This guest post comes to you courtesy of Christian Saucedo, an associate in Reed Smith‘s LSHI group. He was inspired to follow up on a post we wrote earlier about confidential ediscovery involving computerized product design information. It’s a serious topic, involving the “crown jewels” of product manufacturing. As always our guest poster deserve all the credit (and any blame) for their posts.
Earlier this [ed. note, now last] year, the Blog posted about the discoverability of CAD (“computer assisted design”) and FEA (“finite element analysis”) files – highly sensitive and confidential product blueprints that can represent a real economic concern for manufacturers who are nervous about their designs getting into the wrong hands. Here is what is undoubtedly a highly anticipated sequel. And like any good sequel, this post begins by addressing a cliffhanger dangled at the end of the last installment. Specifically, as readers may remember, the Blog noted a lack of known precedent for this type of material previously being held discoverable in other product liability litigation. Fortunately (or perhaps unfortunately for those plaintiff’s lawyers hoping to frolic in the field of manufacturer trade secrets) that remains the case. But in conceivably one of the most unpredictable years in modern history, it seems like a good idea to explore this topic a little more, and see not only what the state of the law is today – but how it may develop in the future.
This issue was first discussed in a post centered on Schmidt v. Navistar, Inc., 2020 WL 5548837 (D.N.M. Sep. 16, 2020). For an in depth analysis of that case, see here. Decided only a few months ago, Schmidt is a decisive victory for companies aiming to keep their product designs under lock and key. That said, it certainly is not a first.
Further research has uncovered Pertile v. GM, Ltd. Liab. Co., 2016 U.S. Dist. LEXIS 34674, at *1 (D. Colo. Mar. 17, 2016). Pertile is an automotive, product liability case involving a roll-over accident. Id. at *3. At issue was the plaintiff’s motion to compel FEA Models, which were not produced by the defendant because – you guessed it – they constituted trade-secrets. Id. at *5. Notably, the defendant had already produced CAD files and engineering and evaluation reports resulting from the FEA Models. Id. at *6-7. But, wanting more, the plaintiff argued this production was insufficient because the FEA Models apparently needed to be produced in native format in order to reflect what the defendant knew when it designed and tested the product at issue. Id. at *5. The Court rightly held – and, in fact, plaintiff agreed – that “public disclosure of the FEA Models would be unacceptable.” Id. at *12. Consequently, the burden shifted to the plaintiff to show the necessity of this information. Id. at *10. Ultimately, Plaintiff failed to do so, and the Court reasoned that the information Plaintiff sought was appropriately addressed by the defendant’s previous (and substantial) productions. Id. at *17-18.
Earlier, Brownlow v. GMC, set aside a magistrate’s order requiring the same defendant to produce disputed CAD files and finite element computer modeling technology. No. 3:05CV-414-R, 2007 U.S. Dist. LEXIS 67973, at *4 (W.D. Ky. Sep. 13, 2007). Although on paper Brownlow represents a win for defendants, this victory feels a little less solid due to the posture of the case. Brownlow was before the court on the defendant’s objections to a magistrate’s discovery order requiring the production of, among other things, CAD files and finite element computer modeling technology. The defendant argued “that it [would] suffer permanent economic damage through the loss of its cutting edge computer modeling technology, which once publicly disclosed cannot be protected.” Id. at *5. The Court agreed that the requested CAD files and finite element computer modeling could be proprietary trade secrets, but no determination was made because the defendant was unable to locate any such files. Id. at *24. Interestingly, the Court set aside part of the Magistrate Judge’s order because it may have misunderstood that “the information sought consisted merely of electronic data files rather than the computer modeling technology itself” and thus “may well have failed to apply the appropriate standard for discovery of trade secrets.” Id. at *27-28.
Undoubtedly, these rulings are good news for manufacturer defendants. For now, at least, it seems that manufacturer defendants can find solid footing in fending off overbroad and risky requests for these kinds of sensitive materials. We would be remiss not to mention, however, that there are indeed instances where defendants in product liability cases have produced these types of files. For example, it appears that the defendant in Wood v. Paccar, Inc., was in fact ordered to produce FEA and CAD models. No. 19-cv-1010-LRR, 2019 U.S. Dist. LEXIS 231880, at *18 (N.D. Iowa Oct. 25, 2019). That said, don’t panic just yet – the trade secret defense was never raised, and therefore doesn’t impact this analysis all that much. For other instances of defendants, for one reason or another, producing these files without raising the trade secret defense, see also Celerity, Inc. v. Ultra Clean Holding, Inc., 476 F. Supp. 2d 1159, 1163 (N.D. Cal. 2007) (holding, in the absence of any trade secret argument, that “If a quote has progressed to the point where an electronic CAD has been prepared, then that should also be produced in electronic form”); Gibson v. Ford Motor Co., No. 1:06-cv-1237-WSD, 2007 U.S. Dist. LEXIS 52579, at *1 (N.D. Ga. July 19, 2007) (denying motion to reconsider order compelling production of Computer Aided Engineering (‘CAE’) or Finite Element Analysis (‘FEA’) files in the absence of any trade secret argument).
And that’s the end of this saga, for now. That said, if we find that this issue begins cropping up in drug and device cases, we will be sure to provide an update. Who doesn’t love a trilogy?