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Swarmify, Inc. v. Cloudflare, Inc.

United States District Court, N.D. California

May 31, 2018

SWARMIFY, INC., Plaintiff,
v.
CLOUDFLARE, INC., Defendant.

          ORDER ON MOTION TO STRIKE

          WILLIAM ALSUP UNITED STATES DISTRICT JUDGE

         INTRODUCTION

         In this action for trade secret misappropriation, defendant moves to strike the latest list of asserted trade secrets that plaintiff disclosed pursuant to Section 2019.210 of the California Code of Civil Procedure. The motion is Granted in part and Denied in part.

         STATEMENT

         The issue is a recurring one, the question of the extent to which a trade secrets plaintiff in a federal action may be permitted to adjust its list of asserted trade secrets after having obtained access to the files of the accused.

         This is an action by plaintiff Swarmify, Inc., against defendant Cloudflare, Inc., for trade secret misappropriation and related state law claims. Swarmify fired the opening salvo in this action with a motion for a preliminary injunction. During briefing on that motion, Swarmify filed its original disclosure of six alleged trade secrets pursuant to Section 2019.210 of the California Code of Civil Procedure. The disclosure's contents and the complaint's allegations have been described in detail in a prior order dated February 27, which denied Swarmify's motion for a preliminary injunction based on failure to show likelihood of irreparable harm. Although it did not actually reach the merits, the February 27 order also discussed at length the “overbreadth of Swarmify's various and ever-shifting descriptions of its supposed trade secrets” and noted that “Swarmify's attempts to set up its purported trade secrets as elusive moving targets do not bode well for the merits of its claims” (see Dkt. No. 88 at 4-6).

         After the dust settled on its motion for a preliminary injunction, Swarmify filed a new disclosure of five alleged trade secrets under Section 2019.210. Despite the fact that Swarmify had already made quicksand of its asserted trade secrets - a problem explicitly called out in the February 27 order - the new disclosure once again drastically overhauled its descriptions of the technology Cloudflare allegedly misappropriated. Cloudflare now moves to strike both the new disclosure and the deficient portions of Swarmify's original disclosure, protesting that Swarmify cannot “take a second bite at the apple” after losing at the preliminary injunction stage but obtaining valuable information about Cloudflare's litigation strategy and defenses (Dkt. No. 101). Swarmify responds that the new disclosure should be allowed because the February 27 order amounted to “an instruction to provide clarification on [Swarmify's] claimed trade secrets.” If that was not the message of the February 27 order, Swarmify says, it would be “content to stand on its Original Disclosure” (Dkt. No. 107 at 2). Swarmify also insists it has not improperly used discovery to overhaul its Section 2019.210 disclosure and, in the alternative, seeks leave to amend its disclosure yet again (see Id. at 13).

         This order follows full briefing and oral argument.

         ANALYSIS

         Section 2019.210 provides:

In any action alleging the misappropriation of a trade secret under the Uniform Trade Secrets Act . . . before commencing discovery relating to the trade secret, the party alleging the misappropriation shall identify the trade secret with reasonable particularity.

         The parties have offered no analysis or authority to explain whether or how this provision should apply where, as here, discovery has already commenced in a federal action, but it is a point worth clarifying. The plain text of Section 2019.210 does not contemplate this scenario.

         Our court of appeals has not spoken directly on the issue, but has cited with approval Universal Analytics v. MacNeal-Schwendler Corp., 707 F.Supp. 1170, 1177 (C.D. Cal. 1989) (Judge Stephen Victor Wilson), for the proposition that 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, 1164-65 (9th Cir. 1998). Universal Analytics, in turn, took that proposition from Diodes, Inc. v. Franzen, 260 Cal.App. 2d 244, 253 (1968), the “seminal decision” that became “the genesis of [S]ection 2019.210.” Brescia v. Angelin, 172 Cal.App.4th 133, 147 (2009). In other words, while Imax did not explicitly discuss Section 2019.210, it applied the core principle codified therein.

         In doing so, Imax affirmed a district court's decision - after commencement of discovery - to grant summary judgment for the defendant on a trade secret misappropriation claim where the plaintiff had failed to identify its alleged trade secrets with sufficient particularity. See 152 F.3d at 1164-68. Consistent with this approach, judges in our district - including the undersigned judge - faced with deficient disclosures under Section 2019.210 have routinely entertained defense motions to defeat trade secret misappropriation claims after commencement of discovery, whether styled as a “motion to strike, ” “motion for summary judgment, ” or something else. See, e.g., Openwave Messaging, Inc. v. Open-Xchange, Inc., 2018 WL 692022, at *4 (N.D. Cal. Feb. 2, 2018) (Judge William Orrick) (examining adequacy of Section 2019.210 disclosure on motion for summary judgment); BladeRoom Grp. Ltd. v. Facebook, Inc., 2018 WL 514923, at *3-5 (N.D. Cal. Jan. 23, 2018) (Judge Edward Davila) (same); Waymo LLC v. Uber Techs., Inc., 2017 WL 5000352, at *7-9 (N.D. Cal. Nov. 2, 2017) (Judge William Alsup) (granting overlapping motions to strike and for summary judgment on trade secret misappropriation claim); Jobscience, Inc. v. CVPartners, Inc., 2014 WL ...


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