Trade Secrets: New Case From Indiana Supreme Court

I emphasize prevention when I write about trade secrets on this blog. Today's case shows a different view of things - protecting trade secrets during litigation.

The Indiana Supreme Court published its decision in Bridgestone Americas Holding, Inc. v. Violet Mayberry, et al. on December 18, 2007. Coming from our own Madison Superior Court Three, the case raised the issue of how to treat trade secrets during litigation. Specifically, if the plaintiff in a product liability case could get the formula for a tire during pre-trial discovery. Judge Thomas Newman, Jr. decided that they could but "restricted the use and dissemination of the skim stock formula to those individuals who are 'an employee, litigant, or expert employed by the parties,” with any violation subject to “severe punishment for contempt of court.'"

The Indiana Supreme Court reviews the history of trade secret protection generally and in Indiana, and then discusses the federal rule for protecting trade secrets in discovery.

Chief Justice Shepard notes the balancing act of the federal rule. He notes Ind. Trial Rule 26(C) makes provision for trade secrets and Indiana enacted the Uniform Trade Secrets Act. At this point, the Indiana Supreme Court announces a rule for evaluating trade secrets during pre-trial discovery:

In consideration of this legislative objective, and owing to the substantial number of courts successfully applying it already, we adopt the three-part balancing test as the proper analysis for whether “good cause” has been shown and whether a protective order should be issued for a trade secret during discovery.

The three parts of the balancing test are:

1. Is the Information a Trade Secret?
2. Is the Information Relevant and Necessary to the Discovering Party’s Case?
3. Does the Harm of Disclosure Outweigh the Need?

As for the outcome for this case:

Because appellees did not meet their burden for showing necessity, a final balancing of the interests is unnecessary to the outcome of this case. Bridgestone demonstrated that the skim stock formula is a trade secret, but appellees could not demonstrate that they needed the formula in presenting their product liability action. Disclosure was therefore inappropriately ordered.

A good decision.