Discovery: Keeping Trade Secrets Secret

All litigators need to be familiar with trade-secrets law, since discovery requests often seek ¬†proprietary information. When this happens, you need to protect your clients’ trade secrets in the discovery process. Last week, Florida’s Second District Court of Appeal addressed this issue in Bright House Networks, LLC v. Cassidy, 2014 WL 84237 (Fla. 2d DCA Jan. 10 2014) (opinion linked below). This case offers multiple takeaways for lawyers when your clients are faced with discovery requests calling for production of trade secrets.

In this case, the plaintiffs had a contract with their cable company that entitled them to perpetual free cable. After the defendant, Bright House Networks, purchased the cable company, it terminated the plaintiffs’ ¬†free services. The plaintiffs sued Bright House and won — a court ruled that they were entitled to lifetime free cable. In response, Bright House started issuing 1099s to the the plaintiffs for the free cable’s value. (Aside: cable companies are the worst.) The plaintiffs sued again, arguing that the 1099s violated the previous judgment, and that Bright House does not issue 1099s to other customers receiving free services.

In discovery, the plaintiffs sought information about all customers receiving free services. Bright House objected, arguing that this information was confidential and proprietary. The lower court overruled this objection, leading to this appeal.

The appellate court reversed, noting that

The Florida Evidence Code contains a privilege against the disclosure of trade secrets. . . . When a party objects to the disclosure of a trade secret, first a court must determine whether the requested information is, in fact, a trade secret. . . . Usually this determination requires the trial court to perform an in camera review of the information. . . . Second, if the trial court determines that the information is a trade secret, then the court must determine if the party requesting the information has shown a reasonable necessity for the information. . . . If the court orders disclosure, it must make findings to support its determination. . . . [T]he trial court may need to order safeguards to prevent the unnecessary dissemination of the information.

Here, the trial court never made an in camera review. The appellate court ordered the trial court to conduct this review and, if necessary, conduct a hearing to determine whether Bright House’s customer information is a trade secret.

There are several takeaways from this case. Carefully review all discovery requests to determine whether they call for the production of proprietary information. If so, timely object and be prepared to have the court review the material in camera.

If the court orders production, the company should avail itself of an immediate appeal if possible. In Florida, that is done through a petition for writ of certiorari, which allows interlocutory review of orders compelling discovery where compliance could cause irreparable harm.

Also, here Bright House conceded that it had offered free services to other customers but had not issued 1099s. In this opinion, the appellate court noted that “In determining necessity for the information, the trial court should consider the significance of Bright House’s stipulation.” Bright House knew what the information sought would show, and tried to prevent disclosure by conceding the point. This may prove successful. When faced with the possibility of producing trade secrets, you should balance the risk of disclosure with the effect a concession of the relevant point will have on the litigation.

Bright House Networks LLV v. Cassidy

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