Northern District of California Requires Particularized Identification of Trade Secrets in Breach of Contract Case

California trade secret litigators are familiar with the requirement that plaintiffs alleging trade secret misappropriation must identify the alleged trade secrets with particularity before discovery begins. This requirement, found in the California Uniform Trade Secrets Act (“CUTSA”), states that “[i]n 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.” (Cal. Civ. Code § 2019.210) The U.S. District Court for the Northern District of California recently applied the identification requirement to a case which did not arise under the CUTSA.

In Monolithic Power Systems, Inc. v. Wei Dong, C.A. 20-cv-06752-JSW (LB), Monolithic sued its ex-employees for breach of contract and fraud, claiming that the former employees stole Monolithic's confidential information.  Defendants argued that Monolithic was required to identify the stolen information with particularity prior to commencing discovery; Monolithic responded that the requirement only applies in cases brought under the CUTSA.  On August 26, 2021, Magistrate Judge Laurel Beeler agreed with the defendants and ordered Monolithic to comply with § 2019.210.

In doing so, Magistrate Judge Beeler cited a 2004 opinion in Neothermia Corp. v. Rubicor Med., Inc., by Judge Edward Chen of the N.D. Cal., in which he held that the identification requirement applied in a case alleging breach of a nondisclosure agreement and patent infringement.  Judge Chen found that the identification requirement “applies not only to theft of trade secrets, but also to disclosure of secrets in violation of a nondisclosure agreement.”  Magistrate Judge Beeler also relied on a 2005 opinion by the California Court of Appeal in Advanced Modular Sputtering, Inc. v. Super, Ct., which applied Neothermia in finding that the identification requirement is not “cause of action specific.”

Judge Beeler’s opinion in Monolithic Power provides new ammunition for defendants in non-CUTSA cases alleging the improper use or disclosure of confidential information – such as cases asserting breach of confidentiality obligations in employment contracts or non-disclosure agreements – to argue that the plaintiff must identify the confidential information with particularity prior to commencing discovery.  Monolithic Power also serves as notice to plaintiffs that they cannot avoid the identification requirement simply by asserting non-CUTSA causes of action.

Lawyers in O’Hagan Meyer’s Intellectual Property and Trade Secrets & Restrictive Covenants practice groups will continue to monitor developments in this area.  If you have any questions, please contact Dana Finberg or the O’Hagan Meyer professional who usually handles your matters.