Although many may be asserted, quite often far less warrant protection
Although many may be asserted, quite often far less warrant protection

The question is whether it is possible to get a court to enter partial summary judgment before trial on some but not all of the trade secrets that the defendant is accused of stealing.

As discussed in the Sept 28 post, the answer is that this may not be possible if the lawsuit is filed in California state court.

But if the trade secret lawsuit is filed in federal court, the answer is yes.  In federal court, it is easier to weed out before trial alleged trade secrets that do not satisfy the legal requirements for protection.

Why should we care?  For each allegedly misappropriated trade secret that is allowed to be argued at trial, the costs incurred in either proving up or rebutting the claim run in the tens if not the hundreds of thousands of dollars spent on attorneys, experts and discovery, not to mention the significant time the court and the jury must devote to determining liability on each such claim.  In other words, the potential savings of time and money to all concerned (court, jurors, and parties) from taking fewer trade secrets to trial are huge. Also, settlement before trial is much more likely if the parties know in advance which trade secret claims will or will not be tried.

Rule 56 of the Federal Rules of Civil Procedure provides in pertinent part that a party may move for partial summary judgment on not just a claim but also a “part of each claim.”  Thus, by its express terms, the federal summary judgment standard allows split summary judgment decisions when multiple concepts and technologies are alleged under one trade secret misappropriation cause of action.  In contrast, as previously discussed, California summary judgment procedure does not allow a split decision on some but not all parts of a single cause of action.

A trade secret misappropriation claim can be brought in federal court under the new Defend Trade Secrets Act (DTSA), which creates a private cause of action under federal law for theft of trade secrets used in interstate or foreign commerce.   In other words, a federal court hearing a DTSA claim has subject matter jurisdiction based on a federal question and the substantive law at issue is a federal statute.  Under the circumstances, Rule 56 provides the governing summary judgment procedure – it allows entry of partial summary judgment on some but not all of the alleged trade secrets encompassed in a DTSA cause of action.

But what about federal lawsuits brought under California substantive trade secret law (California Uniform Trade Secrets Act, Civ. Code, § 3426 et seq.)?  In these cases, the federal court has subject matter jurisdiction based on diversity of citizenship or based on the doctrine of pendant state claims (lawsuit also pleads federal claims and the federal and state claims arise out of the same nucleus of facts)?  Under these circumstances, is summary judgment governed by California or Rule 56 of the Federal Rules of Civil Procedure?

The answer is that a federal court hearing a trade secret claim based on state substantive law will apply the Rule 56 summary judgment standard.

There are a number of reported federal decisions entering partial summary judgment under Rule 56 on specific trade secrets alleged in a single trade secret misappropriation cause of action.  Pixion Inc., v. PlaceWare, Inc. 421 F. Supp. 2d 1233, 1246 (N.D. Cal. 2005) (Plaintiff alleged six categories of trade secrets and various subsets of information within each of the six categories in one cause of action for misappropriation. Applying California law, the Court partially granted defendant’s motion for summary judgment with respect to information in trade secret categories 1, 3, 5 and 6, but denied summary judgment with respect to subcategories of information within categories 2 and 4); Rita Medical Systems, Inc. v. Resect Medical, Inc., 2007 WL 161049 at 5 (N.D. Cal. 2007) (Plaintiff alleged trade secret misappropriation of three different concepts in same cause of action.  The Court previously granted partial summary judgment as to two of the alleged trade secret concepts, and in the cited decision granted summary judgment as to the remaining concept); Callaway Golf Company v. Dunlop, 318 F. Supp. 2d 205, 216 (D. Del., 2004) (Applying California law, Court granted defendant’s partial summary judgment of only 1 concept alleged by plaintiff as a trade secret, and did not adjudicate merits of other trade secret concepts also alleged by plaintiff in same cause of action); Convolve Inc., v. Compaq Computer, 2006 WL 839022 at 9-10, (S.D.N.Y. 2006) (Applying California law, Court rejected plaintiff’s objection that Court had no authority to hear partial summary judgment of just a subset of alleged trade secrets).

There also is strong precedent that federal courts sitting with diversity jurisdiction apply Rule 56 in ruling on motions for summary judgment on state law causes of action.  Cuprite Mine Partners LLC v. Anderson, 809 F.3d 548, 555 (9th Cir. 2015); see also Granite State Ins. Co. v. Smart Modular Technologies, Inc., 1992 U.S. Dist. LEXIS 14638 (N.D. Cal. Sept. 1, 1992) (“The legal standard for summary judgment is a procedural issue and therefore derives from federal law.”); Schneider v. Leggett & Platt, Inc., 1992 U.S. Dist. LEXIS 10587 (N.D. Cal. July 1, 1992) (rejecting argument that federal court must apply the standard for summary judgment under California law).

The greater ability to obtain split summary judgment decisions among trade secrets is material difference between having a trade secret claim heard in federal court as opposed to California state court.