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Discovery of Trade Secrets: How Courts Analyze Disclosure Issues

By Kenneth J. Moran and Steven D. Jansma
February 09, 2004

The first part of this series, published last month, addressed the definition of trade secrets in the context of discovery. As efforts to obtain trade secret information increase, a clear definition of trade secret is vital for the courts to analyze this issue correctly. This second installment addresses that analysis, and the standards and terminology courts apply to decide whether trade secrets should be disclosed, the arguments and evidence that parties resisting this discovery can present to the trial court, and strategies to limit the potential for additional damage if trade secrets are ordered produced.

The Test for Discovery

Federal courts and most states follow the same test. Initially, the party resisting disclosure must demonstrate that the information sought is trade secret. The burden then shifts to the requesting party to prove a “compelling need” for that information. See, e.g., In re Remington Arms Co., 952 F.2d 1029 (8th Cir. 1991); In re Continental General Tire, Inc., 979 S.W.2d 609 (Tex. 1998). While the test appears relatively simple, the standard by which “compelling need” is determined can be elusive. The traditional discovery standard of “relevant to the subject matter” of the litigation is patently insufficient. If mere relevance were enough to require disclosure, the protection afforded trade secrets would be meaningless. In re Continental General Tire, Inc. at 613-614. Rather, courts refer to a somewhat nebulous, heightened burden. Further, courts have also required that the requesting party establish “compelling need” with competent evidence in the form of affidavit, live testimony, or documentary evidence. The argument of counsel does not suffice.

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