In the artificial intelligence legal sphere, a perfect storm for unfair competition and trade secret claims is brewing. The competition for AI talent has reached extraordinary levels.

Top researchers are earning over $10 million annually at OpenAI, with the company offering more than $2 million in retention bonuses and equity packages exceeding $20 million to prevent defections. Even more striking, Meta has reportedly offered some AI researchers compensation packages worth up to $300 million over four years as it builds its superintelligence lab.

These aggressive poaching and retention efforts signal a coming wave — departing superstars from AI labs and enterprise companies deploying cutting-edge AI solutions possess trade secrets undoubtedly valued up to the hundreds of millions of dollars.

After a lull in 2022 following the COVID-19 pandemic, trade secret claims filed in U.S. district courts have swelled in the ensuing years, with the most popular venues including the U.S. District Courts for the Central District of California and Southern District of New York. As the undisputed AI hub of the world, Northern California can expect a pronounced spike in AI-related trade secret and unfair competition claims, with their typically attendant breach of confidentiality claims.

With the current hypersonic speed of AI research, product development and employee hiring, years of litigation delay will take a toll on the industry.

And this is where the "tell me what I took" trade secret conundrum comes to play.

The bottom line is that California must amend California Code of Civil Procedure, Section 2019.210, to introduce procedural clarity and fairness, requiring defendants in possession of former employer materials to promptly disclose and return these materials upon a credible prima facie showing of possession. Without this amendment, strategic delay and unjust enrichment will persist, undermining property rights and stifling innovation.

The Problem With Current Law

Section 2019.210 was enacted with noble intentions: to prevent fishing expeditions in trade secret litigation by requiring plaintiffs to identify their taken trade secrets with reasonable particularity before commencing discovery. However, this well-intentioned provision has created an unintended consequence that undermines fundamental property rights and enables, if not invites, strategic abuse and delay by defendants.

The current framework creates a perverse incentive structure. When a defendant possesses company materials that they have no legal right to retain — whether trade secrets or not — Section 2019.210 effectively shields them from having to return those materials until the plaintiff can navigate the complex process of crafting detailed trade secret disclosures of what they think has been taken. Until court intervention is required in motion practice, defense counsel are the sole arbiters of the sufficiency of plaintiffs' trade secret designations, and the defense response is invariably: "Wrong, do the disclosure again."

To be clear, the gamesmanship problem outlined below disproportionately benefits counsel more than clients, as the back-and-forth exchange and objections to trade secret disclosures that are not adequately particularized almost invariably engender tens of thousands of dollars, if not more, in legal fees. Clients lose the game more often than not.

This delay mechanism transforms what should be a straightforward property recovery into protracted litigation, driving up costs and enabling defendants to maintain possession of materials that rightfully belong to their former employers. When AI companies face litigation involving complex algorithms, machine learning models, proprietary datasets and the newest agentic capability, the "reasonable particularity" requirement will provide ample fodder for this strategic delay.

The Gamesmanship Problem

In practice, Section 2019.210 has become a tool for strategic delay rather than legitimate case management. Defendants routinely exploit the identification requirement through the following predictable tactics.

Initial Disclosures Are Never Enough

Increasingly since the passage of Section 2019.210, precious few litigants have had their initial trade secret identification deemed sufficient by a defendant. Defense claims of inadequate and nonparticularized designation have become invariable. The expensive and time-consuming norm now includes three to four rounds of seriatim attempts at adding further verbiage to create the appearance of particularity that will pass muster with the court.

Selective Disclosure

When faced with prima facie evidence of possession, defendants often acknowledge only the specific materials identified in the plaintiff's showing, while concealing additional company materials they have no right to retain. In other words, to the plaintiff company trying to claw back its property, what it doesn't know, will hurt it. This rewards the technically savvy departing employee that can obfuscate and hide the means of exfiltration and volume of taken company materials.

Delay Tactics

The complex and seriatim process of preparing trade secret disclosures — often requiring extensive, front-loaded forensic investigation that cannot capture the full extent of taken materials — creates months or even years of delay during which defendants continue to benefit from wrongful possession. Ironically, this delay often can harm defendant employers that are unaware of the trove of materials taken by their new hire, and it creates liability when those materials are used by the employee during the months of Section 2019.210 procedural disputes. Most defendant employers would benefit by early and complete turnover of wrongfully retained prior employer materials. You can't misuse, and incur liability for, what you no longer possess. This is particularly so when one's new employee fails to come clean about taken materials, instead using them selectively and surreptitiously without notice to or complicity of the employer.

Burden Shifting

The current system perversely places the burden on the rightful owner to prove what they own and what was taken, rather than requiring the defendant to justify their continued possession of materials that most often clearly belong to the former employer.

Unintended Interference

With Contractual Rights When departing employees retain company materials, more often than not they do so in breach of employment agreements, such as proprietary information agreements. When former employers demand immediate return of all company materials taken in breach of contract, or file a complaint alleging both breach of contract and trade secret misappropriation, Section 2019.210 provides a means of delaying that return for both trade secret and non-trade secret materials alike.

In over 20 years of extensive trade secret practice, this author has never seen a defendant voluntarily return plainly non-trade secret materials while withholding trade secret materials pending a sufficiently particularized disclosure. All materials are withheld from their owner pending resolution of the Section 2019.210 disputes.

A Fundamental Property Rights Perspective

The current framework loses sight of two related basic principles: Companies have an undeniable right to their own materials, and departing employees rarely have rights to continued use of their former employer's materials. Whether those materials ultimately qualify as trade secrets is a separate question from whether a former employee has any right to retain them. The law should not conflate these distinct issues or allow trade secret identification requirements to obstruct the rapid return of company property.

When a defendant possesses company materials — whether they constitute trade secrets, ordinary confidential information or even nonconfidential company documents — the presumption and process should favor prompt return to the rightful owner. This is not about trade secret law; it is about basic property rights and preventing unjust enrichment.

The Proposed Solution

California should amend Section 2019.210 to include a new subsection that addresses instances where plaintiffs make a prima facie showing that defendants possess company materials. The amendment should provide the following.

First, when a plaintiff presents credible evidence under penalty of perjury — such as a forensic expert declaration, computer analysis or even the defendant's own admission — that the defendant possesses former company materials, the burden shifts to require comprehensive disclosure.

Upon such showing, and without the need for court intervention, defendants must disclose and return all company materials in their possession, custody or control, not merely those specifically identified in the prima facie showing. Defense counsel may maintain a litigation copy of the returned materials.

This disclosure requirement should operate independently of and prior to the trade secret identification requirements, recognizing that property recovery and trade secret analysis are distinct legal issues. The requirement should apply to all company materials, recognizing that the right to possession is not limited to trade secrets and that defendants rarely take isolated documents.

Finally, the amendment would provide an expedited protective order mechanism by which defendants could challenge the comprehensive disclosure requirement.

Addressing Potential Objections

Critics might argue that this amendment could lead to overly broad discovery or burden defendants unfairly. However, these concerns are misplaced.

First, the amendment would apply only when plaintiffs make a credible and declared prima facie showing, not in all trade secret cases. This threshold requirement prevents fishing expeditions while addressing clear cases of wrongful possession.

Second, the amendment does not create new substantive rights, but simply provides an efficient mechanism for enforcing existing property rights that are already recognized under California law.

Third, requiring return of company materials is inherently proportional because defendants very rarely have a legitimate interest in retaining former employer materials.

And last, defendants' due process rights are adequately protected by the prima facie evidence requirement and their ability to challenge the showing before being required to make comprehensive disclosure.

The Broader Policy Implications

This amendment would serve several important policy goals.

Creating swift consequences for retaining company materials would discourage employees from taking confidential information in the first place. And streamlining the recovery process would reduce litigation costs for both parties and the court system.

Furthermore, faster recovery of company materials would better protect California's innovation economy by ensuring that companies can quickly regain control of their intellectual property.

Paradoxically, clearer rules about material return could actually enhance legitimate employee mobility by providing certainty about what constitutes permissible versus problematic conduct.

And finally, once a plaintiff-employer fully comprehends the extent of all taken materials, the resulting trade secret disclosure can accurately and completely describe all materials deserving of trade secret protection. The wasteful guesswork goes away.

Implementation Considerations

The amendment should include carefully crafted language to define the prima facie standard and ensure appropriate procedural safeguards. Courts should be given discretion to impose reasonable limitations on the scope of disclosure where justified by specific circumstances, while maintaining the presumption in favor of comprehensive return.

The amendment should also include provisions for sanctions against defendants who fail to comply fully with disclosure requirements, recognizing that the current system's weakness lies partly in inadequate enforcement mechanisms.

Conclusion

Section 2019.210 has inadvertently created a system that privileges strategic delay over property rights. By requiring plaintiffs to navigate complex trade secret identification procedures before they can recover their own materials, the current law enables defendants to exploit procedural requirements to maintain wrongful possession. As AI-related unfair competition and trade secret claims explode in the coming years, commensurate with the multibillion-dollar stakes, California's legal system should not incentivize and reward delay for delay's sake.

The proposed amendment would restore balance to the system by recognizing that property recovery and trade secret analysis are distinct issues requiring different procedural approaches. When defendants clearly possess company materials they have no right to retain, the law should facilitate prompt return rather than creating obstacles that serve no legitimate purpose.

This reform would reduce litigation costs, eliminate strategic gamesmanship and restore respect for fundamental property rights — all while maintaining appropriate protections against genuine fishing expeditions. California's trade secret law should protect legitimate business interests, not enable procedural abuse by those who have already crossed legal boundaries.

The time has come to close the loophole that allows defendants to hide behind trade secret identification requirements while wrongfully retaining company property. This amendment would achieve that goal while strengthening California's position as a leader in protecting innovation and intellectual property rights.

This article was originally published in Law360 on Aug. 5, 2025.