Non-Compete and Trade Secrets News for the week ended April 14, 2017
The Fifth Amendment and Document Production
The Fifth Amendment, and its guarantee against self-incrimination, plays a role in civil litigation and certainly in trade-secret suits. Claims of theft implicate criminal prosecution both at the federal and state level. And while many prosecutors would decline to get involved in a garden-variety civil dispute, the Sergey Aleynikov and David Nosal experiences we have seen suggest that any line-drawing efforts between civil and criminal fact-patterns are tough for anyone to draw. When it comes document production, the general rule is fairly straightforward: the mere act of producing documents (think stolen plans or diagrams) may be a testimonial act for Fifth Amendment purposes. It may, to that end, be an admission that a person has documents that another claims were stolen.
The big trade secret case of the year is in the Northern District of California between Waymo and Uber. And it centers largely on Anthony Levandowski's alleged downloading of 14,000 documents. The case has taken on a life of its own, with twists and turns arising nearly every day on a host of substantive and procedural issues.
One particular filing of interest, though, is Levandowski's effort to avoid having Uber disclose detailed information about the allegedly downloaded documents. The unusual part of Levandowski's motion is that it does not come at the document production stage; instead, he attempted to claim Fifth Amendment rights in Uber's production of a privilege log concerning a particular "due diligence report" that related to Uber's acquisition of Levandowski's company after he left Waymo.
Levandowski's brief is an interesting take on the Fifth Amendment and the testimonial act of document production. It touches, crucially, on issues of attorney-client and common-interest privilege, given a joint defense arrangement between Levandowski and Uber. Here, Levandowski is trying to say that the joint defense between he and Uber allow him to step into the shoes of Uber and prevent it from disclosing details on a privilege log about the due diligence report. Note that Levandowski is not a party to the Waymo suit, but the conduct that is most relevant involves him directly and the allegedly mass download of Waymo materials. Levandowski's brief is available here.
Yesterday, Judge Alsup denied Levandowski's motion, holding that compelling Uber to produce a conventional privilege log would not violate Levandowski's Fifth Amendment rights. The decision is available here. Judge Alsup found that "mere invocation" of one's Fifth Amendment rights cannot automatically supplant conventional privilege log requirements. To this end, he stressed the need for "targeted factual support" - like a privilege log itself - that lends the Fifth Amendment assertion some plausibility.
Interestingly, Judge Alsup touched on an argument not really advanced but which it seems as though he felt was percolating under the surface. He rejected the idea that Levandowski could claim a privilege if the subject due diligence report was provided to Uber so Uber could see whether Levandowski was arriving with baggage - namely a potential trade secret claim to defend. Judge Alsup noted that one cannot use the attorney-client privilege to cloak wrongdoing through "due diligence." Therefore, as a result of the ruling, Uber will have to place the particulars of the due diligence report on a privilege log for Waymo to see. Whether Levandowski will assert further Fifth Amendment rights to its ultimate production remains to be seen. But I think I know the answer.
Bad Faith in California Trade Secrets Actions
I have an article coming out shortly in the Illinois Bar Journal, and it concerns bad faith in trade secrets disputes. In particular, I discuss Illinois' rule that is akin to a Rule 11 "frivolous pleading" standard. I also discuss the rule that seems to prevail elsewhere - the two-part test used by California courts, focusing on objective speciousness and litigation misconduct. As the Court of Appeal in Vescovi v. Clark makes clear, that test is really a one-part test. Objective speciousness probably is enough, because the litigation misconduct derives from the specious nature of the claim. Vescovi is unpublished, but it's a good read nonetheless. A copy of the opinion is available here.
James Flynn of Epstein Becker & Green published a nice piece on Law360 concerning Justice Gorsuch's track record of resolving trade secrets disputes while a Tenth Circuit judge. It is worth a read.