Stemcell Technologies Canada Inc. v. StemExpress, LLC

Background

STEMCELL Technologies Canada Inc. and StemExpress, LLC previously had a business relationship under which StemExpress supplied cell products, sometimes called “leukopak” products, to STEMCELL. Their contract included confidentiality provisions. After the relationship ended, the companies sued each other on claims including breach of contract. StemExpress also alleged that STEMCELL obtained and misappropriated StemExpress’s trade secrets through quality audits of StemExpress’s facilities to start a competing business called Canventa, allegedly violating the California Uniform Trade Secrets Act.

The court referred discovery disputes to Magistrate Judge Laurel Beeler. This order addressed STEMCELL’s request to compel complete or supplemental answers to Interrogatories 1–2, 4–6, and 9–11, as well as STEMCELL’s request for attorney’s fees. StemExpress opposed the motion, requested a protective order concerning the interrogatories, and requested sanctions against STEMCELL.

Legal standard

The court applied Federal Rule of Civil Procedure 26(b), which permits discovery of nonprivileged information that is relevant to a claim or defense and proportional to the needs of the case. Proportionality includes considerations such as the importance of the issues, the amount in controversy, the parties’ access to information and resources, the importance of the discovery, and whether its burden or expense outweighs its likely benefit.

Interrogatories 1–2

These interrogatories asked StemExpress to distinguish its alleged trade secrets from public information and from general knowledge in the industry or specialized knowledge of people skilled in the industry. The court had previously upheld ten of StemExpress’s trade-secret designations. StemExpress’s amended responses provided twenty-seven pages of additional detail about those ten trade secrets, including its process for screening potential biospecimen donors.

The court denied STEMCELL’s request for further responses to Interrogatories 1–2. It found that STEMCELL had argued only in general terms and had not adequately explained what was insufficient about StemExpress’s amended responses. The court also noted that it had already found the trade-secret designations sufficiently specific and that StemExpress was not required to identify the trade secrets with greater particularity through these interrogatory responses.

Interrogatory 4

Interrogatory 4 asked StemExpress to identify every person or entity to whom it had disclosed its trade secrets. StemExpress apparently limited its response to outside consultants and did not identify customers, asserting that the parties had agreed to that limitation during their discussions about discovery. STEMCELL denied making such an agreement and argued that customer disclosures were relevant to whether StemExpress had taken reasonable steps to protect the secrecy of the alleged trade secrets.

The court ordered StemExpress to amend its response to Interrogatory 4 by identifying any customers to whom it disclosed its trade secrets.

Interrogatory 5

Interrogatory 5 asked how each of StemExpress’s trade secrets obtained independent economic value from not being known to others. The court found that StemExpress had not provided a response specific to each trade secret. It ordered StemExpress to amend its response by explaining how each of the ten trade secrets obtained economic value from not being known to others.

Interrogatories 6 and 9

Interrogatory 6 asked for facts showing that each cross-defendant had used each of StemExpress’s trade secrets. The court denied STEMCELL’s request for a further response because it had no reason to believe StemExpress’s eleven-page response was incomplete.

Interrogatory 9 asked what confidential, non-trade-secret information STEMCELL and Canventa allegedly misused. The court likewise denied the request for a further response. It explained that the issue at this stage was whether StemExpress had properly answered the interrogatory, not whether the confidential information ultimately qualified for legal protection.

Interrogatories 10–11 and date limits

Interrogatories 10 and 11 sought the identities of StemExpress customers who purchased certain cell products. The court had previously found these requests relevant but had left open whether their wording was proportional. STEMCELL sought answers covering January 1, 2017, through December 31, 2020. StemExpress argued that four full years was not narrowly tailored or reasonable.

The court ordered further responses to Interrogatories 10 and 11. It limited the responses, like the responses to Interrogatories 4 and 5, to the period of the parties’ contractual relationship: January 1, 2014, through December 31, 2018. The order stated that the parties had previously represented that they agreed to limit the scope of all discovery requests to that period.

Fees and sanctions

STEMCELL requested attorney’s fees for raising the discovery dispute. StemExpress requested sanctions against STEMCELL. The court had previously observed that both parties had failed to cooperate reasonably in discovery and found that the same pattern continued. It denied both attorney’s fees and sanctions on the record before it. The court also stated that the district’s letter-brief process is intended to encourage collaborative solutions and that fees and sanctions are generally, though not always, reserved for the end of discovery, when the parties’ conduct can be evaluated more fully.

Disposition

Judge Laurel Beeler denied STEMCELL’s motion to compel further responses to Interrogatories 1–2, 6, and 9. She ordered further responses to Interrogatories 4–5 and 10–11, limited to January 1, 2014, through December 31, 2018. She denied STEMCELL’s request for attorney’s fees and StemExpress’s request for sanctions. The order stated that it resolved the discovery dispute identified in ECF No. 123.