— -A manufacturer of custom-engineered power springs has sued its former employee for alleged misappropriation of trade secrets, and “upon information and belief’ based upon its review of the ex-employee’s business website, asserts that the defendant employee currently sells spring design software which improperly incorporates the manufacturer’s proprietary information in contravention of his employment agreements and Pennsylvania trade secrets law. The former employee contends that he has developed superior spring technology software utilizing publicly available engineering concepts and his own ingenuity. The ex-employee has appealed the special trial master’s discovery ruling requiring him to provide the manufacturer access to his spring technology software, and argues that the grant of such discovery will enable the manufacturer to discover and possibly replicate his proprietary information and confidential formulas that are reflected in that software.
In trade secrets discovery disputes, the party resisting discovery must first establish that the material sought constitutes protected proprietary information, and if that party does so, the burden shifts to the requesting party to demonstrate a compelling need for that discovery which outweighs the harm of its disclosure. The parties’ submissions indicate that the defendant employee’s
To resolve the parties’ circular arguments regarding the protected statuses of their trade secrets and software, a spring technology software expert will be appointed by the court to review the parties’ respective spring technology software, to determine whether the defendant employee’s software impermissibly integrates the manufacturer’s trade secrets as alleged, and pursuant to the protocol set forth in this memorandum and order, to prepare a report of the expert’s findings. After the expert has provided that report to the defense, the former employee may either (a) furnish it to the manufacturer or (b) file his objection(s) to its production to the manufacturer. In the latter event, the expert’s report will be submitted for an in camera review by the court to determine the discoverability of the report and the software at issue.
I. FACTUAL BACKGROUND
Plaintiff, Sandvik, Inc. (“Sandvik”), maintains a business unit, Sandvik Materials Technology, which designs and manufactures spring products, including custom-engineered power springs. (Docket entry no. 1 at ¶ 2). From October 1995 to July 2009, defendant, William Mecca (“Mecca”), was employed by Sandvik as a process engineer, senior production facilitator,
Sandvik claims to have developed “spring technology software” which “employs an N-value term that allows the otherwise theoretical spiral spring calculations to have ‘real world’ application by creating idealized straight line torque and stress information.” (Docket entry no. 1 at ¶14). Sandvik avers that it has also designed “a Finite Element Analysis (“FEA”) that is capable of application to spring technology software and modeling.” (Id. at ¶ 16). According to Sandvik, its “software is a compilation of numerous data points, formulas and calculations, including use of a refined N-value term, which took Sandvik...many years and substantial funds to develop,” and “that allows it to manufacture custom-engineered springs based on the design specifications of its clients.” (Id. at ¶17).
During the course of his employment with Sandvik, Mecca allegedly “worked on development of spring technology and software” and “helped develop the confidential and proprietary software that allows [Sandvik] to manufacture custom-engineered springs based on the design specifications of its clients.” (Id. at^ 39,40). In that capacity, he ostensibly had access to Sandvik’s “technology related to the process for developing and producing spiral springs, software, design parameters, empirical data on endurance and performance, and application and use of the N-value term in spring development software
Sandvik contends that Mecca’s business “currently advertises online at http://www.spiral-spring.com/ as ‘Spiral Springs Solutions,’ offering consulting services, training, Power Spring Design services, and spring design software.” (Id. at ¶ 45). It is averred that Mecca’s website offers for sale Mecca’s “Power Spring Design Software” and “Spiral Hair Spring Design Software” which are described as using “numerous formulas and FEAmethods.” (Id. at ¶¶ 46-47). Based “[u]pon information and belief,” Sandvik asserts that “the Power Spring Design Software and Spiral Hair Spring Design Software available for sale on the Mecca C & S website incorporates and uses Sandvik’s confidential and proprietary spring technology software, including the numerous, complex calculations that Sandvik has spent substantial time refining.” (Id.
Sandvik filed a complaint against Mecca asserting causes of action for breach of the non-disclosure provisions of his employment contracts, misappropriation of trade secrets and confidential business information under the Pennsylvania Uniform Trade Secrets Act (“PUTSA”), 12 Pa. C.S.A. §5301, et seq., and unjust enrichment. (Id. at ¶¶ 71-107). In connection with those claims, Sandvik “sought information regarding [Mecca’s] development and sales of the spring software at issue, such as information transmitted over [Mecca’s] website, http://www.spiralspring.com/,” and demanded production of Mecca’s spring design “software and the design and development of [Mecca’s] spring software.” (Docket entry no. 9 at pp. 2-3). After Mecca objected to that software discovery on the ground that it seeks his own “trade secrets and confidential information,” (Docket entry no. 10 at p. 3), Sandvik presented a motion to compel discovery to the special trial master, while Mecca submitted a motion for a protective order prohibiting any such discovery. (Docket entry no. 5; docket entry no. 7, exhibit C). On December 16, 2013, the master denied Mecca’s motion for a protective order, and granted Sandvik’s discovery motion subject to a confidentiality stipulation.2 (Docket entry no. 6).
The circular reasoning surrounding the parties’ discovery dispute can best be summarized as follows: Sandvik contends that Mecca misappropriated Sandvik’s trade secrets by including its confidential information in Mecca’s spring technology software, and seeks access to that software in order to prove its claims; whereas Mecca argues that Sandvik’s requested discovery will improperly
By letter dated March 13, 2014, Sandvik reported that it “is amenable to engaging a court-appointed expert to address the merits of the case such as whether trade secret information was misappropriated,” but that Mecca was only willing to retain such an expert “to address the
II. DISCUSSION
(A) STANDARD OF REVIEW
Pursuant to Lacka. Co. R.C.P. 4000.1, discovery motions must initially be presented to and decided by the court-appointed special trial master whose ruling “may be appealed de novo” to the court of common pleas within ten days of the master’s decision. Fratzola v. Klepadlo, 26 Pa. D. & C. 5th 533, 537-538 (Lacka. Co. 2012). Under Pa.R.C.P. 4003.1, “discovery is liberally allowed with respect to any matter, not privileged, which is relevant to the cause being tried.” Berg v. Nationwide Mutual Insurance Company. Inc., 44 A.3d 1164, 1178 n. 8 (Pa. Super. 2012), app. denied, 65 A.3d 412 (Pa. 2013). Information is relevant “if it logically tends to establish a material fact in the case, tends to make a fact at issue more or less probable or supports a reasonable inference or presumption regarding a material fact.” Kelin v. Aronchick,
The relevancy standard applicable to discovery is necessarily broader than the standard used at trial for the admission of evidence. Com. v. TAP Pharmaceutical Products, Inc., 904 A.2d 986, 994 (Pa. Cmwlth. 2006); George v. Schirra, 814 A.2d 202, 205 (Pa. Super. 2002). The party objecting to discovery generally bears the burden of establishing that the requested information is not relevant or discoverable. Koken v. One Beacon Insurance Company, 911 A.2d 1021, 1025 (Pa. Cmwlth. 2006); Yadouga v. Cruciani, 66 Pa. D. & C. 4th 164, 168 (Lacka. Co. 2004). Any doubts regarding relevancy are to be resolved in favor of discovery. Ario v. Deloitte & Touche, LLP, 934 A.2d 1290, 1293 (Pa. Cmwlth. 2007).
Although trade secrets are afforded protection under the law, there is “no absolute privilege or unconditional bar as to disclosure of such matters.” Crum v. Bridgestone/Firestone No. Amer. Tire, LLC, 907 A.2d 578, 585 (Pa. Super. 2006). Pennsylvania Rule of Civil Procedure No. 4012 governs protective orders and states that “for good cause shown” the court may issue an order “that a trade secret or confidential research, development or commercial information shall not be disclosed or [shall] be disclosed only in a designated way.” Pa.R.C.P. 4012(a) (9). “If a party establishes that information sought is a trade secret or confidential business information, then it has established good cause under Rule 4012(a)(9).” Markwest Liberty Midstream & Resources, LLC v. Clean Air Council, 71 A.3d 337,343 (Pa. Cmwlth. 2013).
(B) TRADE SECRETS DISCOVERY
Mecca submits that the “decision of [special trial] master Henry P. Burke allows Sandvik to circumvent the law by avoiding the applicable burden shifting scheme which requires Sandvik to demonstrate by competent evidence that there is a compelling need for the documents and information it requests of [Mecca], and that such necessity outweighs the harm of disclosure.” (Docket entry no. 1 at p. 4). Mecca asserts that “Sandvik has no legitimate need for [Mecca’s] trade secret and confidential information as it has not suffered any recoverable loss as a result of [Mecca’s] market and sale of [Mecca’s] software.” (Id. at p. 11). Sandvik counters that its access to Mecca’s spring software is necessary “to determine the extent of [Mecca’s] misappropriation” of Sandvik’s trade secrets,
As noted above, “[discovery in trade secret litigation is permissible so long as the information sought to be obtained is reasonably related to the underlying cause of action and the need for this information outweighs any harm that may occur as a result of its release.” Rohm and Haas Company, 992 A.2d at 143 (citing Crum, supra). Pennsylvania has adopted the definition of a trade secret set forth in comment (b) to Section 757 of the Restatement (Second) of Torts, which states that “[a] trade secret may consist of any formula, pattern, device or compilation of information which is used in one’s business, and which give him an opportunity to obtain an advantage over competitors who do not know or use it.” Crum, 907 A.2d at 585 (quoting Pestco. Inc. v. Associated Products, Inc., 880 A.2d 700, 706 (Pa. Super. 2005)). Section 5302 of PUTS A similarly defines trade secrets as “[information, including a formula, drawing, pattern, compilation including a customer list, program, device, method, technique or process that: (1) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use; [and] (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” 12 Pa.C.S.A. 5302. See also Krafft v. Downey,
The following factors are to be considered in determining whether the information sought is to be granted trade secret status: (1) the extent to which the information is known outside of the business; (2) the extent to which the information is known by employees and others in the business; (3) the extent of measures taken to guard the secrecy of the information; (4) the value of the information to the business and its competitors; (5) the amount of effort or money expended in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. Com., Department of Public Welfare v. Eiseman, 85 A.3d 1117, 1126 (Pa. Cmwlth. 2014); Crum, 907 A.2d at 585. “Whether information qualifies as a ‘trade secret’ is a highly fact-specific inquiry that cannot be distilled to a pure matter of law.” Eiseman, supra. The crucial criteria for determining whether information constitutes a trade secret “are substantial secrecy and competitive value to the owner.” Markwest Liberty Midstream & Resources, 71 A.3d at 344; Crum, 907 A.2d at 585.
The materials submitted by the parties reflect that Mecca’s spring software does, in fact, contain trade secret information. Mecca’s software embodies formulas and methods that he claims to have developed in the power springs industry, and which provide Mecca with a competitive advantage in that field. The components of Mecca’s particular software are not generally known within or outside his business since Sandvik is obviously unaware of the details of those program elements, even
Nevertheless, Mecca’s spring technology software is clearly relevant to Sandvik’s claims that Mecca has misappropriated Sandvik’s trade secrets. See George, 814 A.2d at 205 (holding that developer of “flow-aid” product for use in steel making process satisfied relevancy standard for discovery of former employee’s home laboratory notes which allegedly contained developer’s trade secrets to alleviate the agglomeration of lime and other powdered constituents of steel manufacturing). To gain access to Mecca’s spring software, Sandvik must further demonstrate that its need for that information outweighs the harm of such disclosure. Although Sandvik contends that any potential harm to Mecca is negated by its proposed confidentiality order, it cannot be denied that “the confidentiality of potentially privileged information is irreparably lost” once it is disclosed to litigants and their
In the context of electronic discovery, courts in other jurisdictions have appointed forensic experts to access the responding party’s electronically stored information in an effort to address electronic discovery disputes without unilaterally disclosing that party’s confidential or privileged information to its adversary in litigation. Following a procedure first articulated in Playboy Enterprises. Inc. v. Welles, 60 F. Supp. 2d 1050, 1054-1055 (S.D. Cal. 1999), those courts have appointed a forensic expert, from a list of proposed experts submitted by the parties, to review the objecting party’s digital files in order to identify any relevant and responsive material. See United Factory Furniture Corp. v. Alterwitz, 2012 WL 1155741, at *5 (D. Nev. 2012); Bank of Mongolia v. M & P Global Financial Services. Inc., 258 F.R.D. 514, 520 (S.D. Fla. 2009). The forensic consultant serves as an officer of the court and is required to sign a protective order to insure against the inadvertent waiver of any privilege or objection by the responding party. Alterwitz, supra, at *6; Commercial Law Corp.. PC. v. Federal Deposit Ins. Corp., 2012 WL 137835, at *3 (E.D. Mich. 2012); Bank of Mongolia, 258 F.R.D. at 520-521; Simon Property Group. L.P. v. mySimon. Inc., 194 F.R.D. 639,642 (S.D. Ind. 2000). The written findings of the court-appointed expert are provided to the responding party, which may either produce those findings in their entirety to the requesting party, or assert objections to their production by submitting
Sandvik contends that it devised in-house applications of a refined N-value term and FEA to create “idealized straight line torque and stress information” which enable it “to manufacture custom-engineered springs based on the design specifications of its clients.” “Upon information and belief’ following its review of Mecca’s website, Sandvik asserts that Mecca has misappropriated those trade secrets by assimilating them into his spring technology software. Mecca denies Sandvik’s allegations and insists that his software is the product of his own ingenuity and publicly available N-value term and FEA concepts. Mecca further submits that the grant of Sandvik’s discovery request will permit Sandvik to discover Mecca’s own trade secrets and to utilize his applications to improve Sandvik’s inferior software. See Crum, 907 A.2d at 584 (observing that the confidentiality of potential trade secrets “is irreparably lost” following their disclosure to a litigation adversary due to the absence of an “effective remedy for a breach of the existing protective order.”).
Trial courts possess the inherent authority to appoint special masters to assist in the resolution of discovery disputes. See, e.g., Liss & Marion. P.C. v. Recordex Acquisition Corp., 937 A.2d 503, 515 (Pa. Super. 2007), aff’d, 603 Pa. 198, 983 A.2d 652 (2009). Sandvik’s proffered objection to the appointment of a spring software expert for the limited purpose of discovery, as opposed to the global merits of the case, does not warrant a different course of action. The validity of Sandvik’s trade
ORDER
And now, this 21 st day of May, 2014, upon consideration of the “appeal motion of defendants, Mecca C & S, Inc. and William Mecca” relative to the discovery order of the special trial master, the exhibits and memoranda of law submitted by the parties, and the oral argument of counsel, and based upon the reasoning set forth in the foregoing memorandum, it is hereby ordered and decreed that:
1. Within the next ten (10) days, counsel for the parties shall agree upon the designation of a spring technology software expert to access and analyze the parties ’ respective
2. The court-appointed spring technology software specialist will serve as an officer of the court and shall sign a confidentiality order, jointly prepared by counsel for the parties, barring that individual from disclosing any spring software information to any person or party, other than as prescribed by this memorandum and order. Any direct or indirect access that the court-appointed expert gains to the parties’ respective software shall not be deemed to be a waiver of any objection or privilege that either party may have to such software or information;
3. Within ten (10) days of the court-appointment of the spring technology software expert, plaintiff, Sandvik, Inc., shall provide such expert access to its spring technology software, including, but not limited to, any applications of a refined N-value term and finite element analysis which plaintiff contends constitute its trade secrets and proprietary information;
4. Within ten (10) days of the date that the court-appointed spring technology software specialist completes the expert’s review and evaluation of plaintiff’s spring technology software, defendants, Mecca C & S, Inc. and William Mecca, shall provide that expert access
5. Within thirty (30) days of the completion of the court-appointed spring technology software specialist’s review and analysis of defendants’ spring technology software, the court-appointed expert shall forward a written report to defendants’ counsel containing the expert’s findings and conclusions with respect to the review of the parties’ spring technology software. Within seven (7) days of defense counsel’s receipt of the written report of the court-appointed spring technology software expert, defendants shall either (a) provide the expert’s report to counsel for plaintiff, or (b) file written objections to the production of that report and serve copies of those objections upon the undersigned and opposing counsel. In the event that defendants object to the production of the expert’s report, it shall submit a copy of that report to the undersigned for an in camera review, and plaintiff shall file a written response to defendants’ objections within seven (7) days of the filing of those objections by defendants; and
6. The fees charged by the court-appointed spring technology software specialist shall be shared and borne equally by the parties, and the parties shall pay their respective shares of the expert’s bill within thirty (30) days of receipt of the same.
1.
Mecca’s employment agreements with Sandvik define the phrase “[confidential or proprietary information” as any “information learned or acquired by [Mecca] during [his] employment with Sandvik that is not generally known in Sandvik’s industry including, but not limited to,... research activities,...designs, ideas, trade secrets,...data, records and formulas.” (Id. at ¶ 32).
2.
Sandvik’s proposed confidentiality order contains detailed provisions designed to protect the parties’ trade secrets and confidential information, and limits the disclosure of any such material to the court, *339the parties’ counsel and counsel’s employees, non-industry testifying or consulting experts who have executed a non-disclosure agreement, and “witnesses or potential witnesses, to the extent they were the creator sendor or recipient of the confidential discovery material.” (Docket entry no. 6, exhibit A at ¶¶ 10-11). The confidentiality stipulation requires those individuals to return or destroy the originals and all copies “of documents designated as confidential discovery material” within thirty days “after the final termination of this action.” (Id. at ¶18).