Case Name: BrightEdge Technologies, Inc. v. Gabriel Martinez, et al.
Case No.: 2013-1-CV-256794

Currently before the Court is plaintiff and cross-defendant BrightEdge Technologies, Inc.’s (“BrightEdge”) motion to file portions of defendant and cross-complainant Searchmetrics, Inc. (“Searchmetrics”) opposition to the motion of cross-defendants Jim Yu (“Yu”) and Tom Ziola (“Ziola”) to strike the cross-complaint under seal.

I. Factual and Procedural Background

This is an action arising from the alleged misappropriation of trade secrets. In the operative first amended complaint (“FAC”), BrightEdge alleges that former BrightEdge employees, Gabriel Martinez and Cullen McAlpine, copied its confidential information and used said information on behalf of Searchmetrics, Brightedge’s competitor. In the FAC, BrightEdge asserts causes of action for misappropriation of trade secrets, civil conspiracy to commit misappropriation of trade secrets, inducing breach of contract, breach of contract, and civil conspiracy.

Subsequently, Searchmetrics filed a cross-complaint against BrightEdge, Yu, and Ziola (collectively, “Cross-Defendants”), in which it alleges that Cross-Defendants made several false representations to potential customers about the efficacy of its search engine optimization products and/or services. The cross-complaint asserts causes of action for trade libel, interference with prospective economic advantage, unfair competition, and false advertising.

On May 9, 2016, BrightEdge filed the instant motion to seal. Searchmetrics filed its opposition on July 15, 2016. On July 21, 2016, BrightEdge filed its reply. On July 28, 2016, the Court continued the hearing on the motion to allow the parties to re-lodge the documents to be filed under seal. On August 1, 2016, Searchmetrics re-lodged those documents.

II. Discussion

BrightEdge seeks an order sealing Exhibits A-H of the declaration of Steven Kimball and the portions of Searchmetrics’s opposition that refer to those documents on the ground that such an order is necessary to protect their trade secrets.

A. Legal Standards

Court records are open to the public unless confidentiality is required by law. (Cal. Rules of Court, rule 2.550(c).) A party may not file a record under seal without a court order, and a court may not permit a record to be filed under seal based solely on the agreement or stipulation of the parties. (Cal. Rules of Court, rule 2.551(a).) The court may order that a record be filed under seal only if it expressly finds facts establishing that: (1) there exists an overriding interest that overcomes the right of public access to the record; (2) the overriding interest supports sealing the record; (3) there exists a substantial probability that the overriding interest will be prejudiced if the record is not sealed; (4) the proposed sealing is narrowly tailored; and (5) no less restrictive means exist to achieve the overriding interest. (Cal. Rules of Court, rule 2.551(d).)

The protection of a trade secret may constitute an interest that overcomes the public’s right to access in the public record. (In re Providian Credit Card Cases (2002) 96 Cal.App.4th 292, 300.) A trade secret is defined as “information, including a formula, pattern, compilation, program, device, method, technique, or process that: [¶] (1) Derives independent economic value, actual or potential, from not being generally known to the public or to 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.” (Civ. Code, § 3426.1, subd. (d).)

A business need only employ reasonable efforts to maintain the confidentiality of its trade secrets. (Religious Technology Center v. Netcom On-Line Communication Services, Inc. (N.D. Cal. 1995) 923 F.Supp. 1231, 1253; see also Pyro Spectaculars North, Inc. v. Souza (E.D. Cal. 2012) 861 F.Supp.2d 1079, 1091 [stating that “a business is not required to turn itself into an ‘impenetrable fortress’ to protect its trade secrets”].) Such reasonable efforts include limiting access to the information, advising employees of the existence of the trade secret, and requiring employees to sign nondisclosure agreements. (Courtesy Temporary Service, Inc. v. Camacho (1990) 222 Cal.App.3d 1278, 1288.) While a single unprotected disclosure of a trade secret is not dispositive of a trade secret claim, multiple failures by a party to protect an alleged trade secret combined with extensive disclosure of such information extinguishes a party’s property right to the information. (Gemisys Corp. v. Phoenix American Inc. (N.D. Cal., Mar. 18, 1999, No. C-96-4017 CW) 1999 WL 417411, at *10.) A party moving to seal documents based on the protection of a trade secret bears the burden of proving the existence of that secret. (In re Providian Credit Card Cases (2002) 96 Cal.App.4th 292, 301.)

B. Analysis

The documents to be sealed constitute: (1) three e-mails comparing the capabilities of BrightEdge and Searchmetrics’ technology (Kimball Decl., Exs. A, E, H); (2) deposition testimony concerning BrightEdge’s sales practices and technology (Kimball Decl., Exs. B-C); (3) a training deck concerning BrightEdge’s sales practices (Kimball Decl., Ex. D); (4) two sales proposals to potential BrightEdge customers (Kimball Decl., Exs. F-G); and (5) portions of Searchmetrics’ opposition which refer to these documents.

In its moving papers, BrightEdge explains that the public disclosure of the technical details of its search-engine optimization services, confidential customer names and pricing information, and sales strategies would interfere with its ability to compete in the marketplace. (Emerlich Decl., ¶ 3.) In addition, BrightEdge provides evidence that it has made reasonable efforts to maintain the secrecy of the information contained in Exhibits A-H by requiring employees to sign confidentiality agreements and by limiting both physical and electronic access to the information. (Emerlich Decl., ¶ 5.) Accordingly, it provides sufficient evidence indicating that the documents at issue contain its trade secrets.

In opposition, Searchmetrics do not contest that each of the exhibits contains confidential information. However, it asserts that BrightEdge voluntarily disclosed Exhibits F-G to potential customers without requiring them to sign a non-disclosure agreement. As such, Searchmetrics contends that the documents are no longer confidential, and therefore restriction of public access is no longer necessary to protect the secrecy of this information.

In reply, BrightEdge claims that Searchmetrics’ opposition is based on two unsupported assertions: (1) the customer proposals were actually sent to prospective customers and (2) the prospective customers have no obligation to keep the proposals confidential. It first contends that there is no evidence in the record that these proposals were ever sent to the customers at issue or that their disclosure was unprotected by a confidentiality agreement. This argument is not persuasive. A court may infer that a customer proposal or script will be disclosed to a customer. (In re Providian Credit Card Cases (2002) 96 Cal.App.4th 292, 305.) Here, the allegedly confidential information are customer proposals and, as BrightEdge makes clear in its reply, these customers subsequently entered into contractual agreements with BrightEdge. (Emerlich Decl. in Reply, ¶ 2.) As such, the Court may infer that BrightEdge sent these proposals to its customers.

Next, BrightEdge asserts that it engaged in reasonable efforts to maintain the confidentiality of its trade secrets because it subsequently agreed to confidentiality agreements with these potential customers. (Emerlich Decl. in Reply, ¶ 2.) As such, it argues that the information contained in these proposals remains confidential. This argument is well-taken. Requiring a third-party to sign a non-disclosure agreement is a reasonable step to ensure the secrecy of the information contained therein. (See Whyte v. Schlage Lock Co. (2002) 101 Cal.App.4th 1443, 1454 [stating that confidentiality agreements are a reasonable step to ensure secrecy].) Here, BrightEdge produces evidence indicating that the two prospective customers at issue subsequently entered into non-disclosure agreements requiring them to maintain the secrecy of its confidential information. (Emerlich Decl. in Reply, ¶ 2.) As such, it appears that BrightEdge made reasonable efforts to maintain the secrecy of this information.

Accordingly, the Court finds that (1) there exists an overriding interest that overcomes the right of public access to Exhibits A-H; (2) this interest supports sealing the unredacted documents; (3) a substantial probability exists that the overriding interest will be prejudiced if the unredacted documents are not sealed; (4) the proposed sealing is narrowly tailored; and (5) no less restrictive means exist to achieve the overriding interest. (See Cal. Rules of Court, rule 2.550(d).) Therefore, BrightEdge’s motion to seal is GRANTED.