Two Common (and Costly) Mistakes in Trade Secrets Litigation


kkTrade secrets litigation can be expensive, and if you can avoid it by implementing the measures that I’ve previously described here, then you are off to a good start.  But if your trade secrets have been misappropriated and you have no choice but to go to court, here are two important issues that are often not given enough attention until much later into a lawsuit, when it’s, often, too late.

How will your company’s trade secrets be protected during the lawsuit?

Typically, when sensitive information is going to be exchanged by the parties to a lawsuit during litigation, both parties will ask the court to enter, what is called, an “agreed protective order,” which describes how the parties will handle the confidential information that they receive from each other. It also imposes restrictions on how a party in a lawsuit may use the information or with whom it can share it.  Such an order is, basically, a contract between the parties, blessed by the court.

In my experience, however, a standard protective order used in many business litigation cases does not address many of the issues that arise in a litigation battle between two direct competitors, where the risk of confidential information being misused by the other side is magnified in comparison to a typical business case. Some standard protective order provisions are not restrictive enough, while others are so restrictive that the parties may run into roadblocks during discovery, increasing the costs of the lawsuit and frustrating the discovery of relevant documents.

Therefore, when deciding how to proceed with a trade secrets lawsuit, a company and its litigation counsel should discuss the specific aspects of a protective order and consider whether additional above-the-board protections should be put in place once the lawsuit is filed.  Since an agreed protective order is viewed by courts as a contract between the parties, the courts are often reluctant to change their terms unless both parties agree, which can make it difficult to add protections down the road if the other side objects to them.  Thus, it pays to analyze what trade secrets are likely to be disclosed during the litigation and what a provisions a protective order should include to ensure the preservation of their confidential nature during the discovery stage and trial. 

How will you calculate and prove the damages your company suffered from the misappropriation?

Many companies spend a lot of money and time proving that their trade secrets were taken and used by a competitor, only to receive a big fat “zero” in damages from the jury or to have a judge throw out their expert’s opinion regarding the damages the company suffered as being too “speculative” or “unreliable.”  

Sometimes, all that a company wants is for the person or entity that took the trade secrets to return them and/or a court order restraining that person or company from using the information they took. However, if the cat is out of the bag, so to speak, and the information has already been used by the time the company finds out that something was stolen, then the company might want to seek monetary compensation. In that case, analyzing what type of damages a company might be able to recover and how such damages may be proven must be done before the lawsuit is filed or shortly thereafter. Knowing whether a company might have a problem showing the amount of damages or linking such damages to the misappropriation can help the company set a realistic litigation budget and devise a settlement strategy.

Bottom line is that the two issues identified above should be addressed and analyzed early on, rather than in the middle of a costly litigation battle, when substantial funds and resources have been invested by the plaintiff and a non-suit might no longer be an option. 

Leiza litigates non-compete and trade secrets lawsuits on behalf of COMPANIES and EMPLOYEES in a variety of industries, and knows how such disputes typically play out for both parties. Contact Ms. Dolghih for a confidential consultation at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108.

One Comment on “Two Common (and Costly) Mistakes in Trade Secrets Litigation

  1. Pingback: Top 10 from Texas Bar Today: False Advertising, False Positives, and Fights Against Corruption | Texas Bar Today

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s