Inteliclear, LLC v. Etc Global Holdings
FOR PUBLICATION (2020)
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Rule of Law:
To survive a motion for summary judgment in a trade secret misappropriation case, a plaintiff must identify the alleged trade secrets with sufficient particularity to raise a triable issue of fact. Granting summary judgment before the non-moving party has had any opportunity for discovery constitutes an abuse of discretion if discovery is necessary to refine the identification of the trade secrets.
Facts:
- Between 2004 and 2006, InteliClear, LLC developed the 'InteliClear System,' a comprehensive software system for managing securities brokerage accounting and settlement services.
- On January 9, 2008, ETC Global Holdings, Inc.'s predecessor licensed the InteliClear System and signed a Software License Agreement agreeing that all information provided by InteliClear was confidential and proprietary.
- In 2012, the license agreement was assigned to ETC Global Holdings, Inc.
- Before terminating its license, ETC began building its own securities clearing software.
- On November 20, 2017, ETC sent InteliClear a notice of termination of the license agreement, effective February 28, 2018.
- In February 2018, after ETC deployed its new system, InteliClear's general manager, Martin Barretto, noticed striking similarities between ETC's system and the InteliClear System.
- In September and October 2018, a computer forensics expert hired by InteliClear, Capsicum Group, investigated both systems and found 'abundant evidence' that elements were identical.
Procedural Posture:
- In December 2018, InteliClear, LLC sued ETC Global Holdings, Inc. in the U.S. District Court for the Central District of California, alleging trade secret misappropriation under the Defend Trade Secrets Act (DTSA) and the California Uniform Trade Secrets Act (CUTSA).
- The district court denied ETC's motion to dismiss the trade secret claims.
- On May 21, 2019, one day after discovery officially began, ETC filed a motion for summary judgment.
- InteliClear responded by submitting declarations detailing its alleged trade secrets and filed a motion under Federal Rule of Civil Procedure 56(d) to defer the summary judgment ruling until after discovery.
- The district court granted ETC's motion for summary judgment, holding that InteliClear failed to identify its trade secrets with sufficient particularity.
- The district court also denied InteliClear's Rule 56(d) motion.
- InteliClear (Plaintiff-Appellant) appealed the grant of summary judgment to the United States Court of Appeals for the Ninth Circuit, with ETC as the Defendant-Appellee.
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Issue:
Does a plaintiff in a trade secret misappropriation case raise a genuine issue of material fact sufficient to defeat summary judgment by identifying specific components and unique combinations within its software system as trade secrets, even if the identification is not exhaustive and no discovery has yet occurred?
Opinions:
Majority - Judge Gould
Yes. A plaintiff raises a genuine issue of material fact by identifying specific components and unique combinations as trade secrets, and summary judgment is premature before the plaintiff has had an opportunity for discovery. The court found that InteliClear's declaration from its general manager, Martin Barretto, identified specific tables, columns, account structures, and methodologies, which went beyond mere 'catchall' phrases and was sufficient to create a triable issue on whether it had identified a trade secret with sufficient particularity. The court also held that there was a triable issue as to whether the system was 'secret,' as InteliClear presented evidence that the combination of its system's components was unique and that it took reasonable measures to maintain secrecy through confidentiality agreements. Finally, the court concluded that the district court abused its discretion under Rule 56(d) by denying InteliClear's request to defer the summary judgment ruling, finding the decision 'precipitous' and 'premature' because no discovery had occurred, which is often an iterative process for refining trade secret identifications.
Analysis:
This decision reinforces the importance of the discovery process in complex trade secret litigation, cautioning district courts against granting summary judgment before the plaintiff has had a meaningful opportunity to gather evidence. It clarifies that the 'sufficient particularity' standard at the summary judgment stage can be met by identifying unique combinations of elements, even if those elements are individually known in the industry. The ruling protects plaintiffs from being prematurely dismissed from court and underscores that identifying at least one trade secret with specificity is enough to survive summary judgment, even if the plaintiff's initial list is not exhaustive.
