Overcoming Objections Based on Trade Secret and Proprietary Information – Attacking Defense Confidentiality or Protective Orders Part Two

In the last part, we discussed how to make the defense meet its burden. In this part, we take a look at how to overcome proposed Confidentiality/Protective Orders based upon defense claims/objections of “trade secret” or “proprietary information.”  The term “proprietary” that is often used by the defense to describe the materials it seeks to protect cannot be found under O.C.G.A. §9-11-26(c)(7) (the statute that sets forth the standard for obtaining a protective order), and thus being “proprietary” does not appear to be a valid basis for requesting a protective order pursuant to O.C.G.A. §9-11-26(c).

What is proprietary information?

Merriam-Webster Dictionary (2019) defines “proprietary” as “something that is used, produced, or marketed under exclusive legal right of the inventor or maker”. The Merriam-Webster  definition of “proprietary” is thus similar to the definition of a “trade secret” under Georgia law, which is both specifically referenced in O.C.G.A. §9-11-26(c)(7) and defined in O.C.G.A. §10-1-761 as:

[I]nformation, without regard to form, including, but not limited to technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, or a list of actual or potential customers or suppliers which is not commonly known by or available to the public and which information:

(A)      Derives 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.

Therefore, in order for materials to constitute a “proprietary” “trade secret” that can properly be the subject of a protective order under O.C.G.A. §9-11-26(c)(7), the defense must first carry their burden to demonstrate through sworn facts and evidence that the materials it seeks to protect meet this definition of a “trade secret” under O.C.G.A. §10-1-761. In other words, the defense must prove through facts and evidence that these materials/documents give the defendant a competitive market advantage by virtue of being kept confidential by the defendant.

What is not proprietary?

Policies, procedures and training materials almost never meet the definition of “trade secrets”. Where some series of actions or a process that is allegedly “confidential” can be gleaned by third parties through simply observing the actions or process, such  actions and process are not “confidential” under Georgia law. Allen v. Hub Cap Heaven, 225 Ga. App. 533, 535, (1997); Capital Asset Research Corp. v. Finnegan, 160 F.3d 683, 688 (11th Cir. 1998) (holding where the vast bulk of the information a party uses in its process is available to the public or the method utilized by the party is the same basic method that would be used by any sufficiently informed and experienced person or entity, compilations of information in the form of the party’s “guidelines” are not “unique combination[s], afford[ing their possessor] a competitive advantage.”); Taylor Freezer Sales Co. v. Sweden Freezer Eastern Corp., 224 Ga. 160 (1968).

Even where a process is so closely guarded that employees are forced to sign confidentiality agreements, the process is not always a trade secret. Equifax Servs., Inc. v. Examination Mgmt. Servs., 216 Ga. App. 35, 39-40 (1994).

Be sure to request copies of all confidentiality agreements and/or non-disclosure agreements signed by employees of the defendant in the past 5 years that pertain to the materials the defense is withholding.  This means that if a third person (outside the organization) could observe these employees in their training or in their day-to-day activities, the policies, procedures and training are by definition not confidential.

Restrictions on discovery

When called upon to rule on a motion for protective order to protect purportedly confidential and proprietary trade secret information and materials, federal courts interpret “good cause” under Federal Rule 26(c) to require the movant to show facts demonstrating the materials are both confidential and that disclosure will create a competitive disadvantage:

Restrictions on discovery are allowed for “good cause” when disclosure of “a trade secret or other confidential research, development or commercial information” is involved. Fed.R.Civ.P. 26(c)(7). The court interprets “good cause” in the context of Rule 26(c)(7) to mean that the party seeking the protective order must demonstrate that the material sought to be protected is confidential and that disclosure will create a competitive disadvantage for the party.

Examples in previous cases

Parsons v. General Motors Corp., 85 F.R.D. 724, 726 (N.D. Ga. 1980); see also Grundberg v. Upjohn Company, 137 F.R.D. 372, 395 (D. Utah 1991) (holding confidential information is information which if disclosed, will cause a clearly defined, serious injury to the defendant’s business, holding protective order was properly denied where defendant did not demonstrate that it would suffer a particularized harm, failed to establish or quantify commercial worth or sale value, and what was presented in that respect was speculative).

Waelde v. Merck Sharp and Dohme, 94 F.R.D. 27, 28 (E.D. Mich. 1981) (holding to obtain a protective order, the movant must show 1) that the material is a trade secret or other confidential information and 2) that disclosure would “work a clearly defined and very serious injury”, a “great competitive disadvantage and irreparable harm”, holding vague and conclusory allegations of confidentiality and competitive harm are insufficient and holding the movant must make “a particularized showing that the information sought is confidential” and come forth with “specific examples” of competitive harm).

U.S. v. Hooker Chemicals and Plastics Corp., 90 F.R.D. 421 (W.D. N.Y. 1981) (holding where a corporation moving for protective order had alleged in conclusory fashion that it would suffer certain injuries by requested discovery, but no specific instances were cited where trade secrets would be disclosed or where corporation would be put at competitive disadvantage, court could not evaluate such claims of particularized need, and protective order could not issue).

Particularized harm

If a federal court finds that particularized harm will result from disclosure of information to the public, then it balances the public and private interests to determine whether a protective order is necessary. Rivera v. NIBCO, Inc., 364 F.3d 1057 (9th Cir. 2004); General Dynamics Corp. v. Selb Manufacturing Corp., 481 F.2d 1204, 1212 (8th Cir. 1973), Cert. denied, 414 U.S. 1162 (1974) (holding such determination must also include a consideration of relative hardship to nonmoving party should the protective order be granted).

If you can show the policies, procedures or materials are generally known or readily ascertainable by a third-party observer through proper means, they do not meet the definition of a trade secret. Do all companies competing in this market have the same or similar policies, procedures or materials? Force the defense to show specifically what, if anything, the defendant has done to protect the alleged confidentiality of the information or materials. Do employees have to return all policies, procedures and training materials when they leave the company? Is that policy enforced? Have they sued former employees for a failure to do so? What documents prove that? Have all employees signed non-disclosure agreements? If so, what’s the scope?

Conclusion

In and of itself, the failure of a party defendant to take reasonable measures to protect purportedly “confidential and proprietary information” from disclosure to third parties (outside of any efforts its lawyers might undertake to obtain confidentiality orders where adverse incidents result in litigation) is fatal to its claim of “confidentiality”. Infrasource Inc. v. Hahn Yalena Corp., 272 Ga. App. 703 (2005).

This is another significant and distinct burden placed on the defense when they ask the court to enter a protective order on the grounds that the information and materials are “proprietary” or “trade secrets” of the defendant. With some strategic discovery requests and perhaps 30(b)(6) depositions on these issues, you can likely fatally undermine the defense’s claims of “trade secret” protection and defeat their motion for a protective order.

The attorneys at Rafi Law Firm have extensive experience in handling all types of cases, including referrals from other attorneys. We have a proven history of obtaining substantial recoveries for those injured. To speak with someone at our firm, call 404-800-1156 to discuss your case today.

2021-12-20T15:31:03-05:00