Ed. Note: This is the third in a series of articles taken from Gavin Parsons' CLE presentation for the North Carolina Bar Association's Antitrust and Complex Business Dispute CLE Program presented on Thursday, January 30, 2025. Read the first article here and the second here.
When faced with trade secret misappropriation, swift and strategic action is crucial.
For in-house counsel, understanding the litigation process and available remedies can mean the difference between protecting valuable intellectual property and watching it lose its protected status.
This guide focuses on key litigation strategies and the critical role of injunctive relief in trade secret cases.
The Race to the Courthouse
Trade secret cases often begin with a race to secure immediate court intervention.
Unlike other intellectual property disputes that might benefit from lengthy pre-litigation investigation, trade secret cases frequently require immediate action to prevent irreparable harm. The first 48 to 72 hours after discovering potential misappropriation are critical.
Immediate Action Items
Before or contemporaneous with filing suit, in-house counsel should immediately:
- Implement a litigation hold and preserve all relevant evidence
- Engage digital forensics experts (internal or external) to document unauthorized access or downloads
- Review all relevant agreements (NDAs, employment contracts, etc.)
- Document the specific trade secrets at issue and their value
- Gather evidence of protection measures in place
- Consider whether to engage criminal authorities
- Identify key witnesses to provide affidavits supporting injunction filings
- Draft preservation letters to all potential parties and witnesses
Remember, courts will scrutinize your company's response time. Delays in seeking protection can undermine claims of irreparable harm and make obtaining injunctive relief more difficult.
Choosing Your Forum
Trade secret cases generally can be filed in either federal or state court, as the federal Defend Trade Secrets Act (DTSA) does not preempt state law claims. This choice requires careful strategic consideration.
Federal courts may offer advantages in cases involving interstate commerce or international parties, while state courts might provide faster injunctive relief or more favorable precedent.
For cases in North Carolina, the North Carolina Business Court has developed substantial trade secret jurisprudence and can be an attractive venue. It provides some of the features of a federal court, such as a single judge assigned to hear all aspects of the case, expedited discovery, dispute resolution, formal briefing for most substantive motions, along with an overall case management order.
Trade secret cases in state court with amounts in controversy over $5 million must be designated to the Business Court, while those under $5 million may be designated there by either party.
Securing Injunctive Relief
Temporary restraining orders (TROs) and preliminary injunctions are crucial tools in trade secret litigation. However, obtaining them requires careful preparation and specific evidence. Courts typically won't grant injunctive relief based on mere suspicion or generalized allegations of misappropriation.
Elements of a Strong Injunction Motion
Your motion should clearly establish:
- The specific trade secrets at issue
- How the trade secret derives value from being secret
- The reasonable measures taken to maintain secrecy
- Clear evidence of misappropriation
- Threat of immediate and irreparable harm
- Why monetary damages are inadequate
- Balance of hardships favoring an injunction
- Public interest considerations
Most importantly, be specific about what relief you're seeking.
Courts are increasingly rejecting vague injunction requests that simply reference "confidential information" or "trade secrets" without more detail.
Crafting Effective Injunctive Relief
Consider requesting specific provisions such as:
- Orders to isolate and sequester devices containing trade secret information
- Prohibition on accessing or deleting potentially misappropriated information
- Required submission of devices for forensic examination
- Certification of compliance with injunctions by counsel
- Restrictions on specific work activities by former employees that could lead to disclosure
- Prohibition on product distribution incorporating trade secrets
- Requirements for return or destruction of trade secret information
Remember that courts generally do not prohibit a former employee from working for a competitor solely based on a non-disclosure agreement.
Instead, focus on preventing the use of specific trade secrets while allowing the employee to use their general skills and knowledge.
Discovery Strategies
Trade secret litigation demands a sophisticated approach to discovery, particularly given the complex electronic evidence often involved. A critical threshold issue is the pre-discovery identification of trade secrets.
Many courts require plaintiffs to identify their trade secrets with particularity before obtaining discovery of defendants' confidential information. This requirement serves to balance the protection of legitimate trade secrets against the risk of plaintiffs using discovery as a fishing expedition to learn competitors' secrets.
The identification process requires careful consideration of competing interests. You must be specific enough to support your claims and meet court requirements while avoiding public disclosures that could jeopardize trade secret status. Working with outside counsel to obtain entry of an appropriate protective order that allows you to file sensitive information under seal often provides the best solution to this challenge.
The time-sensitive nature of trade secret cases frequently necessitates expedited discovery, particularly in conjunction with temporary restraining orders or preliminary injunction proceedings.
To secure expedited discovery, you must demonstrate why standard discovery timelines would prove inadequate, specifically identify crucial early-stage discovery needs, and explain how the requested discovery relates to preventing irreparable harm. Courts will weigh these factors against the burden expedited discovery would impose on defendants.
When electronic evidence plays a central role, as it often does in trade secret cases, establishing a proper forensic examination protocol becomes essential.
An effective protocol should address the selection and compensation of neutral forensic experts, define the scope of examination, establish procedures for handling privileged and confidential information, and set clear timelines and reporting requirements.
The protocol should anticipate potential disputes and provide mechanisms for their resolution.
Criminal Implications and Parallel Proceedings
The criminal implications of trade secret misappropriation add another layer of complexity to civil litigation strategy.
While potential criminal liability under federal and state law can provide significant leverage, it requires thoughtful handling to avoid ethical pitfalls. Timing of criminal referrals can impact civil discovery and may lead to stays of civil proceedings. Individual defendants may invoke Fifth Amendment protections, complicating both discovery and settlement discussions.
In-house counsel must work closely with outside counsel to navigate these parallel proceedings effectively.
Protective Orders in Trade Secret Cases
Trade secret litigation requires particularly robust protective orders that go beyond standard confidentiality provisions.
Effective orders typically establish multiple tiers of confidentiality, including "attorney's eyes only" designations for the most sensitive information. They should carefully define access restrictions for individual defendants and establish concrete requirements for information storage and transmission.
The order should anticipate the entire lifecycle of confidential information, from initial disclosure through post-litigation destruction or return.
The Role of Expert Witnesses
Expert testimony plays a pivotal role in trade secret litigation, with three types of experts proving particularly valuable.
Digital forensics experts provide analysis of electronic evidence and documentation of misappropriation patterns. Their work often proves decisive in preliminary injunction proceedings and shapes the overall trajectory of the case.
Damages experts help quantify losses and establish both trade secret value and the improper benefit gained by a defendant.
Industry experts provide essential context about technical aspects, the value of information, and help courts value and distinguish between protected trade secrets and general industry knowledge.
The timing of expert engagement can significantly impact case outcomes. Early involvement of experts, particularly forensic specialists, often proves crucial in preliminary injunction proceedings and shapes the development of the overall case strategy.
These experts can help identify key evidence, develop preservation protocols, and guide discovery requests.
Looking Ahead
The complexity of trade secret litigation demands a balanced approach that combines urgency with strategic planning. While immediate action remains critical, hasty or poorly planned litigation can prove counterproductive.
Success requires gathering key evidence and developing a coherent strategy while moving quickly enough to prevent irreparable harm and preserve available remedies.
In our next article, we'll explore damages theories and strategies for maximizing recovery in trade secret cases, focusing on how to build and present compelling evidence of both actual losses and unjust enrichment.
