It’s no secret that California’s economy has been hit hard by the dot-com bust and electricity crisis. However, what’s been lost in public debate are the wacky bills, concerning availability of discovery documents, recently passed by California legislators.

AB 36 (Steinberg, D-Sacramento) and its companion SB 11 (Escutia, D-Montebello) seek to prevent defendants in civil suits from keeping information secret, even when that information is not used at trial. Before a case goes to trial, there is an information gathering period known as “discovery.” During discovery, defendants are asked to disclose information that might bolster the plaintiff’s case and vice versa.

The bills threaten to make public the information handed over during discovery. Supporters claim that the bill will protect consumers from companies that shield product defects and hazards, such as the Firestone tire defects, with secrecy agreements. While this is a laudable goal, its unintended consequences will have disastrous results.

In the information age, ideas are the bread and butter of business. The success of software companies, bio-tech firms, and other technology-related businesses is dependent upon keeping new discoveries and business information secret. If, through exploratory litigation, a company can find out what its competitor is doing simply by coming up with frivolous charges, then intellectual property, consumer safety, and the growth of the economy are at serious risk.

Revealing companies’ proprietary information and intellectual property will harm consumers because it will discourage investment in research and development (R&D) and make documentation and inter-company discussion of product hazards more scarce. If companies can learn about competitors’ best ideas and their potential flaws by simply filing a lawsuit, all businesses will be much less likely to document or even fund projects in the R&D phase.

These bills, and any like them, will increase risk, not reduce it. Another obvious unintended consequence is that the bills will lead to increased litigation as languishing businesses go after those with the competitive advantage. This translates into increased costs for everyone except trial lawyers, who stand to gain a bundle with new cases. The more companies are forced to spend on litigation, the more costly it is for them to do business, and no one would be surprised when the companies then pass those costs on to consumers.

Potentially life-saving new advances in technology could be stymied or wind up costing so much that they would be hopelessly out of reach for poorer members of society. Imagine if a new heart valve your father needs was never produced or became more expensive simply because the company that produced it was forced to spend significant amounts of money fighting off increased numbers of lawsuits and related worries. The results are anti-consumer, anti-safety, and destructive of fair competition.

By favoring litigation over innovation, these bills are a disaster waiting to happen. Even more disturbing is that the provisions of the bills apply “[n]otwithstanding any other provision of law.” This means that existing protections for consumers and businesses could be disrupted. California law already protects consumers by mandating that “court records are presumed to be open unless confidentiality is required by law.” In other words, a judge already has the authority to decide if a company should be able to keep information confidential. It doesn’t make sense to change this balance.

To avoid more chaos in the California economy, legislators must pay attention to the unintended consequences of their actions. Opening the door for companies to get access to their competitors’ sensitive information will only serve to hurt consumers, damage the economy, and make trial lawyers more wealthy. Governor Davis should carefully consider how these bills would add to the growing list of problems already affecting California’s economy.