E-Discovery

Congress passed the Defend Trade Secrets Act of 2016 (DTSA) with much fanfare, touting its potential to curtail both domestic and cross-border theft of American ingenuity and technology. While not substantially different from its state law counterparts, the DTSA offers a unique and powerful remedy previously unavailable to aggrieved parties in their efforts to curb trade secret misappropriation: ex parte seizure of property containing trade secrets.

The DTSA seizure order provision also involves key electronic discovery issues of which counsel and clients should be aware. This article provides a brief overview of DTSA seizure orders and discusses e-discovery considerations in connection with those orders.

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DTSA Seizure Orders

The DTSA seizure order provision enables plaintiffs to obtain a court order ex parte that seizes from defendants "property" containing plaintiffs' trade secret information. For a court to issue a seizure order, plaintiffs must satisfy eight separate requirements memorialized in 18 U.S.C. §1836(b)(2)(A)(ii). The underlying prerequisites include those that must be established for a Federal Rule of Civil Procedure (FRCP) 65 order such as showing the existence of immediate and irreparable harm and the likelihood of success on the merits.

More significantly, however, plaintiffs must demonstrate that relief under FRCP 65 would be inadequate. This includes showing that defendants would evade compliance with a temporary restraining order or a preliminary injunction and that if provided notice, defendants would move, hide, or destroy plaintiffs' trade secret information. Plaintiffs also need to establish (among other things) that the harm they would suffer if the court did not issue the seizure order would outweigh the harm to defendants if their property were seized.

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Technical Experts and E-Discovery

If a seizure order is issued, law enforcement officials can effectuate the order's seizure directive by taking possession of smartphones, tablets, laptops, email accounts, paper documents, or other property identified in the order as containing plaintiffs' trade secret information. Nevertheless, law enforcement involved in the seizure may not have the technical ability to copy data from seized electronic devices. Nor may they have the ability to modify login credentials for seized email accounts or other online repositories like personal clouds or messaging applications.

To address this issue, the DTSA authorizes the appointment of a neutral technical expert to facilitate the seizure of assets encompassing plaintiffs' trade secret information. With a qualified technical expert in place, plaintiffs and the court can be reasonably certain that seized accounts will have login credentials properly modified and pertinent information from those accounts copied for subsequent analysis. Moreover, having a technical expert in place with forensics expertise will better ensure that information seized from computers, smartphones, and tablets is properly copied and placed in the custody of the court.

Courts should consider appointing a technical expert that is an e-discovery service provider. This is because the technical expert will likely need to run search queries at the direction of the court or a court-appointed special master to identify and locate trade secret information among the seized property. Having an e-discovery platform to host seized data, run search queries, and produce information during discovery should therefore be an essential qualification for the appointed technical expert.

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Special Masters and E-Discovery

Upon taking custody of defendants' seized property, a court could conceivably review the information itself to identify the existence of plaintiffs' trade secrets. However, seizure orders have the potential to encompass hundreds of thousands of electronic documents. A court simply does not have the staff, time, or other resources needed to review massive troves of electronic data.

This is why special masters are a key aspect of DTSA seizure order practice. The DTSA specifically contemplates the appointment of special masters both to identify trade secret information among the seized property and to facilitate the restoration of all other seized information to defendants.

To accomplish these objectives, special masters should have electronic discovery expertise. Such expertise includes an understanding of electronic discovery search methodologies and analytics tools, together with the sophistication to use those resources to identify trade secret information. Working together with the court's technical expert, the special master should be able to quickly and efficiently sort through the corpus of seized data, isolating plaintiffs' trade secret information for erasure while separating out non-trade secret materials for return to defendants (as shown in Shumway v. Wright, D. Utah 2019).

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Seized Property in Discovery

A final e-discovery consideration for DTSA seizure practice is whether seized information should be subject to discovery if a matter does not resolve before the commencement of discovery. Hosted on a technical expert's e-discovery platform, defendants' seized data would provide a corpus of potentially relevant information which the parties could search for discovery purposes. Courts have even authorized parties during discovery to supply search terms to the special master in an effort to identify relevant information (Blue Star Land Servs. v. Coleman, W.D. Okla. 2018).

While defendants should be allowed to review seized information for discovery purposes, courts should be wary of granting plaintiffs access to the database of seized property. The seized information will likely be replete with defendants' confidential and proprietary information. Providing plaintiffs—who are generally defendants' business competitors—with even limited access to seized information reflecting, e.g., sales and marketing data, financial records, or strategic plans, could pose significant harm to defendants.

In addition, the seized documents may include attorney-client privileged information belonging to defendants, along with vast quantities of irrelevant data. The seized information may also implicate the privacy rights of third parties (Carlson v. Jerousek, Ill. App. 2d 2016.) While protective orders with "attorneys eyes only" provisions are often viewed as an elixir on such issues, those orders would not ameliorate the harm that would arise if disclosures were made of privileged documents, irrelevant information, or other materials affecting third party privacy rights. Given the prospect of looming satellite litigation to address these issues, courts would be well advised against providing plaintiffs with direct access to seized information.

Philip Favro is a consultant for Driven, Inc. where he advises organizations and their counsel on issues relating to the discovery process and information governance. He is presently serving as a Special Master on a Defend Trade Secrets Act case.