## Facts

- Centurion Industries, Inc. and the patent owner sued Warren Steurer and Associates and Instructional Materials and Equipment Distributors in a California patent infringement action involving a “teaching device” with a self-generated program.
- Cybernetic Systems, Inc., a nonparty manufacturer of the accused teaching machines, created and controlled the machines’ functions through proprietary software it claimed as a trade secret.
- Centurion could not obtain personal jurisdiction over Cybernetic in the California action and instead noticed a Rule 30(b)(6) deposition and subpoenaed documents from Cybernetic in New Mexico.
- Centurion sought production of the software and related materials to evaluate whether the accused machines met the patent’s claim limitations.
- Cybernetic objected, asserting trade secret protection and arguing Centurion had not shown the relevance and necessity required to justify disclosure.
- A magistrate ordered production subject to a strict protective order limiting access and use to counsel and experts in the California litigation; the district court affirmed.

## Issues

1. Under Federal Rule of Civil Procedure 26(c)(7), when may a court compel a nonparty to produce trade secret information in discovery in light of claimed competitive harm?
2. How are burdens allocated, and what balancing test governs, when trade secret status and potential harm are shown but the requesting party asserts relevance and necessity?

## Decision

- The Tenth Circuit affirmed the order compelling production of Cybernetic’s software and related materials, subject to the protective order.
- The court held that trade secrets are not absolutely immune from discovery.
- It found Cybernetic met its initial burden to show trade secret status and potential harm from disclosure.
- It concluded Centurion met its shifted burden to show the information was relevant and necessary to the patent infringement issues.
- The district court did not abuse its discretion in ordering disclosure with restrictions designed to reduce the risk of competitive injury.

## Legal Principles

- There is no absolute privilege shielding trade secrets and confidential commercial information from discovery.
- Under Rule 26(c)(7), the resisting party must first show (1) the material is a trade secret and (2) disclosure may be harmful.
- If that showing is made, the requesting party must prove the information is (1) relevant and (2) necessary to the claims or defenses.
- The court must balance the requesting party’s need for the information against the injury likely to result from disclosure.
- If relevance or necessity is not shown, discovery should be denied; if shown, disclosure may be ordered unless the request is unreasonable, oppressive, annoying, or embarrassing.
- Protective orders limiting access and use are a standard method to allow needed discovery while reducing disclosure-related harm.
- Discovery rulings on trade secret production and protective orders are reviewed for abuse of discretion.

## Conclusion

The court affirmed compelled disclosure of a nonparty’s trade secret software because the requesting party showed relevance and necessity to prove patent infringement, and the trial court reasonably balanced need against harm by imposing a strict protective order.


Centurion Indus., Inc. v. Warren Steurer & Assocs., 665 F.2d 323 (10th Cir. 1981)