Beyond State Law: The Ninth Circuit’s New Framework for DTSA Trade Secret Identification

Trade secret litigation presents a fundamental paradox at the pleading stage: on the one hand, a plaintiff must identify their allegedly misappropriated trade secrets with sufficient specificity to survive a motion to dismiss, without providing an overly detailed disclosure in the public complaint that could effectively destroy the trade secret’s protected status, undermining the very foundation of the claim, while also describing the trade secrets sufficiently to provide defendants with adequate notice to mount a defense and ensure compliance with required pleading standards. The federal Defend Trade Secrets Act (DTSA) does not provide explicit identification guidance. At the state level, only California and Massachusetts have enacted statutory provisions addressing certain aspects of trade secret identification under their respective versions of the Uniform Trade Secrets Act. In general, Federal courts in these jurisdictions, especially in California, have looked to state trade secret discovery rules for guidance on pleading requirements.

A Changing Landscape

The recent Ninth Circuit decision in Quintara Biosciences, Inc. v. Ruifeng Biztech, Inc., significantly altered this landscape by holding that the California Uniform Trade Secrets Act does not bind federal courts adjudicating DTSA claims. Accordingly, plaintiffs in California asserting only DTSA misappropriation claims before discovery are required only to identify their trade secret with “sufficient particularity” to separate them from matters of general knowledge in the trade or of special knowledge of those persons skilled in the trade, and rather than meeting the more stringent “reasonable particularity” standard under Cal. Civ. Proc. Code § 2019.210.  Moreover, the court emphasized that dismissing a trade secret case early in the litigation as a discovery sanction before the parties have had the opportunity to “refine and clarify the identification of the alleged trade secrets at issue” will “rarely” be justifiable.

Quintara brought suit against Ruifeng in the Northern District of California under the DTSA for the misappropriation of nine trade secrets, ranging from customer databases to computer software, design of new products and “DNA Donor technology.” Shortly after the Rule 26 Conference, Ruifeng sought to halt discovery until Quintara identified its trade secrets in the first amended complaint with greater specificity. The district court held that the plaintiff must comply with Cal. Civ. Proc. Code § 2019.210, that requires that “before commencing discovery relating to the trade secret, the party alleging the misappropriation shall identify the trade secret with reasonable particularity.”Quintara then filed a Disclosure that included a more fulsome description of the trade secrets. However, Ruifeng found this description to be still lacking and moved to strike Quintara’s trade secrets in the Disclosure under Rule 12(f) of the Federal Rules of Civil Procedure.

While admitting that the CUTSA does not apply to this matter, the district court applied the “reasonable particularity” rule, holding that “Quintara failed, in part, to meet section 2019.210’s requirements, and it struck nine of the 11 trade secrets from the Disclosure.According to the court, the two remaining trade secrets were sufficiently described. The parties then conducted discovery on the remaining trade secrets. Quintara dropped one of the remaining claims, and a jury found for Ruifeng on the single trade secret still at issue.

On appeal, the Ninth Circuit found that the district court had abused its discretion by striking Quintara’s trade secrets, which effectively resulted in the dismissal of the claims relating to those trade secrets. The court began its analysis by emphasizing that while the definition of a trade secret under the DTSA is very broad, “not all proprietary information qualifies for protection as property interest under the DTSA.” A plaintiff may not simply rely on “catchall phrases or identify categories of trade secrets,” but “must prove that the claimed trade secret has sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons … skilled in the trade.”  This is a question of fact, and a plaintiff should have the opportunity “to refine its identifications through discovery . . .” Accordingly, “a district court may grant summary judgment only if there is no genuine dispute that a plaintiff could identify a trade secret with sufficient particularity.”

The court recognized that the amount of discovery concerning whether a trade secret has been identified with sufficient particularity is a “delicate problem.” In trade secret cases, the court suggested that “the conventional order of pleadings, initial disclosures, and first-round discovery may not be enough to set the stage for factual development of a trade-secret claim. Discovery in a trade-secret case, then, requires an iterative process where requests between parties lead to a refined and sufficiently particularized trade secret identification.” Courts have the authority to manage this under Rule 16 pretrial management power and Rule 26(c)(1)(G).

The court then determined that the district court should not have dismissed Quintara’s claim to nine of its trade secrets for failing to meet CUTSA’s “reasonable particularity” rule. The court noted that unlike the CUTSA, the DTSA does not include requirements concerning the timing and scope for identifying trade secrets. According to the court, theft of trade secret cases brought under the DTSA, the Federal Rules of Civil Procedure apply and the CUTSA “does not control a federal trade-secret claim.”

The Ninth Circuit also held that Rule 12(f) does not provide a basis to strike the trade-secret Disclosure even if it is assumed that it is a pleading as required by the Rule. Under this Rule, “[t]he court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent or scandalous matters.”The court found that Quintara’s trade secrets are not an “insufficient defense,” “redundant,” “impertinent,” or “scandalous.” “So, any authority to strike the trade secrets at issue cannot lie in Rule 12(f).”

Finally, the court determined that the district court’s dismissal of Quintara’s claim to the nine trade secrets as a discovery sanction on the basis that it failed to disclose the trade secrets with “reasonable particularity” was an abuse of discretion.  Dismissal based on a failure to comply with a pretrial order is a harsh penalty that is only justified “in a limited set of extreme circumstances” that did not exist in the present case. In particular, the court weighed five factors in considering whether a dismissal is an appropriate sanction and determined that none of them favored dismissal. The court placed particular emphasis on the fourth factor that addresses the public policy favoring disposition of cases on the merits, and the fifth factor, which considers the availability of other less drastic alternatives. Regarding the fourth factor, the court determined that the district court’s dismissal on the motion to strike before discovery had progressed, “did not fairly permit development of the issues for resolution.” As to the fifth factor, the court suggested that the district court should have considered a less drastic alternative, such as a “protective order limiting discovery to whether Quintara had identified its trade secrets with sufficient particularity before permitting additional discovery.”

Takeaways

Quintara provides key points for both plaintiff and defendant trade secret attorneys, especially those in California.

First, it establishes that federal courts in California are not bound by California’s “reasonable particularity” standard in cases in which the DTSA is asserted and the plaintiff did not assert a state law theft of trade secret claim. This creates a potentially more lenient federal standard where plaintiffs need only identify trade secrets with “sufficient particularity to separate them from matters of general knowledge in the trade.”

Second, discovery in trade secret cases should be “iterative process where requests between parties lead to a refined and sufficiently particularized trade secret identification.” This means lawyers should plan for multiple rounds of disclosure refinement rather than demanding perfect specificity upfront, giving plaintiffs more opportunity to develop their claims through discovery.

Third, the Ninth Circuit emphasized that dismissing trade secret cases early in litigation before parties have had the opportunity to “refine and clarify the identification of alleged trade secrets” will “rarely” be justifiable. Accordingly, defense attorneys should focus on other strategies besides early dismissal motions for failure to identify the trade secrets at issue with sufficient particularity. However, this also creates an obligation on the part of the plaintiff to cooperate with the defendant in providing the required identification of the trade secrets.

Fourth, the court found that Rule 12(f) motions to strike don’t provide a basis for challenging trade secret disclosures, since such disclosures typically don’t qualify as “insufficient defense,” “redundant,” “impertinent,” or “scandalous” matter under the rule. This removes one potential avenue for early challenges to trade secret identification.

Fifth, the decision creates an incentive for plaintiffs in California to rely exclusively on DTSA claims rather than state CUTSA claims, since the federal standard is more permissive. This strategic choice could significantly impact case management, discovery scope, and the likelihood of surviving early dismissal motions.

Quintara may likely influence federal courts beyond the Ninth Circuit. Courts will need to develop new frameworks for managing the “delicate problem” of trade secret discovery while balancing legitimate protection needs against defendants’ due process rights. As this area of law continues to evolve, the Quintara standard may become important guidance for how federal courts approach the challenging intersection of trade secret protection and procedural fairness.

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Author: Wavebreakmedia