Dancing in Secret: the Ethical Dilemma of Disclosure and Confidentiality in Trade Secret Cases
| Publication year | 2012 |
| Pages | 0024 |
| Citation | Vol. 53 No. 1 Pg. 0024 |
2012 Spring, Pg. 24. DANCING IN SECRET: The Ethical Dilemma of Disclosure and Confidentiality in Trade Secret Cases
Volume 53, No. 1
Spring 2012
"We dance round in a ring and suppose, But the Secret sits in the middle and knows."(fn1)
Disclosure of a client's confidential information can be devastating to both the client and attorney.(fn2) Risks multiply in trade secret cases(fn3) where owners of proprietary information seek to recover for misappropriation of secret material,(fn4) while at the same time needing to protect it from further dissemination.(fn5) Those accused of misappropriation, however, must understand the nature of the proprietary material in order to have any hope of mounting a reasonable defense. At the same time, they are loathe to disclose sensitive information of their own.(fn6) Caught in the middle of these competing priorities are the parties' counsel, who must litigate highly technical (and often emotionally charged) cases without giving away the company "jewels."(fn7) Moreover, counsel must navigate these uncertain waters without violating their ethical duties under the professional conduct rules.(fn8)
The purpose of this article is to alert practitioners to ethical considerations inherent in litigating trade secret cases.(fn9) It will discuss the ethical rules implicated by the disclosure dilemma, and the potential for violating these principles during trade-secret litigation. Finally, the article will outline tools to help the practitioner zealously and ethically litigate the matter while avoiding damage to the client's proprietary interests.
I. ETHICS RULES AND POTENTIAL DANGERS INHERENT IN TRADE SECRET LITIGATION
A. Confidentiality, Privileged Information, and Inadvertent Disclosure
Ethical risks abound in litigation of trade secret cases. Inadvertent disclosure of a client's valuable trade secret or misuse of proprietary information by an opposing party should strike fear in the heart of every trade secret litigator. The risks are particularly high in trade secret litigation, where the time-sensitive nature of the litigation heightens the risk of inadvertent disclosure during discovery.
Protection of a client's proprietary information is grounded in both the ethical rules and rules of evidence.(fn10) The comments to the ABA Model Code note:
The principle of client-lawyer confidentiality is given effect by related bodies of law: the attorney-client privilege, the work product doctrine and the rule of confidentiality established in professional ethics. The attorney-client privilege and work-product doctrine apply in judicial... proceedings. . .The rule of client-lawyer confidentiality applies in situations other than those where evidence is sought from the lawyer through compulsion of law. The confidentiality rule... applies not only to matters communicated in confidence by the client but also to all information relating to the representation, whatever its source.(fn11)
Regardless of origin, however, inadvertent disclosure of a client's trade secrets may have dire economic consequences for a client(fn12) and a devastating effect on the course of litigation.(fn13) Further, inadvertent disclosures, which violate the duties to preserve confidentiality and perform competently(fn14) can lead to a waiver of the attorney-client privilege.(fn15) As the Circuit Court of Appeals noted in Texaco Puerto Rico, Inc. v. Department of Consumer Affairs, 60 F.3d 867 (1st Cir. 1995)," [i]t is apodictic that inadvertent disclosures may work a waiver of the attorney-client privilege."(fn16) Such a waiver can, in turn, have serious professional consequences for the practitioner.
1.) Acts Triggering Waiver
Courts have adopted a myriad of views about the events triggering waiver,(fn17) ranging from the view that the privilege is "never waived," to "strict accountability"(fn18) where "disclosure waives the privilege regardless of the privilege holder's intent or inadvertence."(fn19 )There is also a middle-of-the-road approach, adopting the view that courts must look at the "totality of the circumstances" of the inadvertent disclosure.(fn20) According to this view, a court must "examine (1) the reasonableness of the precautions taken to prevent inadvertent disclosure, (2) the amount of time it took the producing party to recognize its error, (3) the scope of the production, (4) the extent of the inadvertent disclosure, and (5) the overriding interest of fairness and justice."(fn21) As such, "the level of care exercised to prevent disclosure is an important factor.... It seems clear that gross negligence or recklessness can rise to the level of a waiver, while inadvertent disclosure through mere negligence or misfortune may not rise to this level."(fn22) Thus, risks abound as there is deep uncertainty about when inadvertent disclosure results in waiver. Because the test for waiver varies among jurisdictions, courts have ordered vastly different disclosure in factually similar situations.(fn23) Indeed, the New Hampshire federal court has applied both the "strict accountability" approach and the "totality of the circumstances" test, concluding that there was waiver in the former case and no waiver in the latter.(fn24)
2.) Consequences of Waiver
There is also great uncertainty surrounding the scope of the waiver created by inadvertent disclosure. The district court in Gail v. New England Gas Company(fn25) discussed at length the problems with the different approaches. Some courts adhere to the view that "all protection for the inadvertently disclosed information is lost and the party to which disclosure was made ... would be free to use the information ... including disseminating the information to others."(fn26)
Indeed, this draconian approach "may be viewed as extending to other privileged information on the same subject not already disclosed."(fn27) Obviously this loss of privilege would be particularly disastrous, and patently unfair in scope, for parties who pursue litigation seeking to stem economic damage resulting from misappropriation of a trade secret. The court in Gail notes that on the other hand, where the remedy is merely returning the disclosed documents, "[a]s a practical matter, once privileged information has been disclosed, it becomes virtually impossible to 'un-ring the bell' without unfairly penalizing the recipient of the information for the carelessness of the discloser."(fn28) Using a limited waiver approach is also problematic because it ignores "the practical question of whether any remaining vestiges of the privilege can be preserved in a manner that is consistent with the purposes that privilege serves but that does not unfairly penalize the opposing party or require the impossible."(fn29)
3.) Duties Following Receipt of an Inadvertent Disclosure
New Hampshire Rule of Professional Conduct 4.4(b) directly addresses a receiving lawyer's ethical duties where there has been an inadvertent disclosure.
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