Trade secret law and the changing role of judge and jury.

• Author: Lipton, Bradley

Two recent Supreme Court decisions, Bell Atlantic Corp. v. Twombly (1) and Ashcroft v. Iqbal, (2) appear to have changed substantially the standard by which courts review motions to dismiss at the pleadings stage. In these two decisions, the Supreme Court has emphasized that judges should scrutinize pleadings thoroughly to weed out plaintiffs bringing unmeritorious suits. Although this revised standard was set forth in Twombly, the 2009 Iqbal decision was probably more significant. Since Twombly involved the relatively complex and specialized field of antitrust, it was initially unclear whether the Court intended to extend its holding elsewhere. Iqbal answered that question, confirming that the Court intends the new standard to apply to litigation in other areas. (3) Judges, in other words, have been put on notice to be more aggressive about throwing out claims of all types at the pleadings stage.

Although Iqbal settled that issue, it left others in its wake. One particularly important question is whether the Court's new attitude about motions to dismiss holds significance beyond the pleadings stage. Read broadly, the Court's recent decisions indicate a changing attitude about the allocation of authority between judge and jury. The Court has not addressed whether this changing judicial role should be limited to the pleadings stage. In Twombly and Iqbal, the Court indicated that judges should dismiss more cases at the earliest stages of trial. A reasonable extension of this view would be that judges should also be more aggressive about dismissing unmeritorious claims as litigation progresses.

If judges are going to be more critical of unmeritorious plaintiffs, then this Comment suggests that the law governing intellectual property--specifically that of trade secrets--would be a good place to start. While the Supreme Court has made no recent statements regarding summary judgment and trade secret law, the circuit courts generally have held that judges should be quite hesitant to dismiss plaintiffs' trade secret claims at the summary judgment stage. This attitude has contributed to costly litigation that is open to abuse by unmeritorious litigants. Since concern about the costliness of unmeritorious suits has been the primary motivating factor for the Court's recent shift, (4) trade secret doctrine is especially in tension with the current Court's views on the role of the judge. This Comment thus argues that judges in trade secret cases should be more willing to dismiss claims than in the past.

The Supreme Court's recent rulings regarding intellectual property suggest that the Court is, generally speaking, interested in the allocation of authority at the summary judgment stage in this area of law. Furthermore, abusive litigation in intellectual property is particularly troublesome, allowing wealthy holders of property to deter less wealthy individuals with the mere threat of litigation.

1. THE STANDARD FOR SUMMARY JUDGMENT IN TRADE SECRET LAW

   Trade secret law has been acknowledged by both commentators and courts as extraordinarily important to the modern American economy. (5) The doctrine protects against the misuse of confidential business or technical information by unfair or unreasonable means. (6) The doctrine is implicated when confidential information is misappropriated by means of theft or a breach of a duty of confidentiality. When an owner of information successfully brings suit for a violation of trade secret law against those who use the information improperly, courts award the owner damages and/or injunctions against future use or disclosure. (7) In order to qualify for this protection, however, the trade secret owner must show that it possesses valuable information and has taken reasonable steps to maintain the confidentiality of the secret.

   In practice, trade secret claims are considered particularly onerous for litigants, because the inquiry is especially fact-intensive. This fact-intensiveness is true of intellectual property cases generally, as the matters being litigated tend to be complex and technical. (8) As a result, it is notoriously hard for defendants to have intellectual property cases resolved at the summary judgment stage, as such cases almost always present at least an arguable issue of material fact after discovery. (9)

   The nature of the inquiry in trade secret law also makes such claims particularly difficult for the defense. In most jurisdictions, whether information qualifies as a trade secret is determined by a multipronged, factually intensive test. (10) Furthermore, to demonstrate that their use of the information was legally appropriate, defendants typically must make a showing not about their own behavior, but about the other party's failure to take reasonable steps to protect the trade secret. (11) The standard of "reasonableness" is especially contingent on facts because the judgment as to whether additional precautions would have been so costly as to be unreasonable will vary according to the value of the secret being protected. (12) If judges are reluctant to exercise their own judgment at the summary judgment stage, then there will often be a factual dispute sufficient to warrant a trial.

   In light of this fact-based inquiry, judges have set an especially high bar for summary judgment in trade secret cases. The textbook citation for the standard comes from Judge Posner in Rockwell Graphic Systems, Inc. v. DEV Industries, Inc. (13) Rockwell Graphics, a manufacturer of printing press parts, filed suit against competitor DEV, alleging that the defendant could only have produced similar parts with Rockwell's diagrams detailing the method of manufacture, a trade secret. (14) DEV countered with evidence that Rockwell had routinely supplied copies of manufacturing diagrams to subcontractors and had made little effort to get these copies back or to limit further copying, undermining Rockwell's claim that it took reasonable precautions to keep the...