Toyota Motor Corp lost a key courtroom skirmish with product-liability lawyers on Wednesday over rules for safeguarding its trade secrets in litigation stemming from complaints about its cars racing out of control.

The judge presiding over the cases rejected Toyota's request to bar any confidential information it produces in pretrial proceedings from being disclosed to outside experts or consultants on the plaintiffs' legal team if those experts had worked for a rival car company in the past year.

Toyota <7203.T> sought the exclusion as part of a protective order the judge will issue sealing from the public record any proprietary information that may compromise Toyota's competitive position during the so-called discovery process.

Plaintiff's lawyers argued Toyota's request would have gone too far, hampering their ability to hire top-rate automobile industry engineers and other experts as they pursue scores of personal-injury and consumer class-action claims against the Japanese carmaker.

This is a very limited area of expertise, plaintiffs lawyer Mark Robinson said during a two-hour hearing that dealt mostly with procedural issues. Most of these are people who have worked for other companies.

U.S. District Judge James Selna agreed, saying he saw no reason why former employees of other car companies could not be made privy to confidential material as experts for the plaintiffs without exposing Toyota's trade secrets.

But Selna granted Toyota's request to generally exclude current employees of Toyota's competitors, whom he said by definition have divided loyalties.

He also agreed to establish a separate, more restrictive order safeguarding Toyota's computer source code, which the company called the crown jewel of its intellectual property.

The next hearing in was tentatively set for July 20.

LATEST FACE-OFF OVER DOCUMENTS

Toyota faces a potential civil liability estimated at more than $10 billion from lawsuits sparked by complaints of runaway automobiles that also have led to worldwide recalls of more than 8 million of its vehicles.

The National Highway Traffic Safety Administration is investigating reports that as many as 89 crash deaths since 2000 may be linked to unintended acceleration in Toyota cars.

Technical issues are at the heart of those inquiries, as well as litigation being waged in U.S. courts. The legal outcome hinges on the ability of experts hired by plaintiff's lawyers to sift through and interpret the mountain of documents those lawsuits are expected to generate.

Toyota has insisted that the only defects involved in unintended acceleration of its vehicles are ill-fitting floor mats and sticking gas pedals.

But many of the lawsuits suggest that at least some of the problems with surging engines are rooted in an as-yet unidentified glitch in Toyota's electronic throttle control system, which the company has steadfastly denied.

Wednesday's hearing marked the second time the two sides have squared off in court since more than 100 separate federal lawsuits related to unintended acceleration in Toyota vehicles were merged in April for pretrial proceedings and assigned to Judge Selna in Orange County, California.

Toyota says it now faces more than 230 such federal lawsuits. More than 150 other cases have been filed in various state courts around the country.

Selna last month ruled for the plaintiffs in giving Toyota 30 days to turn over the bulk of some 125,000 pages of documents already submitted to congressional panels and auto safety regulators. The deadline is July 2.

Those documents and many more to be turned over during discovery -- in which the two sides exchange information to prepare for trial -- will all be subject to the protective order argued in court on Wednesday.

Such an order essentially will let Toyota decide which documents and other material will be labeled as confidential -- trade secrets such as product research and design or proprietary financial and marketing information.

Those records would then be turned over to the plaintiffs but be sealed from scrutiny except by officers of the court, lawyers and their respective clerks, paralegals and other employees. Under the judge's decision, plaintiffs' consultants, even if formerly employed by Toyota's rivals, also would be privy to the documents.

Selna rebuffed Toyota's request to prohibit the most sensitive of its internal documents -- those it deems highly confidential -- from being shared between lawyers in the consolidated federal litigation and attorneys pursuing separate cases against Toyota in various state courts.

The consolidated federal case is: In re: Toyota Motor Corp Unintended Acceleration Marketing, Sales Practices and Products Liability Litigation, 8:10ML02151.

(Editing by Derek Caney and Matthew Lewis)

Toyota Lawsuit