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Volume XI, Number 267

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Trade Secret Litigants Take Note: California District Court Provides Guidance on Obtaining a Preliminary Injunction and Expedited Discovery

In trade secrets litigation, it is often critical to expeditiously obtain protection from further disclosure or continued misappropriation of the trade secret at issue through a motion for preliminary injunction.  Courts are quick to point out, however, that preliminary injunctions are “an extraordinary and drastic remedy,” and are only to be granted if the movant, “by a clear showing, carries the burden of persuasion” as to each element of the preliminary injunction test.  Lopez v. Brewer, 680 F.3d 1068, 1072 (9th Cir. 2012) (observing that to obtain preliminary injunctive relief, a plaintiff must generally demonstrate that: “1) he is likely to succeed on the merits of such a claim; 2) he is likely to suffer irreparable harm in the absence of preliminary relief; 3) the balance of equities tips in his favor; and 4) that an injunction is in the public interest.”).

Generally, a plaintiff can increase the likelihood of success on a motion for preliminary injunction by ensuring that its complaint describes the trade secret(s) at issue with particularity and contains detailed factual allegations regarding the nature and mode of misappropriation.  It is often advisable for a plaintiff to also petition the court for authorization to conduct early discovery to further understand the suspected trade secret theft, which may further buttress plaintiff’s position that it is “likely to succeed on the merits” of its claim and  likely to suffer “irreparable harm” without an injunction at the outset of the case.  In federal court, expedited discovery may be authorized under Federal Rules of Civil Procedure, Rule 26(d)(2), for good cause, and “for the parties’ and witnesses’ convenience and in the interests of justice.” Philips N.A. LLC v. Advanced Imaging Servs., et al., Case No. 2:21-cv-00876 JAM AC, 2021 WL 2593291, at *2 (E.D. Cal. June 24, 2021).

The recent decision in Philips provides valuable insight for clients and practitioners alike with respect to how to successfully make a request for expedited discovery to support a motion for preliminary injunction in the context of trade secret litigation.  In that case, Philips alleged that Advanced Imaging Services (“AIP”) – a medical device equipment company that services Philips medical imaging devices – had fraudulently obtained access to Philips’s internal computer network and misappropriated trade secrets incorporated into Philips’ copyright-protected service and diagnostic software on its medical imaging devices.”  2021 WL 2593291 at *1.  Philips filed a motion for preliminary injunction the day after it filed its complaint, along with a request for expedited discovery to support its motion for equitable relief.  Id.  In response, AIP argued that expedited discovery was inappropriate because Philips had been aware of the alleged theft “for more than a year before filing its complaint,” had failed to identify its trade secrets with the particularity required under California Code of Civil Procedure section 2019.210 (“Section 2019.210”), and because the requested discovery was overbroad.  Philips, 2021 WL 2593291 at *4.

The court rejected AIP’s arguments, and found that Philips had demonstrated good cause to conduct its requested expedited discovery.  Particularly instructive was the reasoning behind the court’s rejection of AIP’s overbreadth argument: the court noted that Philips had sufficiently identified in its filings “how each interrogatory and each request for production related to the pending motion [for preliminary injunction],” thus satisfying its burden to show how each of those requests were “appropriate for early discovery” and would “aid the court in resolving the preliminary injunction motion.”  Id. at *5.  Also notable was the court’s rejection of AIP’s “timeliness” argument; the court found that the length of time Philips allegedly knew of the misappropriation was immaterial in light of Philips’s claim of ongoing abuse.  Id.  Finally, the court dispensed with AIP’s argument under Section 2019.210, as the grounds for Philips’s motion for preliminary injunction did not rest solely on the trade secret causes of action.  Id.

Philips thus offers important guidance to help tip the scales in favor of a motion for expedited discovery intended to support a pending motion for preliminary injunction.  At the outset, clients should be prepared to work closely with their litigation counsel to not only to draft a fact-intensive complaint, but also to draft and hone tailored discovery requests that target documents and information that directly relate to counsel’s need to show a “likelihood of success” on the merits, as well as the risk of “irreparable harm” if the injunction is refused.  Relatedly, clients should always work with counsel to identify the trade secret that has been allegedly misappropriated as concretely as possible under the circumstances in the complaint, to minimize the risk of being stymied in discovery (e.g., Section 2019.210), and to enable counsel to tailor discovery requests tethered to the specific trade secret(s) at issue in the case.  Finally, Philips demonstrates the importance of highlighting the ongoing nature of the defendant’s trade secret misconduct when moving for expedited discovery, so as to support the need for both discovery and for injunctive relief itself.

Philips makes clear the importance of joint counsel/client collaboration in the pre-complaint stage of a trade secrets dispute, so that the flurry of motions that often need to be filed in the early stage of litigation are well-integrated and primed for success.

 

Copyright © 2021, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XI, Number 208
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About this Author

Associate

Patrick McGill is an associate in the intellectual Property Practice Group in the firm's San Diego (Del Mar) office.

858-720-7407
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