BRIGHT IDEAS: Trade Secrets, Law and Practice

quinto_trade_secrets.jpgAs the second book in the Bright Idea series we have Trade Secrets, Law and Practice (Oxford University Press). David Quinto and Stuart Singer are the authors. David is a founding partner and head of internet litigation at Quinn Emanuel Urquhart Oliver & Hedges in Los Angeles, CA. Stuart Singer is a partner at Boies, Schiller & Flexner, LLP. I know David from my time at Quinn Emanuel and from our work together on The Law of Internet Disputes (Aspen).

The case that spurred David to write Trade Secrets was in its early stages when I was at the firm. Now, more than ten years later, the book is out. It has drawn priase from Jim Pooley (the author of one of the most useful treatises on trade secret law), Lance Liebman (a former Columbia Law School dean who now heads the American Law Institute), and Martha Barnett (a former ABA president). So here is David explaining what drove him to explore the way trade secrets operate and the journey involved in writing the book. With that, here’s David.

DAVID QUINTO:

Trade Secrets: Law and Practice has been a long time in the making. Almost ten years ago, I got involved in a knock-down, drag-out trade secrets dispute between my client, Avery Dennison, and 3M. Avery had innocently hired three of 3M’s R&D people: one contacted Avery seeking a job in Los Angeles because his fiancée had moved there and his 3M job had just been terminated; a second wanted to re-locate to Los Angeles to be near family and landed at Avery after a head hunter sent his resume there; and the third decided to move to California after he was transferred by 3M to a facility more than an hour’s drive from his home. The three employees had worked for 3M in upstate New York, Minnesota, and Canada. Significantly, none had worked on any product competitive with anything Avery manufactured. In Los Angeles, Avery did not see any particular problem. From 3M’s viewpoint in St. Paul, however, matters appeared more ominous. 3M and Avery competed in many areas and not only had Avery hired three R&D employees in quick succession, but all three were intimately familiar with technologies that could potentially be useful in manufacturing Avery’s products.

The litigation lasted several years. In the process, the parties conducted exhaustive discovery. Among our surprises were the discovery that 3M’s crown jewel trade secret had been patented (and, hence, wasn’t a trade secret at all) and that another claimed trade secret had been surreptitiously published by 3M as a hedge against the possibility that a competitor might independently discover it and attempt to patent it. At the end, there was no evidence of any use of any 3M information by Avery. However, by the time the parties entered into a confidential settlement following a three-day mediation, 3M had spent more than $30 million in attorneys’ fees leaving no stone unturned. Avery’s fees were substantially less, but were nonetheless substantial.

I was assisted in the litigation by my then-partner, Warrington Parker. On cold Minnesota nights, we thought about what the parties might have done differently to avoid incurring enormous legal fees fighting over nothing. We thought about how to prove a negative, that no information had been misappropriated. And we war-gamed the possible injunctive moves the parties could make given that the employees were all subject to non-compete agreements and given that California adamantly refuses to enforce such agreements. Could the employees be sued elsewhere? Could Avery be sued for inducing breach of contract? What would the Full Faith and Credit clause of the Constitution require with respect to enforcing in California a judgment entered elsewhere? What could be done to preempt a claim brought in another state?

After the suit was over, I continued think about problems unique to trade secrets litigation. For example, a number of states reject the doctrine of “inevitable disclosure” as a basis to award injunctive relief, but almost every state has a statute allowing a “threatened” misappropriation to be enjoined. What’s the difference? Will a “threatened” misappropriation justify the issuance of a permanent injunction, or merely a preliminary injunction? Is different injunctive relief available if a misappropriation is “inevitable” as opposed to “threatened”? Do the states that enjoin “inevitable” disclosures always do so, or only when a non-compete agreement is involved? How can a defendant find an expert to opine that something is not a trade secret when no competitor will disclose its manufacturing process? Which states will require a trade secret plaintiff to identify its trade secrets with reasonable particularity before commencing discovery? Is a state law requirement that the plaintiff identify its trade secrets before commencing discovery enforceable in federal court? Do different states follow different rules in determining whether and when ancillary claims will be preempted by a trade secret misappropriation claim? When might such claims be preempted even if no trade secret misappropriation is alleged? What defenses are unique to trade secret litigations and how are they established?

I believed that a book exploring the ins-and-outs of trade secret litigation on a state-by-state basis, written from each the plaintiff’s and the defendant’s perspective, would be useful. I also thought it would be useful to consider what measures could have been undertaken to prevent the misunderstandings that led to the 3M v. Avery litigation, the steps that a trade secret owner could take to investigate and prepare for a possible claim, how to protect trade secrets at trial, and when it makes sense to seek criminal prosecution of a trade secret thief. Eventually I submitted a book proposal to Oxford University Press, which circulated it for peer review. One of the reviews, shared with me anonymously, appeared to have been written by a law school friend, Stuart Singer. Stuart served as president of the Harvard Law Review, was asked to clerk for the U.S. Supreme Court immediately upon graduation, and is now a partner of David Boies at the Boies, Schiller & Flexner firm. I put it to him: if you’re so enthusiastic about the idea, why don’t you help me write the book? I’m enormously grateful that he agreed to do so.

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