Trade secret litigation nearly always requires pretrial motion work for a temporary restraining order and preliminary injunction.  The recent decision in Sitrus Technology Corporation v. Le (C.D. Cal. April 27, 2002) No. SACV2200184CJCJDEX) 2022 WL 2255019 illustrates the challenges and complications with this early and significantly material pretrial motion work.

The case involves the common alleged fact pattern in trade secret litigation of the departing employee allegedly taking corporate trade secrets.  Here, the departing employee was the Chief Technology Officer (CTO).  The Company was a fables design company.

The CTO left Company and took 24 laptops, 15 servers, and a number of proprietary and highly valuable protype chip circuit boards.  Allegedly the CTO had been using the Company’s prior office space as well, along with the Company’s former employees for a new business.  If true, the circumstantial evidence strongly indicated the taking of confidential corporate information.

Ostensibly this is the reason why the District Court granted the request for a temporary restraining order (TRO).  The TRO was focused on enjoining the CTO from accessing trade secret information or altering or destroying confidential trade secret information or other business records of the Company within his possession.

Thereafter, the CTO turned over all devices and assets to the Company.  The Company’s forensic IT team then had time to review what evidence had been taken, whether data had been transferred to another computer, or was destroyed.  Specifically, the IT team had 2 months to analyze the devices.

Critically, prior to the turnover of the material and lawsuit the CTO had started deleting Company data on the subject electronic devices.  The deletions occurred based on tentative settlement discussions that failed.

Whether due to the deletion of data that wiped 10 of the 15 laptops clean or because no such evidence ever existed, there was no direct damaging evidence uncovered by the Company’s forensic team against the CTO.  As alleged by Plaintiff, the forensic team, still needed more time to recover deleted information.  Again, the team already had about 2 months to investigate the devices.

Without more, the District Court denied the request for a preliminary injunction.  Besides being troubled with the lack of direct evidence to support a showing of irreparable harm, there was also the issue of the fact the preliminary injunction sought a mandatory rather than a prohibitory injunction.  Mandatory injunctions carry a heavier burden of proof, are rarely granted, and are closely scrutinized on appeal.  The requested preliminary injunction was to enjoin the Defendant from refusing to return the Company devices and assets.  Besides the burden of proof issue, as discussed above, the CTO had turned over the devices already.

This is a unique case in so far as a CTO with high level access did take electronic and physical corporate assets in conjunction with leaving the company.  However, nothing more at that stage of the case could be established.

The lessons primary lesson from this ruling is that the owner of trade secret information should never mince words about requiring the preservation of evidence and should not suggest data be destroyed prior to or during litigation.  The correct course would have been to require the devices be returned to the Company or a third party to mirror the hard drives before deleting any data.

Finally, as most trade secret practitioners know it is not at all uncommon that a successful TRO does not lead to an order for a preliminary injunction.  Accordingly, the framing of the proposed order for a preliminary injunction should be framed to enhance the likelihood of success.