Amgen v CCH

CXO REVIEW

Amgen v CCH

California Correctional Health Care Services (CCH)

Date of decision April 9, 2020

Amgen was treating an impending price increase as confidential information

Amgen was required by law to give notice to registered purchasers, such as CCH, when it planned to increase its prices

When a third party asked CCH to disclose information in one of the notices, Amgen moved for an injunction, claiming that the information was a trade secret

Court of Appeals found the information was not bound by an NDA and therefore wasnot able to be protected as a trade secret

CXO SUMMARY

Sensitive business information, such as pricing strategies, can be protected by trade secret laws. However, non- disclosure agreements MUST cover the specific information shared with your partners. This is a cross-disciplinary problem because the business executives typically only care that there is an NDA, not necessarily about the details of what is covered.

The act of labeling confidential information as a trade secret is an important first step to protecting your assets. However, when you share that information outside the company, the NDA is ultimately the governing document. It needs to be written with appropriate specificity to protect the assets in question.

OVERVIEW
Amgen Inc. is a biopharmaceutical company with an annual revenue of about 25 billion dollars. Amgen is required, by law, to give its registered purchasers notice before increasing its prices. CCH was one of its registered purchasers at the time of this case and, therefore, received these notices. Confidential business information like pricing strategy can be protected as a trade secret. However, if you are required to disclose such sensitive information, all possible efforts should be made to impose confidentiality obligations onto the party that gains access to that information.

ROUND 1
Amgen was granted a preliminary injunction based on trade secret protection, which required its customer, CCH, to maintain the secrecy of its price increase notices.

ROUND 2
The Court of Appeals found that the preliminary injunction was not warranted because Amgen’s information was not kept sufficiently “secret”. Not only did Amgen fail to show that the information would remain confidential once their customers received it, they were also unable to prove the economic benefit of the information.

ANALYSIS
This is an interesting case where a company was legally required to disclose sensitive information, which might otherwise be considered a trade secret.

Trade secrets must be kept confidential in order to maintain their status. Unfortunately for Amgen, it was not enough to simply label the disclosed information as confidential because this did not actually create a duty of confidentiality.

In this case, CCH was ultimately able to share the information it received from Amgen because the court determined that they did not have any confidentiality obligation to Amgen in relation to that information. If the parties had set out their confidentiality obligations from the outset, however, they may not have had to go to court in the first place.

In order to increase its chances of success at court, Amgen should have made a greater attempt to impose a duty of confidentiality upon the parties to whom it was compelled to disclose the information. It is important to note, however, that the court did not comment on whether a confidentiality agreement would be valid in these circumstances.

GENERAL COUNSEL REVIEW

Court of Appeals found that a preliminary injunction was not warranted because the pricing notice was not a trade secret and was therefore not exempt from disclosure under the California Public Records Act.

Decision Link

Date of filing
March 19, 2019

Court of Appeals
Court of Appeals of California, Second District, Division One

Claim
Trade Secret Privilege

Date of decision
April 9, 2020

Presiding judge
Bendix, J.

Relief sought
Preliminary Injunction preventing CCH from disclosing the details of price increase notices

BACKGROUND

The plaintiff was required, by law, to give notice to its registered purchasers whenever it planned to increase its prices. When a third party asked the defendant, who was a registered purchaser, to disclose the information contained in one of these notices, the plaintiff argued that this information was a trade secret and therefore confidential under the California Public Records Act. In an attempt to protect the information, the plaintiff moved for an injunction, which was granted at the trial level, but reversed at the Court of Appeals.

The injunction was reversed by the Court of Appeals because the Court found that the notice of price increases was not a trade secret. To be a trade secret, the information must be (1) valuable because it is unknown to others and (2) information that the owner has attempted to keep a secret.

The Court found that the plaintiff failed on the first point because it shared the price increases with the registered purchasers, who were under no obligation to protect the confidentiality of the information. It did not matter that the plaintiff was legally required to do so. At minimum, the plaintiff would have needed to provide evidence that the information was not and would not, be disclosed to the public or those who could obtain economic value from the information’s disclosure.

Though Amgen labeled the information as “confidential” when it distributed it to registered purchasers, this did not create a legitimate confidentiality obligation. In addition, the Court found that the registered purchasers themselves could obtain economic value from receiving the information (e.g. they could choose to buy from another seller). Because of this, any benefit that the plaintiff may have derived from keeping future prices a secret was lost the moment the increase was disclosed to the registered purchasers.

KEY PRECEDENTS CITED

  • DVD Copy Control Assn., Inc. v. Bunner (2004) 116 Cal.App.4th 241, 251 [10 Cal.Rptr.3d 185] (DVD Copy) Provides a test for determining whether something is a trade secret.
  • Bridgestone/Firestone, Inc. v. Superior Court (1992) 7 Cal.App.4th 1384 The party claiming the trade secret privilege under Evidence Code section 1060 bears the burden of proving its entitlement to that privilege.
  • ITV Gurney Holding Inc. v. Gurney (2017) 18 Cal.App.5th 22, 28-29 [226 Cal.Rptr.3d 496] (ITV Gurney) The factors that a court will consider when deciding whether to order a preliminary injunction.

LEGAL SIGNIFICANCE

Simply labeling information as “confidential” is not necessarily enough to secure its status as a trade secret. This is because the label does not automatically impose a duty of confidentiality upon the person accessing the information. It is important to ensure that, to the greatest extent possible, trade secrets are only shared with people who have a duty to protect them and to refrain from gaining economic value from them.

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