asserted trade secret at the point of enforcement.

The California Code of Civil Procedure provides that:

Any action alleging the misappropriation of a trade secret under the Uniform Trade Secrets Act, before commencing discovery relating to the trade secret, the party alleging the misappropriation shall identify the trade secret with reasonable particularity subject to any orders that may be appropriate under Section 3426.5 of the Civil Code.

CODE OF CIVIL PROCEDURE SECTION 2019.210. See also, Mark Lemley, The Surprising Virtues of Treating Trade Secrets as IP Rights, 61 Stan. L.Rev. 311 (plaintiff should be required to “clearly define[ ] what [trade secret] it claims to own, rather than (as happens all too often in practice) falling back on vague hand waving”).

Here, the plaintiff only generally alluded to the “process of applying a secret solution to the inner and outer surfaces adjacent the lip of a beverage cup to permit a first mixture of spices to adhere to those surfaces.” According to the courts, that general allusion is insufficient to meet the burden required by California law .

The trial court questioned whether New Castle and Monugian had any trade secrets because of the lack of details in their trade secret designation and their failure to describe their trade secrets with sufficient particularity. The court expressed concern that “what we need is a description with sufficient particularity,” and the court asked, “If I were [to] grant your [requested] preliminary injunction on the record as it stands right now, how would we ever know whether it was violated or not?” On appeal, New Castle and Monugian do not address these concerns by making a well-reasoned argument that their trade secret designation was sufficiently specific to justify an injunction prohibiting use of their claimed trade secret information. New Castle and Monugian assert in their reply brief, without citing to any evidence, that “the sufficiency of the disclosure could have been resolved by simply viewing the device” and that “had the trial court viewed the device, the boundaries of an injunction would have been easier to fashion.” They do not explain, however, how a physical inspection of the device would reveal the precise nature and description of their secrets or guide the court in crafting an appropriate injunction, nor how such an inspection would be relevant to the alleged trade secrets in the spice mixture and blending.

Obviously, without proof of a trade secret, no preliminary injunction could issue.

For those of us coming from the patent field, it easily makes-sense that someone wanting to protect information as a trade secret should be able to at least describe the information to the court in a way that is reasonably precise and complete. That burden is somewhat less than what is placed on patent applicants and is not applied until the point of enforcement. However, an important and unique element of this case is that the written description requirement noted above comes from California Civil Procedure law. It is unique to California law and not generally an aspect of the Uniform Trade Secret Act that has been adopted across the nation. See, Graves & Range, Identification of Trade Secret Claims in Litigation: Solutions for a Ubiquitous Dispute, 5 Nw. J. Tech. & Intell. Prop. 68 (2006).

California is absolutely on the right path here and some courts have caught-on: Engelhard Corp. v. Savin Corp., 505 A.2d 30 (Del.1986), DeRubeis v. Witten Technologies, Inc., 244 F.R.D. 676 (N.D.Ga.2007); Automed Techs., Inc. v. Eller, 160 F .Supp.2d 915 (N.D.Ill.2001); Dura Global Technologies, Inc. v. Magna Donnelly, Corp., 2007 WL 4303294 (E.D.Mich.2007); Del Monte Fresh Produce Co. v. Dole Food Co., Inc., 148 F.Supp.2d 1322 (S.D.Fla.2001); and Ikon Office Solutions v. Konica Minolta Business Solutions, 2009 WL 4429156, *4–*5 (W.D.N.C.2009); and Switch Comm’n Group v. Ballard, 2012 WL 2342929, *5 (D. Nev. June 19, 2012). Judge Cote wrote the following in her 2008 Sit-Up decision:

A corollary requirement of specificity for claimed trade secrets is inferable from this holding: If a particular piece of information, or a formula, is not entitled to trade secret protection because it is “so vague and indefinite” at the time it is divulged, then it cannot be granted protection as a trade secret by a court during litigation if it is “vague and indefinite.” Specificity is required at the moment of divulging so that the party to whom the secret is revealed understands the contours of the secret information and does not inadvertently or purposefully transgress its boundaries. Similarly, specificity is required before the court so that the defendant can defend himself adequately against claims of trade secret misappropriation, and can divine the line between secret and non-secret information, and so that a jury can render a verdict based on a discriminating analysis of the evidence of disclosure and misappropriation.

Sit-Up Ltd. v. IAC/InterActiveCorp., 05 CIV. 9292 (DLC), 2008 WL 463884 (S.D.N.Y. Feb. 20, 2008). See also, Big Vision Private Ltd. v. E.I.DuPont De Nemours & Co., 2014 WL 812820 (S.D.N.Y. Mar. 3, 2014); Triple Tee Golf, Inc. v. Nike, Inc., 485 F.3d 253, 265 (5th Cir.2007); SL Montevideo Tech., Inc. v. Eaton Aerospace, LLC, 491 F.3d 350, 354 (8th Cir.2007) (“[s]imply to assert [that] a trade secret resides in some combination of otherwise known data is not sufficient, as the combination itself must be delineated with some particularity in establishing its trade secret status”).

30 thoughts on “The Written Description of a Trade Secret

  1. I don’t see how you can comply and still keep it secret – or am I missing something?

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  2. Agreed the plaintiff should have had to describe the trade secret. Otherwise, the allegation of theft is a mere tautology – you stole “it” because I say you stole “it”.

    As we know, only the Supreme Court gets to employ empty, undefined tautologies like “abstract”. Legal rigor and intellectual honesty are only for the rest of us schmucks.

    Reply
  3. They do not explain, however, how a physical inspection of the device would reveal the precise nature and description of their secrets

    Funny that – an actual physical item itself is (gasp) not enough. How can a word description in physical terms then even dare serve as a proxy?

    Reply
        1. Something is broken, all right. Pretty sure it’s not my “irony meter.’

          Please keep the laughs coming, Seinfeld.

          Reply
  4. There is the matter of right and wrong here Ned. The Court should not just pay it lip service…

    (see what I did there?, pretty good right?)

    Reply
    1. Les, Imagine that you are the patent counsel the major company and you have an employment form that asks an incoming employee to list on the form excluded intellectual property, property that he already owns, and that he wishes not to be subject to the obligation of disclosure and assignment to the company. Let us say that the form only requires the employee to identify the subject matter by a simple description, which the employment department never checks. Next imagine that such employee incorporates something into one of your products, claims that the subject matter is his separate property based on the form, and demands royalties. Alternatively, let us say that he incorporates subject matter into your products and then files a patent application on it claiming it as his separate invention, and demands you pay royalties. What would you think?

      Well for one, I would think the employee or law firm who design such a form should be instantly fired for being a complete incompetent. What is the central problem here? I can tell you what it is – a lack of written description of what that separate idea is that in any detail.

      You know I was such a patent counsel. I found with my company, and with many other companies that used a particular major firm, that the described employment form to be prevalent among companies here in Silicon Valley. What did I do? Well, I revised the form to limit the exclusion to patent applications filed before the employment date and included a further statement by the employee that anything not listed on the form was deemed to be within his skill and knowledge. I would not accept anything else.

      Reply
  5. Does the accused cup have spices on the lip?

    Yes?

    Did the guy tell the guy that makes the accused cup how to stick the spices on?

    Yes?

    Whats the mystery?

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    1. Les, but 1) was known; and 2) has to be limited to the method and means as any injunction must be so limited.

      I find it remarkable that there are many participating in this forum who do not seem to have any common sense.

      Reply
      1. I a guy sells drugs and makes a pile of money and then invests that pile in a legit business and makes a bigger pile of money, when the DEA catches up with him, do the confiscate only the first pile worth of money or do they take the whole kit and kabutle?

        The starting point was ill gotten. Even if they modified it in someway, that’s still ill gotten gains.

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        1. You missed the point: by failing to plead with specificity, the plaintiff didn’t actually allege theft of a trade secret, so there was no theft of trade secret. The plaintiff vaguely said, “We put spices on the lining of a cup.” That wasn’t a secret, that was known. There may have been a secret in the particular mixture of spices, but the plaintiff didn’t specify that; and there may have been a secret in how the spices were attached to the cup, but that wasn’t specified either. There can’t be theft of a secret if the plaintiff doesn’t explain what the secret is. Duh.

          Reply
          1. similarly as to the Madstad case, there may be merits here, but bad lawyering has prevented those merits from being reached.

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              1. See the linked threads Ned. Note too the manner in which the Madstad decision is written. With a better attorney, the good ship AIA can be sunk. The Congressmen may rue the day that they choose not to include the sever-ability amendment and went the Chaebol route.

              2. Well, anon, I think IPRs are unconstitutional. This is really not part of the first-to-file provisions. Are you sure the whole AIA fails if IPRs are not constitutional?

                What if Congress provides a fix for IPRs — such as providing that they be conducted by an Art. III court?

              3. Ned, Congress contemplated the express ability to inoculate against the while law falling by allowing several-ability of the separate sections and – they explicitly chose otherwise.

                Yes Ned – one section going down sinks the entire law.

                The analogy to the Titanic is apropos.

  6. It is nice you endorse reason and common sense in trade secret law Dennis.

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  7. It sounds like the plaintiff was trying to claim protection for the idea of putting a mixture of spices/flavorings around the inside of the cup, rather than the specific mixture actually used. The former might be novel and non-obvious and therefore patentable (unless the spices are considered natural and then the PTO will make the claims run the new 101 gauntlet) but I agree with DC – why the heck should it be protected as a trade secret? Once you’ve told everyone that you coated in the inside with spices, it’s no longer a secret. What should be deserving of TS protection is the particular mix applied, just like the Colonel’s secret blend in KFC or the secret ingredient in Coke. If there was a particular difficulty in getting the flavorings to stick to the cup and this was overcome in a particular way, that too might be a protectable trade secret, but it seems that here the plaintiff didn’t make it clear if that was what was being alleged. (I also wonder if the flavorings used could be determined via some good analytical chemistry work, which would weaken if not eviscerate the TS protection.)

    Reply
    1. It sounds to me like the plantiff didn’t want to describe how they stick the spices on the cup in a court paper.

      It also sounds to me that even if the accused cup maker is doing it in a different manner, he first paid for a stolen secret and used that as the basis from which to develop his different manner.

      I don’t see why they submitted description is not sufficient.

      Reply
      1. That’s an assumption your making Les, and the Court shouldn’t need to guess, the Plaintiff’s job is to prove their case. Keep in mind that they’re trying to shut down a competitor and maintain a monopoly pricing in the marketplace.

        If the Court doesn’t know what the ‘secret manner’ is, then its hard to say whether the ‘secret manner’ was used to generate the manner being used, or just the idea was taken. And there is no right to the idea itself, as anyone who purchases the product can tell that the spice is stuck on the cup.

        Either there are many ways of doing it, in which case they should establish that the same method is being done, or likely being done, and to do that they need to explain the method. Or, if there is only one way of doing it, they should at least show why the solution is so complicated no one else could achieve it without knowing the secret manner of doing it.

        As to not wanting to tell the super secret method to the court, that’s why you can apply for confidentiality orders.

        Potentially they didn’t want to disclose because the ‘secret method’ of ‘attaching the spices’ isn’t particualrly complicated or hard to figure out. You can attach spices to a cup by spraying or dipping into a liquid sugar or sugar and salt solution, draining out, then dipping into dry spices. Let the water disolve, then shake out spices that don’t stick/will fall out.

        If the real secret is the spice mix, you run into the complication of proving they are using the same spice mix (if you can prove it with testing easily you risk proving that it wasn’t ‘secret’ to begin with as it was discoverable by standard testing).

        Reply

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