Inteliclear, LLC v. Etc Global Holdings ( 2020 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
INTELICLEAR, LLC, No. 19-55862
Plaintiff-Appellant,
D.C. No.
v. 2:18-cv-10342-
RGK-SK
ETC GLOBAL HOLDINGS, INC.,
Defendant-Appellee. OPINION
Appeal from the United States District Court
for the Central District of California
R. Gary Klausner, District Judge, Presiding
Argued and Submitted September 3, 2020
Pasadena, California
Filed October 15, 2020
Before: Ronald M. Gould and Sandra S. Ikuta, Circuit
Judges, and David A. Ezra, * District Judge.
Opinion by Judge Gould
*
The Honorable David A. Ezra, United States District Judge for the
District of Hawaii, sitting by designation.
2 INTELICLEAR V. ETC GLOBAL HOLDINGS
SUMMARY **
Trade Secrets
The panel reversed the district court’s grant of summary
judgment in favor of ETC Global Holdings, Inc. in an action
alleging that ETC misused InteliClear, LLC’s securities
trading tracking system.
InteliClear brought claims for trade secret
misappropriations under both the federal Defend Trade
Secrets Act (“DTSA”) and the California Uniform Trade
Secrets Act.
The panel held that there was a genuine issue of material
fact as to whether InteliClear identified its trade secrets with
sufficient particularity. The panel further held that a jury
properly instructed could make the determination of what
trade secrets existed, before addressing other elements of the
claim.
Under the DTSA, a required element of a trade secret is
that the owner “has taken reasonable measures to keep such
information secret.” 18 U.S.C. § 1839(3). The panel held
that there was a triable issue whether InteliClear had shown
that parts of the InteliClear system were secret. Specifically,
first, the panel held that InteliClear, through a declaration,
had demonstrated that its alleged trade secrets were not
simply uncommon in other systems, but in combination,
unique in the industry. Second, the panel held that
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
INTELICLEAR V. ETC GLOBAL HOLDINGS 3
InteliClear contended correctly that it took reasonable
measures to encrypt and compile its source code and require
licensees to agree to confidentiality. The panel concluded
that a reasonable jury could find that portions of the
InteliClear system were not generally known or reasonably
ascertainable to others.
The panel held that the district court abused its discretion
under Fed. R. Civ. P. 56(d) by issuing its summary judgment
ruling before discovery occurred. The panel concluded that
the summary judgment granted was precipitous, premature
and did not fairly permit development of the issues for
resolution because the nonmoving party did not have a
discovery opportunity.
COUNSEL
Richard S. Order (argued) and Adam B. Marks, Updike
Kelly & Spellacy P.C., Hartford, Connecticut; Kenneth A.
O’Brien Jr. and Laura A. Alexander, Sheppard Mullin
Richter & Hamilton LLP, Los Angeles, California; for
Plaintiff-Appellant.
J. Kevin Fee (argued) and Michael E. Kenneally, Morgan
Lewis Bockius LLP, Washington, D.C.; Brian M. Hom,
Morgan Lewis Bockius LLP, Los Angeles, California;
Kathryn A. Feiereisel, Morgan Lewis Bockius LLP,
Chicago, Illinois; for Defendant-Appellee.
4 INTELICLEAR V. ETC GLOBAL HOLDINGS
OPINION
GOULD, Circuit Judge:
This appeal involves the requisite particularity with
which trade secret misappropriation plaintiffs must define
their trade secrets to defeat a motion for summary judgment.
Deciding trade secret claims means navigating the line
between the protection of unique innovative technologies
and vigorous competition. Plaintiff InteliClear seeks to
protect its interest in the logic and architecture of its
securities tracking database, while Defendant ETC
maintains that its newer system is an independent
improvement to the securities tracking marketplace. Before
we reach the question of whether the defendant
misappropriated the plaintiff’s intellectual property, we must
identify InteliClear’s alleged trade secrets and decide if they
are protectable.
We hold that: (1) there is a triable issue of fact as to
whether (a) InteliClear described its alleged trade secrets
with sufficient particularity and (b) InteliClear has shown
that parts of the InteliClear System are secret; and (2) the
district court abused its discretion under 56(d) by issuing its
summary judgment ruling before discovery occurred.
Accordingly, we reverse the district court’s grant of
summary judgment in favor of Defendant ETC.
I
Between 2004 and 2006, InteliClear developed the
“InteliClear System,” a comprehensive electronic system for
managing stock brokerage firm accounting, securities
clearance, and securities settlement services. Martin
Barretto (Barretto), InteliClear’s General Manager,
developed the InteliClear System to address a void in back
INTELICLEAR V. ETC GLOBAL HOLDINGS 5
office offerings. InteliClear used a Structured Query
Language (SQL) relational database designed to handle
millions of trades each business day.
On January 9, 2008, ETC’s predecessor and later
subsidiary obtained a license of the InteliClear System from
InteliClear and signed a Software License Agreement. The
agreement acknowledged that all information InteliClear
provided was confidential, proprietary, and copyrighted, and
through the agreement, ETC agreed to maintain that
information in confidence “during and after” the terms of the
agreement. The rights, duties, and obligations under the
License Agreement were assigned and delegated to
Defendant ETC in 2012.
On November 20, 2017, ETC sent InteliClear a notice of
termination of the Software License Agreement, effective
February 28, 2018. ETC committed to “remove the
InteliClear database from its systems” by February 26, 2018.
On March 5, 2018, ETC certified that the InteliClear System
had been removed from all ETC servers and that all copies
of the InteliClear System had been destroyed. But before
terminating the Software License Agreement, ETC had
begun building its own securities clearing software. Shortly
thereafter, ETC deployed its own new electronic trading
system. In February 2018, Barretto—the InteliClear
System’s architect—noticed similarities between ETC’s
new system and the system he had built for InteliClear,
including a table used in the ETC system with the same
“unique names” in a column as used in the InteliClear
System.
InteliClear contacted ETC in April 2018 about its
suspicion that ETC had improperly used the InteliClear
System to build its own system. After months of negotiation,
ETC agreed to allow Capsicum Group, LLC, a computer
6 INTELICLEAR V. ETC GLOBAL HOLDINGS
technology and forensics expert hired by InteliClear, to
compare the two systems and investigate. Consultants from
Capsicum investigated the two systems in September and
October 2018. Capsicum then issued a Summary Report,
finding “abundant evidence” that elements of the ETC
system were identical to elements of the InteliClear System.
Samuel Goldstein, Capsicum’s founder and CEO, stated in
his declaration: “In fact, so striking were the similarities that
it appeared to us that ETC’s system had been constructed by
a programmer who had one eye on the InteliClear System as
it was running and the other eye on the system he was
building, like a painter looking back and forth at a live model
while depicting her on the canvas.”
After receiving the Capsicum report, in December 2018,
InteliClear filed the underlying suit against ETC in federal
court. InteliClear alleged that ETC misused InteliClear’s
securities trading tracking system. InteliClear brought
claims against ETC for: (1) misappropriation under the
federal Defend Trade Secrets Act (“DTSA”);
(2) misappropriation under the California Uniform Trade
Secrets Act (“CUTSA”); and (3) unfair competition.
The district court dismissed InteliClear’s unfair
competition claim, reasoning that it was preempted by the
CUTSA, but denied ETC’s motion to dismiss as to
InteliClear’s trade secret misappropriation claims. The day
after discovery began, on May 21, 2019, ETC moved for
summary judgment on InteliClear’s remaining claims. ETC
contended that InteliClear did not identify its trade secrets
with sufficient particularity, and that InteliClear did not
show that the InteliClear System was a trade secret or that
ETC had access to InteliClear’s source code. In response to
ETC’s motion, InteliClear submitted a sealed declaration
INTELICLEAR V. ETC GLOBAL HOLDINGS 7
from Barretto describing the system’s features in more
detail. To date, no discovery has occurred.
The district court granted ETC’s motion for summary
judgment and held that InteliClear failed to sufficiently
identify which elements of the InteliClear System were
allegedly trade secrets. The district court also denied
InteliClear’s motion to defer ruling until after completion of
discovery under Rule 56(d) because the court determined
that discovery would not resolve the underlying
deficiencies—i.e., the failure to state the alleged trade
secrets with sufficient particularity. Because the district
court dismissed InteliClear’s claims on that basis, it did not
reach the issue of whether a genuine dispute existed with
respect to misappropriation or damages. We address the
district court’s decisions on summary judgment and Rule
56(d) discovery below.
II
We review a district court’s grant of a motion for
summary judgment de novo. Jada Toys, Inc. v. Mattel, Inc.,
518 F.3d 628, 632 (9th Cir. 2008). We determine whether,
viewing the evidence in the light most favorable to the
nonmoving party, there are any genuine issues of material
fact. Fed. R. Civ. P. 56. A genuine dispute of material fact
exists only “if the evidence is such that a reasonable jury
could return a verdict for the nonmoving party.” Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The
moving party bears the initial burden of identifying portions
of the record that demonstrate the absence of a fact or facts
necessary for one or more essential elements of each claim.
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the
moving party meets this burden, the opposing party must
then set out specific facts showing a genuine issue for trial
to defeat the motion. Anderson, 477 U.S. at 250.
8 INTELICLEAR V. ETC GLOBAL HOLDINGS
III
InteliClear brings claims for trade secret
misappropriation under both the federal DTSA and the
California CUTSA. Courts have analyzed these claims
together because the elements are substantially similar. See,
e.g., ChromaDex, Inc. v. Elysium Health, Inc., 301 F. Supp.
3d 963, 970–71 (C.D. Cal. 2017). We conclude that it is
appropriate to do so here.
We start from the important premise that the definition
of what may be considered a “trade secret” is broad. See
Forro Precision, Inc. v. Int’l Bus. Machines Corp., 673 F.2d
1045, 1057 (9th Cir. 1982). Under the DTSA, a “trade
secret” is defined as: “all forms and types of financial,
business, scientific, technical, economic, or engineering
information, including patterns, plans, compilations,
program devices, formulas, designs, prototypes, methods,
techniques, processes, procedures, programs, or codes,
whether tangible or intangible, and whether or how stored,
compiled, or memorialized physically, electronically,
graphically, photographically, or in writing.” The
information must “derive[] independent economic value,
actual or potential, from not being generally known to, and
not being readily ascertainable through proper means by,
another person who can obtain economic value from the
disclosure of use of the information.” 18 U.S.C. § 1839(3).
Therefore, the definition of trade secret consists of three
elements: (1) information, (2) that is valuable because it is
unknown to others, and (3) that the owner has attempted to
keep secret. See 18 U.S.C. §§ 1839(3), (5).
To succeed on a claim for misappropriation of trade
secrets under the DTSA, a plaintiff must prove: (1) that the
plaintiff possessed a trade secret, (2) that the defendant
misappropriated the trade secret; and (3) that the
INTELICLEAR V. ETC GLOBAL HOLDINGS 9
misappropriation caused or threatened damage to the
plaintiff. See 18 U.S.C. § 1839(5). The district court did not
reach elements two and three—misappropriation and
damage—because it found that InteliClear failed to show it
possessed a trade secret by not identifying its secrets with
sufficient particularity.
A
To prove ownership of a trade secret, plaintiffs “must
identify the trade secrets and carry the burden of showing
they exist.” MAI Sys. Corp. v. Peak Computer, Inc.,
991 F.2d 511, 522 (9th Cir. 1993). “The plaintiff ‘should
describe the subject matter of the trade secret with sufficient
particularity to separate it from matters of general
knowledge in the trade or of special knowledge of those
persons . . . skilled in the trade.’” Imax Corp. v. Cinema
Techs., Inc., 152 F.3d 1161, 1164 (9th Cir. 1998). 1 Plaintiffs
must “clearly refer to tangible trade secret material” instead
of referring to a “system which potentially qualifies for trade
secret protection.” Id. at 1167 (emphasis in original).
Plaintiffs may not simply rely upon “catchall” phrases or
identify categories of trade secrets they intend to pursue at
trial. See Imax, 152 F.3d at 1167; X6D Ltd. v. Li-Tek Corps.
Co., No. 10-cv-2327-GHK-PJWx, 2012 WL 12952726,
at *6 (C.D. Cal. Aug. 27, 2012). It is inadequate for
plaintiffs to “cite and incorporate by reference hundreds of
1
Pursuant to California Code of Civil Procedure Section 2019.210,
plaintiffs must identify their trade secrets with “reasonable particularity”
prior to commencing discovery. Cal. Civ. Code § 2019.210. Federal
courts have applied the state provision in federal cases. See SocialApps,
LLC v. Zynga, Inc., No. 4:11-CV-04910 YGR, 2012 WL 2203063,
at *1–3 (N.D. Cal. June 14, 2012). We hold that there is a triable issue
of fact as to whether InteliClear sufficiently identified its trade secrets
under both the federal statutory standard and the state statutory standard.
10 INTELICLEAR V. ETC GLOBAL HOLDINGS
documents that purportedly reference or reflect the trade
secret information.” X6D Ltd. v. Li-Tek Corps. Co., 2012
WL 12952726, at *6 (internal quotations omitted); see also
IDX Sys. Corp. v. Epic Sys. Corp., 165 F. Supp. 2d 812, 819
(W.D. Wis. 2001) (“Long lists of general areas of
information containing unidentified trade secrets are not
substitutes for particularized and concrete trade secrets.”).
Identifying trade secrets with sufficient particularity is
important because defendants need “concrete identification”
to prepare a rebuttal. Imax, 152 F.3d at 1167. Courts and
juries also require precision because, especially where a
trade secrets claim “involves a sophisticated and highly
complex” system, the district court or trier of fact will not
have the requisite expertise to define what the plaintiff
leaves abstract. Id.At the highest level of generality, InteliClear described
its trade secrets as “the InteliClear System’s unique design
and concepts and the unique software, formulas, processes,
programs, tools, techniques, tables, fields, functionality, and
logic by which its components interrelate and process data.”
In response to ETC’s motion for summary judgment,
InteliClear produced, among other things, two declarations:
the Barretto Declaration and the Goldstein Declaration.
Barretto Decl. ¶ 1–45, Goldstein Decl. ¶ 1–33. In his
declaration, General Manager and InteliClear System
architect Barretto expanded upon the initial definition and
described specific features of the InteliClear System as trade
secrets. 2 Barretto outlined the specific tables, table columns,
account identifiers, codes, and methodologies InteliClear
2
Because the portions of the Barretto Declaration that describe the
elements of the InteliClear System that are trade secrets were filed under
seal, we refer to those sections in general terms. Barretto Decl. ¶ 12–20.
INTELICLEAR V. ETC GLOBAL HOLDINGS 11
claimed as trade secrets. Barretto Decl. ¶ 12–20. ETC
responded to the Barretto Declaration by submitting a
supplemental declaration from its Chief Technology Officer,
Barnaby Hatchman, arguing that there were four areas where
InteliClear’s explanation of its trade secrets was “unclear.”
ETC maintained that identifiers like the above still fail to
separate trade secrets from information known in the
industry. Id. For example, ETC argued it was unclear what
“methodology” means—though Barretto refers to certain
underlying triggers and queries—and whether it describes
source code, a table structure, or something else. Id.We hold that there is a genuine issue of material fact as
to whether InteliClear identified its trade secrets with
sufficiently particularity. A reasonable jury could conclude
that the uniquely designed tables, columns, account number
structures, methods of populating table data, and
combination or interrelation thereof, are protectable trade
secrets. Unlike the plaintiffs in Imax, InteliClear here
identified aspects of its database logic and architecture with
enough specificity to create a triable issue of fact. Rather
than using “catchall” phrases or merely identifying
categories of information, the Barretto Declaration—filed
under seal to protect InteliClear’s proprietary information—
specified the program processes, tables, columns, and
account identifiers from its SQL database that it considered
trade secrets. See Imax, 152 F.3d at 1167.
The district court appeared to come to this same
conclusion that trade secrets were involved, when it
acknowledged that the Barretto Declaration identified
“some” of InteliClear’s trade secrets. Specifically, the court
stated:
Plaintiff describes its trade secrets through a
declaration by its General Manager, Barretto.
12 INTELICLEAR V. ETC GLOBAL HOLDINGS
To be sure, Barretto identifies “some of the
features” of the System that it considers trade
secrets, such as its uniquely-designed tables,
columns, account number structures, and
methods of populating table data. (Barretto
Decl. ¶¶ 12–20). But Barretto’s description
raises a problem: By only identifying “some”
of its trade secrets, Plaintiff leaves open the
possibility that it might later argue that other
unnamed elements of the InteliClear System
are trade secrets as well.
(emphasis added) (footnote omitted). At this stage,
particularly where no discovery whatsoever had occurred, it
is not fatal to InteliClear’s claim that its hedging language
left open the possibility of expanding its identifications later.
InteliClear’s burden is only to identify at least one trade
secret with sufficient particularity to create a triable issue.
See Freeman Inv. Mgmt. Co. v. Frank Russell Co., No. 13-
CV-2856 JLS, 2016 WL 5719819, at *11 (S.D. Cal. Sept.
30, 2016) (noting that “it’s not the volume, it’s the
particularity that matters”).
Our holding is consistent with the standard for
“sufficient particularity” set by other federal circuits. In IDX
Systems Corp. v. Epic Systems Corp., 3 the Seventh Circuit
held that a description of the methods and processes
underlying the features of a software package were “both too
vague and too inclusive” to defeat a summary judgment
motion because they “effectively assert[ed] that all
3
The California Court of Appeal held that “[t]he reasoning of IDX
is not inconsistent” with California trade secret law, which is
substantially similar to trade secret law under the DTSA. See Bresica v.
Angelin, 172 Cal. App. 4th 133, 150 n.1 (Cal. Ct. App. 2009).
INTELICLEAR V. ETC GLOBAL HOLDINGS 13
information in or about its software is a trade secret.”
285 F.3d 581, 583–84 (7th Cir. 2002). The court cautioned
that a plaintiff “must do more than just identify a kind of
technology and then invite the court to hunt through the
details in search of items meeting the statutory definition.”
Id. Even though the IDX plaintiff’s descriptions spanned
43 pages, those pages described the software without
separating the trade secrets from other information that goes
into any software package because the plaintiff merely
tendered the “complete documentation for the software.” Id.By contrast, rather than tendering the entire database to
the court and asking the district judge to parse through it to
determine what seemed valuable and generally unknown,
InteliClear made that determination itself. See TelSwitch,
Inc. v. Billing Sols. Inc., No. C 12-00172 EMC LB, 2012 WL
3877645, at *3 (N.D. Cal. Sept. 6, 2012) (holding that the
plaintiff’s “unique configuration of tables, fields, and joins
that is the structure of [its] SQL database” description was
sufficiently particular under the CUTSA). We hold that
there is at least a genuine dispute as to whether InteliClear
was successful in identifying at least one trade secret with
sufficient particularity. See Pyramid Techs., Inc. v. Hartford
Cas. Ins. Co., 752 F.3d 807, 818 (9th Cir. 2014) (“Where
conflicting inferences may be drawn from the facts, the case
must go to the jury.”) (citation and internal quotation marks
omitted). At this stage of the proceedings, we hold that a
jury properly instructed can make the determination of what
trade secrets exist, before addressing other elements of the
claim.
B
Under the DTSA, a required element of a trade secret is
that the owner “has taken reasonable measures to keep such
information secret.” 18 U.S.C. § 1839(3); Cal. Civ. Code
14 INTELICLEAR V. ETC GLOBAL HOLDINGS
§ 3426.1(d) (defining trade secrets under CUTSA similarly).
Items in a trade secret description that “any user or passer-
by sees at a glance” are “readily ascertainable by proper
means” and therefore “hard to call trade secrets.” IDX,
285 F.3d at 584 (holding that “the appearance of data entry
screens” are not trade secrets).
The district court found no triable issue as to whether
features of the InteliClear System were truly “secret”
because they were either: (1) “uncommon” in other systems
but not “generally unknown,” or (2) visible to end-users of
the InteliClear System who are not under confidentiality
obligations. We address each argument in turn and conclude
that neither is persuasive.
First, InteliClear, through the Barretto Declaration,
demonstrated that its alleged trade secrets were not simply
uncommon in other systems, but in combination, unique in
the industry. Though Barretto noted that use of one
component of the database was “not common in other
systems,” this description was in the context of explaining
how several components had been uniquely combined to
produce an effect “not found elsewhere on Wall Street.”
Barretto Decl. ¶ 16. Databases designed to track similar
information will inevitably have overlap in how they
categorize data. InteliClear went further and made it
sufficiently clear that the combination and interrelation of its
database components was unique.
Second, InteliClear contends, we think correctly, that it
took reasonable measures to encrypt and compile its source
code and require licensees to agree to confidentiality.
Confidentiality provisions constitute reasonable steps to
maintain secrecy. MAI Systems Corp. v. Peak Computer,
Inc., 991 F.2d 511, 521 (9th Cir. 1993). It is also “well
established that ‘confidential disclosures to employees,
INTELICLEAR V. ETC GLOBAL HOLDINGS 15
licensees, or others will not destroy the information’s status
as a trade secret.’” United States v. Nosal, 844 F.3d 1024,
1043–44 (9th Cir. 2016) (quoting Restatement (Third) of
Unfair Competition § 39 cmt. f (1995)); see also United
States v. Chung, 659 F.3d 815, 825–26 (9th Cir. 2011)
(noting that “oral and written understandings of
confidentiality” can qualify as “reasonable measures” to
keep information confidential).
Here, ETC’s subsidiary entered into a confidentiality
agreement with InteliClear in 2008, the Software License
Agreement, which was assigned to ETC in 2012. In that
agreement, ETC expressly agreed to keep the information
InteliClear provided by license confidential “during and
after” the terms of the agreement. In responding to
InteliClear’s complaint, ETC submitted evidence that an
InteliClear System client, Industrial and Commercial Bank
of China (“ICBC”), used ETC for clearing services and
provided ETC with a trade specification and interface to
ensure that all trade files were compatible with the
InteliClear System. As an ICBC clearing client, ETC had
“end-user access to the ICBC InteliClear client interface” but
ETC asserts that it was never asked to treat the material as
confidential. ETC produced screenshots where aspects of
the InteliClear System’s infrastructure were visible to end-
users. InteliClear contends that the confidentiality provision
that bound ETC as a licensee also bound ICBC and any other
third party to which ICBC needed to show components of
the InteliClear System. Barretto Decl. ¶ 22. When ETC
became an ICBC clearing client in 2014, it had already been
a licensee of the InteliClear System for more than six years
pursuant to the Software License Agreement. At that time,
ETC would have been bound by the existing confidentiality
provision and has not provided other examples of end-
16 INTELICLEAR V. ETC GLOBAL HOLDINGS
users—who are not subject to a confidentiality agreement—
that had access to InteliClear’s trade secrets.
We hold that, viewing the facts in the light most
favorable to InteliClear, a reasonable jury could find that
portions of the InteliClear System are not “generally known”
or “readily ascertainable” to others. 18 U.S.C. § 1839(3).
Though ETC provided some evidence that end-users of the
InteliClear System can see some of the logic and source code
underpinning the database, InteliClear introduced sufficient
rebuttal evidence to create a genuine dispute of material fact.
InteliClear’s efforts to protect its trade secrets through
licensing agreements constitute reasonable measures that are
adequate to preclude judgment as a matter of law. See MAI,
991 F.2d at 521.
IV
We review denial of a Rule 56(d) request to defer a
summary judgment ruling to complete discovery for abuse
of discretion. Tatum v. City & Cnty. of S.F., 441 F.3d 1090,
1100 (9th Cir. 2006). 4
Rule 56(d) provides that “[i]f a nonmovant shows by
affidavit or declaration that, for specified reasons, it cannot
present facts essential to justify its opposition, the court may:
(1) defer considering the motion or deny it; (2) allow time to
4
InteliClear argues in the alternative that the district court should
have asked it to clarify its identifications pursuant to Fed. R. Civ. P.
56(e)(1). ETC argues that InteliClear waived its Rule 56(e) argument
because it did not move for reconsideration of the district court’s
summary judgment order, instead raising the issue for the first time on
appeal. We need not decide InteliClear’s Rule 56(e) claim, however,
because we conclude that the district court abused its discretion in
denying Rule 56(d) discovery.
INTELICLEAR V. ETC GLOBAL HOLDINGS 17
obtain affidavits or declarations or to take discovery; or
(3) issue any other appropriate order.” Fed. R. Civ. P. 56(d).
To prevail on a request for additional discovery under Rule
56(d), a party must show that: “(1) it has set forth in affidavit
form the specific facts it hopes to elicit from further
discovery; (2) the facts sought exist; and (3) the sought-after
facts are essential to oppose summary judgment.” Midbrook
Flowerbulbs Holland B.V. v. Holland Am. Bulb Farms, Inc.,
874 F.3d 604, 619–20 (9th Cir. 2017) (citation omitted).
When ETC filed its motion for summary judgment, the
discovery period had lasted for only one day and no
discovery had yet been requested or provided. The district
court recognized that discovery had “just begun,” but held
that “[n]o amount of discovery propounded on [ETC] will
uncover which elements of [InteliClear’s] own InteliClear
System it believes are trade secrets and which are generally
known” (citing Sit-Up Ltd. v. AIC/InterActivCorp., No. 05-
09292, 2008 WL 463884, at *7 (S.D.N.Y. Feb. 20, 2008)).
Federal cases analyzing whether a plaintiff’s trade
secrets are described with “sufficient particularity” typically
arise in the battleground of discovery. In such cases,
discovery provides an iterative process where requests
between parties lead to a refined and sufficiently
particularized trade secret identification. See, e.g.,
TelSwitch, Inc. v. Billing Sols. Inc., 2012 WL 3877645, at *4
(holding that Plaintiffs’ trade secret description was
adequate where Plaintiff, at a hearing, “agreed that it was
limiting the scope of its claims to the precise database
disclosed [during discovery]”); see also E. & J. Gallo
Winery v. Instituut Voor Landbouw-En Visserijonderzoek,
No. 17-cv-00808-DAD-EPG, 2018 WL 2463869, at *6
(E.D. Cal. June 1, 2018) (“[T]he issue of whether all of the
18 INTELICLEAR V. ETC GLOBAL HOLDINGS
plaintiffs’ alleged trade secrets have been publicly disclosed
is a factual issue which is the proper subject of discovery.”).
Pursuant to Rule 56(d), InteliClear submitted
declarations showing that it would receive information
necessary to refine its identifications through discovery.
Even ETC’s briefing suggests that a delay in ruling so that
the parties could produce documents would have resolved
the issue. See Appellees’ Br. 19 (explaining that “InteliClear
could easily have disclosed, for instance, an export file
reflecting its table design, or its source code”). In ETC’s
reply to the Barretto Declaration, it noted that Barretto gave
examples of the “unique columns” he created, but ETC
contended that it was “unclear whether InteliClear claims
rights to all columns in the tables at issue, only the columns
identified by Barretto, or something else.” Even a small
amount of discovery would have let InteliClear clarify such
discrete points, which would have driven a potentially
meritorious case forward. See TelSwitch, Inc. v. Billing Sols.
Inc., 2012 WL 3877645, at *4.
Refining trade secret identifications through discovery
makes good sense. The process acknowledges the inherent
tension between a party’s desire to protect legitimate
intellectual property claims and the need for intellectual
property law to prevent unnecessary obstacles to useful
competition. Other courts have recognized that plaintiffs in
trade secret actions may have commercially valid reasons to
avoid being overly specific at the outset in defining their
intellectual property. See IDX, 285 F.3d at 583 (“Reluctance
to be specific is understandable; the more precise the claim,
the more a party does to tip off a business rival to where the
real secrets lie and where the rival’s own development
efforts should be focused.”).
INTELICLEAR V. ETC GLOBAL HOLDINGS 19
The cases upon which ETC relies are distinguishable. In
Sit-Up—cited by the district court in dismissing InteliClear’s
claims—the trial court noted that there had been “massive
document discovery” prior to the summary judgment motion
at issue. 2008 WL 463884, at *5 (stating that the “parties
continued to meet and confer to address discovery disputes,
keeping the Court apprised both of the parties’ progress in
discovery and their need for additional time to complete
summary judgment motions”). The court “repeatedly”
reminded Plaintiffs of their burden to specifically identify
trade secrets and ordered Plaintiffs to produce that
information. Id. at *8 (“[P]laintiff’s inability to identify its
trade secrets with specificity has been an issue in this action
for more than half of its pendency.”). It was only after
Plaintiffs made supplemental disclosures, more than one
conference was held, and both parties asked for and received
additional time extensions that the court held that Plaintiff
failed to satisfy its burden. Id.Similarly, in Imax Corp. v. Cinema Technologies, Inc.,
we held that the defendant was entitled to summary
judgment because Imax did not satisfy its burden of
identifying which “dimensions and tolerances” it claimed as
trade secrets. 152 F.3d at 1164. But by that point in the case,
the parties had gone through a protracted discovery period
where Imax repeatedly had failed to achieve the level of
specificity that the court had requested. During discovery in
that case, Defendant CTI served interrogatories asking Imax
to “identify the entire content of each and every trade secret”
allegedly misappropriated. Id. at 1165 (emphasis in
original). The magistrate judge granted CTI’s motion to
compel complete responses to these requests and denied
Imax’s motion for reconsideration and overruled its
objections after Imax claimed the requests for specificity
were vague and overly broad. Id. Ultimately, after receiving
20 INTELICLEAR V. ETC GLOBAL HOLDINGS
Imax’s Fourth Supplemental Responses to the initial
interrogatories, we concluded that “[u]nder these facts,
reasonable specificity could only be achieved by identifying
the precise numerical dimensions and tolerances as trade
secrets.” Id. at 1166–67.
Imax emphasized that the plaintiff, having gone through
the dialectic discovery process, should not have been
confused “as to the level of specificity required” and, by
failing to request further clarification of the discovery
orders, “knowingly incurred the risk that its Fourth
Supplemental Reponses would not meet the ‘reasonable
particularity’ requirement.” Id. at 1167–68 (emphasis
added). InteliClear, on the other hand, endeavored to be
specific at the outset in identifying aspects of the InteliClear
System that were protectable because they had value and
were generally unknown. At this stage of the litigation,
InteliClear did not have cause to guess that the Barretto
Declaration would be insufficient to identify its trade secrets
with particularity. See Freeman Inv. Mgmt. Co. v. Frank
Russell Co., No. 13-CV-2856 JLS, 2016 WL 5719819, at
*10–12 (S.D. Cal. Sept. 30, 2016) (holding that the
plaintiffs’ “subjective and vague descriptions” were
insufficient “at this late stage in the litigation” and that
additional attempts to refine its identification would be “too
little too late” after a year and a half of discovery).
Unlike in Imax where there had been a discovery
process, ETC here moved for summary judgment on the
trade secret claims on May 21, 2019, the day after the
initiation of discovery. To date, no discovery has been
conducted and oral argument in the district court was
cancelled. On these facts, we conclude that the summary
judgment granted was precipitous, premature and did not
fairly permit development of the issues for resolution,
INTELICLEAR V. ETC GLOBAL HOLDINGS 21
because the “nonmoving party has not had the opportunity
to discover information that is essential to its opposition.”
Metabolife Int’l, Inc. v. Wornick, 264 F.3d 832, 846 (9th Cir.
2001) (citation omitted). We hold that the district court
abused its discretion in declining to defer a summary
judgment ruling until discovery had proceeded.
V
Construing the relevant evidence in the light most
favorable to InteliClear, we hold that genuine disputes of
material fact remain as to whether InteliClear demonstrated
that it possessed protectable trade secrets and that the district
court abused its discretion in denying discovery under Rule
56(d). 5
REVERSED.
5
Our decision is without prejudice to the possibility that ETC may
wish to renew its summary judgment motion after the conclusion of
discovery.