How Should Litigators Establish Evidence in Trade Secret Cases? Part Three: Evidence

Like any other type of litigation, trade secret cases rise or fall on the strength of the evidence that can be put before the factfinder. Yet before a lawyer can focus on what evidence they have to make or defend their case, they must first collect that evidence. And with information technology being incorporated into every business at a lightning-fast pace, evidence has accordingly become increasingly complicated to source.

There are three primary considerations for the identification, collection, and preservation of evidence for use in a trade secrets case: the identification of targets that bad actors may look to appropriate confidential, proprietary, and trade secreted information; the preservation of evidence showing that targeted areas have been improperly accessed and by whom; and the collection of this evidence for use in litigation.

I. Collecting and preserving evidence in a trade secret case

i. Identification of Preservation Targets

Misappropriation requires unauthorized access: a defendant cannot use or disclose sensitive information without having the ability to access and appropriate that information in the first place. Obtaining evidence of this access is therefore critical. The process of culling that evidence involves identifying the potential locations where a bad actor may have accessed the trade secreted information, understanding what systems the client has in place to monitor and document such access, and collecting the records those systems may generate.

During the initial assessment with the client, several discussion points should be raised: incident response plans that lay out corrective steps taken in responding to anomalous activity; email protection systems that track identity of email authors and recipients, contents, and attachments; endpoint detection and response systems that monitor activity on workstations, laptops, and mobile devices; log monitoring through SIEM systems that collect and analyze logs of all activity; and data backups that periodically capture snapshots of pertinent systems and data.

These various sources of record keeping can work in concert with one another to create compelling arguments of improper use. For example, a SIEM report could show precisely what a terminated employee accessed and transmitted, while data backups could show that the information accessed was subsequently destroyed.

ii. Preservation of evidence

Evidence preservation procedures should begin immediately after identifying the potential sources of data that may have been accessed. These activities are essential to maintain the integrity of collected evidence and as a best practice against claims of spoliation. They include: physical quarantine of hardware provided to the bad actor, with a chain of custody created to ensure a link back to the bad actor remains in place; retention holds on all systems that employ retention policies; and routine preservation policies as would be used in any litigation.

iii. Collection of evidence

Collecting evidence of access in the manner outlined above is not any different or unique than any other type of litigation. Best practices should be employed to maintain metadata, chain of custody, and ensure all relevant custodians have collected and provided their data.

II. Statutory protections on using trade secreted evidence in litigation

A separate, but no less concrete, evidentiary concern is preserving the secrecy of the information being litigated while still being able to litigate the matter in the first place. TUTSA mandates that courts “shall preserve the secrecy of an alleged trade secret by reasonable means.” The act creates a “presumption in favor of granting protective orders to preserve the secrecy of trade secrets.” These orders may include provisions that limit access to confidential information to only the attorneys and their experts, empower the court to hold in camera hearings, require sealing of court records, and order any person involved in the litigation to not disclose the alleged trade secret without prior court approval.

TUTSA also contains a procedure whereby the court can exclude a party or limit its access to the alleged trade secret, requiring a balancing of seven factors including the value of the trade secret, the degree of competitive harm from disclosure, whether the other party already possesses the trade secret, and whether the party’s defense is impaired by lack of access.

The Supreme Court of Texas has harmonized TUTSA with Texas Rule of Civil Procedure 76 to provide a specific procedure for sealing records in a trade secret case, still imposing Rule 76’s public notice requirements, applying Rule 76’s bar on motions to reconsider, and emphasizing Rule 76’s requirement that a party demonstrate the absence of measures less restrictive than a seal.