Stemcell Technologies Canada Inc. v. StemExpress, LLC

Background

The parties are biotech companies. StemExpress supplied cell products to STEMCELL under agreements containing confidentiality provisions. After their business relationship ended, they sued each other on several claims, including breach of contract. StemExpress also alleged that STEMCELL used confidential information obtained during quality audits to misappropriate trade secrets and establish a competing company called Canventa.

StemExpress identified twelve alleged trade secrets. They included processes for screening and managing biospecimen donors, step-by-step processing instructions and batch records, collection-center and laboratory design, freezing products, making custom biospecimen products, donor-consent forms, and certificates of analysis for quality control.

Discovery dispute

The parties disputed whether StemExpress’s trade-secret designations were specific enough to permit discovery under California Code of Civil Procedure section 2019.210. That provision requires a party alleging trade-secret misappropriation to identify the trade secret with reasonable particularity before beginning related discovery. The court treated the requirement as a case-management tool and explained that it does not require a party to prove the trade secret’s merits or describe it in every detail before discovery begins.

STEMCELL argued that the designations did not distinguish StemExpress’s information from generally known industry practices or publicly available information. STEMCELL also argued that some designations concerned specifications STEMCELL had provided, products STEMCELL did not make, or information determined by customers rather than StemExpress.

Analysis

The court concluded that designations 5, 6, and 7 raised merits questions—whether the information qualified as trade secrets—not merely questions about whether the designations were adequately described. The court also treated the challenge to designation 4 as a relevance issue because STEMCELL said it did not make mobilized leukopak products, while StemExpress alleged that the information was confidential and connected to its claims.

The court found the designations generally sufficient because the parties had a business relationship governed by confidentiality provisions and STEMCELL had access to identifiable confidential information through its audits. That relationship gave STEMCELL more information about the alleged secrets than a defendant with no prior access would have had. The court also said StemExpress did not have to prove in its designation that the information was not generally known; that issue could be examined through discovery and later proceedings.

The court treated designation 11 differently because it apparently consisted of a publicly available form, and StemExpress did not respond to that argument. The court therefore struck designation 11.

Disposition

Magistrate Judge Laurel Beeler struck designation 11 but otherwise denied STEMCELL’s motion to strike the trade-secret designations and stay discovery. The order stated that discovery could proceed on the remaining designations and disposed of the motion identified as Electronic Case Filing No. 74.