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PAR Pharmaceutical, Inc. v. Quva Pharma, Inc.

United States District Court, D. New Jersey

February 27, 2019

PAR PHARMACEUTICAL, INC., et. al., Plaintiffs,
v.
QUVA PHARMA, INC., et. al., Defendants.

          MEMORANDUM OPINION AND ORDER

          DOUGLAS E. ARPERT, UNITED STATES MAGISTRATE JUDGE

         This matter comes before the Court on the following motions: (1) a motion by Defendants QvVa Pharma Inc. (“QuVa”), Stuart Hinchen, Peter Jenkins, Mike Rutkowski, Donna Kohut, David Short, Travis McGrady, David Hartley, joined by Defendant Stephen Rhoades, for “entry of a protective order to prevent Plaintiffs Par Pharmaceutical, Inc. and Par Sterile Products, LLC … from obtaining broad discovery prior to finalizing its identification of alleged trade secrets”; and (2) a motion by Plaintiffs Par Pharmaceutical, Inc. and Par Sterile Products, LLC (together, “Par”) to compel discovery. As set forth below, Defendants' motion will be denied, and Par's motion will be granted in part and denied in part.

         I. QuVa, et al.'s Motion for Protective Order

         On August 14, 2017, Par filed its Complaint asserting claims for trade secret misappropriation, unfair competition, breach of contract, breach of fiduciary duty, breach of the duty of loyalty, breach of the duty of confidence, and tortious interference with contractual relations. ECF No. 1. After filing suit, Par moved for expedited discovery, which the Court granted. ECF No. 43. As part of expedited discovery, Par responded to Defendants' interrogatories, identifying certain trade secrets (designated Trade Secret Nos. 1-52) that Par alleges Defendants misappropriated. ECF No. 278-1, Ex. B at 36-69. Par's interrogatory responses further stated that Par “reserve[d] the right to change, add, or remove the identified trade secrets based on information or documents revealed or obtained through investigation or discovery.” Id., Ex. A at 7. Defendants objected to Par's reservation, noting that “Par is not entitled to include broad catch-all language as a tactic to preserve an unrestricted, unilateral right to subsequently amend its trade secret statement.” Id., Ex. C at 2-3.

         During expedited discovery, Defendants produced documents to Par, some of which had been in the possession of one of Par's former employees who, at that time, was employed by QuVa. According to Par, when it reviewed Defendants' document production, Par learned of other trade secrets that Defendants allegedly misappropriated. As such, upon the commencement of full discovery, Par again responded to Defendants' interrogatories and identified not only the earlier-identified 52 trade secrets, but 16 additional trade secrets as well (designated Trade Secret Nos. 53-68). Defendants contend Par's assertion of additional trade secrets was improper.

         The parties are presently engaged in full discovery, and Defendants are concerned that Par will use information obtained in discovery to improperly expand their trade secret list. See Snyder et al., Trade Secret Law and Corporate Strategy §9.05[3], 178-79 (2018) (“More than one plaintiff has reviewed a defendant's internal documents only to claim information in those documents as plaintiff's trade secrets…”). Defendants point out that Par's discovery requests seek, among other things, all Par documents and information in Defendants' possession and full images of the electronic media that contain Par documents and information. See, e.g., ECF No. 278-1, Ex. F at 8, 21. Concerned that Par may improperly claim that information found in Defendants' possession is a trade secret, and in light of the broad discovery the parties are undertaking, Defendants have filed this motion seeking the following, two-fold relief:

         First, Defendants contend that Par should be held to its original designation of trade secrets made in response to QuVa's Interrogatory No. 1, dated October 30, 2017, plus certain trade secrets that were the subject of an earlier motion to strike that was denied by Judge Martinotti. Thus, Defendants ask that Par's June 20, 2018 list of alleged trade secrets Nos. 53, 54, 56, and 58-68 be stricken, and that Par be precluded from further expansion of its identification of trade secrets based on documents produced during the discovery now underway. See Defendants' Proposed Order at ECF No. 277-1.

         Second, Defendants seek a Protective Order directing that Defendants are not required to provide discovery to Par relating to non-trade secret topics (i.e., topics that do not relate to items identified as Par trade secrets, including discovery related to Par's non-trade secret claims) until Par's trade secret list is deemed final. Id.

         In support of their motion, Defendants cite a number of cases, primarily from outside of this District, that support the proposition that “[g]enerally, a plaintiff in a misappropriation of trade secrets case must identify with precision the trade secrets at issue at the outset of the litigation.” Givaudan Fragrances Corp. v. Krivda, No. 08-4409(PGS), 2013 WL 5781183, at *4 (D.N.J. Oct. 25, 2013). Par also makes an analogy to patent cases, in which this District's Local Patent Rules require parties to delineate their theories of the case early in the litigation and to adhere to those theories once they have been disclosed.

         In opposition to Defendants' motion, Par argues that although Defendants styled their motion as one for a protective order, what they actually seek is an order compelling Par to “finalize” its identification of trade secrets in order to limit Par to those that Par identified when it moved for a preliminary injunction. Par contends that “finalizing” its list of asserted trade secrets, limited to those identified as part of its application for preliminary relief has no support in law because no court has ever done what Defendants ask this Court to do. Par further argues Defendants' motion has no support as a matter of policy, since adopting Defendants' argument and granting Defendants' relief would reward a trade secret defendant for hiding its misappropriation.

         In resolving the instant dispute, it is helpful to review the various policy considerations recognized by courts that have addressed the question of whether a plaintiff must identify asserted trade secrets early in the litigation. Indeed, it is not uncommon for the parties in trade secret cases to experience a “discovery impasse” where defendants oppose discovery until the plaintiff has identified in sufficient detail the trade secrets underlying its claims. DeRubeis v. Witten Techs., Inc., 244 F.R.D. 676, 680 (N.D.Ga. 2007). As one sister district court has noted, courts generally have identified at least three policies which support allowing the trade secret plaintiff to take discovery prior to identifying its alleged trade secrets: (1) “a plaintiff's broad right to discovery under the Federal Rules of Civil Procedure”; (2) “the trade secret plaintiff, particularly if it is a company that has hundreds or thousands of trade secrets, may have no way of knowing what trade secrets have been misappropriated until it receives discovery on how the defendant is operating”; and (3) a plaintiff that is required to identify the trade secrets at issue without knowing which of those secrets have been misappropriated is placed in somewhat of a “Catch-22” in that “[s]atisfying the requirement of detailed disclosure of the trade secrets without knowledge [of] what the defendant is doing can be very difficult” because “if the list is too general, it will encompass material that the defendant will be able to show cannot be trade secret, [and] [i]f instead it is too specific, it may miss what the defendant is doing.” Id.

         On the other hand, courts have identified other policies which support delaying certain discovery until the trade secret plaintiff has sufficiently described the trade secrets at issue: (1) “lawsuits might regularly be filed as ‘fishing expeditions' to discover the trade secrets of a competitor”; (2) “until the trade secret plaintiff has identified the secrets at issue with some specificity, there is no way to know whether the information sought is relevant, ” therefore, “requiring the plaintiff to sufficiently identify its trade secrets prior to allowing discovery on the defendant's trade secrets helps the court to determine the outer permissible bounds of discovery”; (3) “it is difficult, if not impossible, for the defendant to mount a defense until it has some indication of the trade secrets allegedly misappropriated”; (4) “requiring the plaintiff to state its claimed trade secrets prior to engaging in discovery ensures that it will not mold its cause of action around the discovery it receives.” Id. at 680-81. These considerations are helpful to the Court here.

         As noted above, Defendants' motion relies primarily on case law that stands for the proposition that a plaintiff in a trade secret case must identify the trade secrets at issue early in the litigation. In the present case, Par has, at the earliest stages of this litigation, identified numerous trade secrets upon which it contends its claims are based. Indeed, Par identified 52 such trade secrets prior to receiving any discovery from Defendants and several more trade secrets after receiving early discovery. Thus, the issue on this motion is not whether Par has identified allegedly misappropriated trade secrets. Rather, the issue is whether that identification should be fixed and final at this early stage in the litigation. The Court concludes that it should not.

         To the extent that Defendants contend that the authorities they rely on “demand finality” in trade secret disclosures, those authorities generally do not support the blanket prohibition sought here to preclude Par's ability to supplement its list of trade secrets as discovery proceeds. Many courts do, in fact, permit trade secret plaintiffs to amend or supplement their trade secret disclosures based on information gained through discovery, although often upon a showing of good cause. See, e.g., Morgardshammar, Inc. v. Dynamic Mill Servs. Corp., No. 09-379, 2009 WL 10685154, at *3 (W.D. N.C. Nov. 19, 2009) (“If subsequent discovery reveals additional trade secrets that may have been misappropriated, Plaintiff may amend the list to identify them.”); Powerweb ...


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