Alleging the Existence of a Trade Secret in a Misappropriation Case

In analyzing whether to grant the motion to dismiss, the court is faced with some fundamental questions: How much detail does it take to allege a trade secret under federal pleadings standards? Can the alleged trade secret be described generally in the complaint? Or must it be described in detail, so as to give the defendant notice of what exactly is at stake in the case? Courts are often inconsistent in the answers, and many decisions across the federal districts are in conflict. This article analyzes the various considerations that inform a court's viewpoint on the issue; ultimately, one of these viewpoints tends to make its way to the final written opinion. Lawyers who litigate trade secret cases should be well-aware of these considerations.

Start with the Rules: FRCP 8

The starting place for understanding what this article calls the trade secret pleadings “detail dilemma” are the Federal Rules of Civil Procedure. Rule 8 merely requires “a short and plain statement of the claim showing the pleader is entitled to relief.” Under the pleadings standard set forth by the United States Supreme Court in Ashcroft v. Iqbal, a complaint “must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. 662, 678 (2009). Under the Iqbal standard, a mere conclusion as to a trade secret does not suffice for “sufficient factual matter”; a plaintiff cannot merely allege that it “has a trade secret” that “is valuable” and was ultimately “stolen.” But, how much more factual detail is required?

The Language of the DTSA and Inconsistent Judicial Approaches

In order to answer this question, one must understand the DTSA's language. The DTSA defines a “trade secret” as “all forms and types” of “financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes. …” Often, a plaintiff will use these DTSA statutory buzzwords in the Complaint. For example, a plaintiff may allege that its proprietary trade secret consists of “business strategic plans, formulas and procedures regarding its secret customer pricing processes.” This sentence, arguably nonsensical, uses five different DTSA trade secret buzzwords. It is a good example of many complaints that are filed today, where little more than the DTSA statutory catchphrases are listed as “examples” of the plaintiff's trade secrets. Certainly, this is more than a bald conclusion as to the existence of a trade secret, but perhaps not much more. Is it enough to merely allege categories of information as the alleged trade secret?