Court Holds Preliminary Injunction Hearing in “Houston College of Law” Trademark Case

Court Holds Preliminary Injunction Hearing in “Houston College of Law” Trademark Case

There is something almost surreal about a Houston courtroom packed with Houston lawyers watching some of Houston’s most prominent lawyers argue about whether a Houston law school’s new name infringes the trademarks of another Houston law school.

That was the scene on Friday, August 26 in U.S. District Judge Keith Ellison’s courtroom. Judge Ellison heard lengthy presentations by two teams of lawyers. The judge interjected questions and comments but made no ruling. You can read the motion for injunction here and the response here.

For readers who are not Houston lawyers, a little background. South Texas College of Law is a private law school located in downtown Houston. It recently changed its name to Houston College of Law. The nearby University of Houston promptly sued Houston College of Law for trademark infringement, claiming that the new name is likely to be confused with the public University of Houston, which has its own law school.[1]

Houston College formerly
Houston College of Law argues it changed its name because “South Texas” gave people the wrong idea

Shortly after being sued, Houston College of Law received a gift: this opinion from the Eleventh Circuit Court of Appeals holding that there was no likelihood of confusion between “Florida International University” and “Florida National University.”[2] Houston College of Law argued that this Florida case provided a “blueprint” for the Houston case. However, the University of Houston argued that the Florida case had significantly different facts.

Watching this hearing was more educational than attending any trademark litigation seminar. Among a host of intriguing issues raised, these stood out:

  1. What is the Name of the Law School at the University of Houston?

You would think this would be an easy issue. Over the years, the law school at the University of Houston has called itself the “University of Houston College of Law,” “Bates College of Law,” and the “University of Houston Law Center.”

The defendant argued that “University of Houston Law Center” has been the name since 1982, and that UH has abandoned “University of Houston College of Law.” The plaintiff argued that despite the change to the primary name “University of Houston Law Center,” UH has continued to use “College of Law” on diplomas and other materials.

Houston College of Law Plaque and Diploma
UH argues it still uses the name “College of Law”

Why does it matter? For one thing, the University of Houston did not include “University of Houston Law Center” on the list of registered and common law trademarks it sought to protect. It is easier to show a likelihood of confusion between “Houston College of Law” and “University of Houston College of Law” than to show a likelihood of confusion between “Houston College of Law” and “University of Houston Law Center.” A rose by any other name may smell as sweet, but in trademark litigation, the name’s the thing.

Judge Ellison did not resolve this issue at the hearing, but it was interesting that he asked more than once whether the defendant’s new name could cause some confusion with the name “University of Houston Law Center.” There was also a lot of argument about school colors, but the judge seemed less interested in that.

  1. Who Are the Relevant Purchasers of Services from a Law School?

Houston College of Law argued that prospective students are the relevant consumers, while the University of Houston argued for a broader group that includes people who hire law school graduates. Why does this matter?

Let’s back up a little. The key issue in trademark infringement litigation is “likelihood of confusion.” To determine likelihood of confusion, courts consider a list of eight factors (for some reason trademark lawyers call them “digits”), which include the “identity of purchasers” and the “degree of care exercised by potential purchasers.”[3] A higher degree of care means a lower likelihood of confusion.

If, as Houston College of Law argues, the relevant consumers are prospective law school students, you would expect the likelihood of confusion to be lower. These are relatively sophisticated “purchasers” making a major life decision. They are likely to exercise a high degree of care in selecting the place where they are going to spend their lives (and money) for the next three years.

But if you expand the universe of “consumers” to a larger group that includes practicing lawyers and potential clients, you would expect the likelihood of confusion to be higher. In a sense, UH argues, a law school doesn’t just produce education, it produces law school graduates. The “consumers” of those graduates include the people who decide whether to hire the graduates. Those people are not making a life decision about where to go to law school and may be more likely to be confused.

Both arguments are plausible. But arguments are one thing, authorities are another. Judge Ellison asked more than once what authority—meaning case law—the University of Houston had to support its position that the relevant consumers are not just prospective law students. UH had an argument for its broader definition of relevant consumers, but it did not identify any direct authority for it.

UH Law Center
UH argues that the relevant consumers are not limited to prospective law students

But even if the relevant consumers are prospective students, UH argued, the survey conducted by its expert found that the confusion rate among prospective law students was actually higher than the confusion rate among other groups. Houston College of Law, on the other hand, argued that any initial confusion among prospective law students will be quickly dispelled as soon as they start investigating law schools. That argument dovetails with the next legal issue.

  1. Does “Initial-Interest Confusion” Matter When the Service at Issue is a Three-Year Law Degree?

When the defendant’s alleged infringement causes initial confusion among consumers that is later cleared up, trademark lawyers call it “initial-interest confusion.” Does evidence of initial-interest confusion establish a “likelihood of confusion”?

Houston College of Law argued that the concept of initial-interest confusion, if it applies at all in the Fifth Circuit, is limited to scenarios like bars and fast food restaurants. For example, if a restaurant on the highway uses the name “McDonalds” to get people to pull over and come in, it has caused McDonalds harm because once those people are “in the door,” they may decide to stay even after they realize “this isn’t the real McDonalds.” Similarly, if a bar uses the word “Elvis” in its name to get people in the door, it has benefitted from the association with the King, even if people later realize that the bar is not affiliated with the real Elvis Presley.[4]

coffee shop sign
A trademark that gets people “in the door” can create “initial-interest confusion”

Prospective law school students, on the other hand, are not going to walk into a law school because of the name and say “well, as long as I’m here, I might as well stay another three years and get a law degree.” Even if a prospective student initially thinks that Houston College of Law is affiliated with the University of Houston, that initial impression does not cause any harm to the University of Houston once the student learns he was mistaken. At least that is Houston College of Law’s argument on “initial-interest confusion.”

  1. Does Trademark Infringement Create a Presumption of Irreparable Injury?

If the judge finds a likelihood of confusion, does UH get an injunction? Theoretically, a plaintiff seeking an injunction must show imminent “irreparable injury,” meaning injury that cannot be adequately compensated by money damages. I say “theoretically” because as a practical matter, this is one of the most ignored rules in litigation. The real rule seems to be that an injunction will be issued if the judge thinks the defendant’s conduct is not just bad, but really bad.

But that’s a subject for another post. In trademark litigation, it is usually enough for a plaintiff to prove that the defendant is infringing the plaintiff’s trademark. The court then issues an injunction ordering the defendant to stop doing the thing that is infringing the plaintiff’s trademark. This has become so commonplace that some say a showing of likelihood of confusion creates a presumption of irreparable injury, such that specific evidence of irreparable injury is not required.

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Does the eBay case apply to trademark litigation?

However, in eBay Inc. v. MercExchange, L.L.C., the U.S. Supreme Court declined to adopt a categorical presumption that patent infringement causes irreparable harm favoring an injunction.[5]

Does the eBay principle apply to trademark infringement as well? This is an issue trademark lawyers love to argue, but it borders on academic. In most cases the plaintiff offers at least some evidence of irreparable harm. If the judge is inclined to grant an injunction, it is safer for the judge to cite evidence than to rely on a categorical presumption that may or may not apply.

The argument to Judge Ellison on this issue was typical. Houston College of Law argued that there is no presumption of irreparable injury and that the evidence did not prove irreparable injury. Conversely, the University of Houston argued that there is a presumption of irreparable injury and that even without a presumption, the evidence proves irreparable injury.

“How do you value a law school?” UH’s counsel pointedly asked in his summation. If the University of Houston Law Center’s national ranking drops because of confusion with Houston College of Law, he argued, that harm cannot be adequately compensated with dollars. The same number of students may enroll and pay the same tuition, but the quality of the students won’t be the same.

If Judge Ellison issues an injunction, I expect he will say something to this effect: “It is unclear in the Fifth Circuit whether a showing of trademark infringement creates a presumption of irreparable harm, but in this case it is unnecessary to decide that issue because there is evidence of irreparable harm.”

Will he issue an injunction? Stay tuned to Five Minute Law to find out.

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Zach Wolfe practices business litigation with Fleckman & McGlynn, PLLC, a Texas law firm with offices in Austin, Houston, and The Woodlands.

His references to arguments made in the lawsuit are not endorsements of the arguments. Any opinions expressed are his own, not the opinions of his firm or clients. Every case is different, so don’t rely on this post as legal advice for your case.

[1] Bd. of Regents of the Univ. of Houston Sys. v. Houston College of Law, Inc., No. 4:16-cv-01839 (S.D. Tex. 2016).

[2] Florida Int’l Univ. Bd. of Trustees v. Florida Nat. Univ., Inc., No. 15-11509, 2016 WL 4010164 (11th Cir. July 26, 2016).

[3] Am. Rice, Inc. v. Producers Rice Mill, Inc., 518 F.3d 321, 329 (5th Cir. 2008).

[4] This was an actual case: Elvis Presley Enterprises, Inc. v. Capece, 141 F.3d 188 (5th Cir. 1998).

[5] eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 393-94 (2006).

Webcast: Proving (or Attacking) Lost Profits Damages in Trade Secrets and Other Cases

Webcast: Proving (or Attacking) Lost Profits Damages in Trade Secrets and Other Cases

Today I am excited to present a one-hour webcast on the Texas Supreme Court’s recent decision in Southwestern Energy v. Berry-Helfand and what it means for lost profits damages and trade secrets cases. I previously addressed the case here. Thanks to TexasBarCLE for hosting and to my panelists Kelly Leonard and Robert Ford for their insights. You can download the slides here.

If you have comments, feedback, or questions, please feel free to post them as comments below. Thanks!

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Zach Wolfe practices business litigation with Fleckman & McGlynn, PLLC, a Texas law firm with offices in Austin, Houston, and The Woodlands. 

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.

Call Crockett and Tubbs: Three Lessons from the Recent Miami Case on the Defend Trade Secrets Act

Call Crockett and Tubbs: Three Lessons from the Recent Miami Case on the Defend Trade Secrets Act

Last week I learned from Houston litigator Jason Sharp that a federal court in Florida recently issued an opinion concerning the new federal Defend Trade Secrets Act (DTSA). This is a big deal if you are a trade secrets litigation nerd. It’s probably kind of like how my mom felt as a teenager when a new Beatles record came out.

In M.C. Dean, Inc. v. City of Miami Beach, the federal district court dismissed a trade secrets lawsuit because the plaintiff failed to plead a plausible case that it made reasonable efforts to maintain the secrecy of the information and that the information was “misappropriated” by the defendants.[1]

This new case teaches us some important things about federal trade secrets litigation:

  1. It’s good to know people who keep up with new DTSA cases so you don’t have to.
  1. For Texas lawyers, who now have the option to file trade secrets lawsuits in state or federal court, the higher pleading standard in federal court is a factor to consider, but not that big a deal (as I will explain).
  1. No one should file a trade secrets case in federal court without using my essential checklist for properly pleading a DTSA claim.

Let’s break this down.

Lesson 1: Follow people who follow recent trade secret cases.

This one is self-evident.

Lesson 2: Federal pleading standards are a factor, but not a big factor, in deciding where to file a trade secrets lawsuit.

Lesson 2 arises from the difference in pleading standards between Texas state court and federal court. Most lawyers learned in law school that both state and federal courts allow “notice pleading,” meaning that it is sufficient to file a pleading that gives the other side “fair notice” of your claim. However, in the famous pair of cases Twombly and Iqbal, the U.S. Supreme Court held that what law school professors had been teaching all those years was wrong. It turns out that in federal court you have to plead specific facts sufficient to establish a “plausible” basis for your claims. The defendants in M.C. Dean used this principle to their advantage by arguing the plaintiff failed to plead a “plausible” trade secrets claim.

Beach
The City of Miami Beach argued the plaintiff failed to plead a plausible trade secrets claim

Texas state courts, in contrast, still allow notice pleading. Or do they? As hypothesized in this interesting post on a recent Texas Supreme Court case, Texas courts may be moving towards the higher “factual plausibility” standard of federal court. But for now it is probably safe to assume that pleading standards are higher in federal court.

Why does the difference in pleading standards matter for trade secrets cases? As I wrote in this earlier post, the Defend Trade Secrets Act is very similar to the Uniform Trade Secrets Act that most states have adopted, but it does not preempt state trade secrets law. Thus, as Sharp and I discussed in a webcast for TexasBarCLE, the primary practical effect of the DTSA is to give plaintiffs the option to file trade secrets lawsuits in federal court (as long as there is a sufficient connection to interstate or foreign commerce).

So when deciding whether to file a trade secrets claim in state or federal court, the M.C. Dean case shows that the higher pleading standard in federal court favors filing in state court, right?

Well, not so much. M.C. Dean was an unusual case in two ways. First, it was not the typical trade secrets case where an employee leaves a company and goes to work for a competitor, taking alleged trade secrets with him. Rather, it was a case where the plaintiff voluntarily provided the alleged trade secrets to another party pursuant to a contract. In the more typical case, it is easier to allege misappropriation.

Trade Secret File
Does M.C. Dean, Inc. v. City of Miami Beach show that it is better to file a trade secrets lawsuit in state court?

Second, the reason for dismissal in M.C. Dean was not that the plaintiff failed to plead sufficient facts to support the trade secrets claim. The problem was that undisputed facts—namely, the contract at issue—affirmatively negated the plaintiff’s trade secrets allegations. Specifically, the key fact that doomed the plaintiff’s trade secrets claim was that the plaintiff, a sub-contractor on a City construction project, signed a contract providing that the information at issue was the property of the City and could be used by the City without restriction. It is hard to see how pleading more facts would have saved the case from this fundamental defect.

In most cases, it’s really not that hard to plead a plausible trade secrets claim. So, if filing in federal court is otherwise a good strategy for your trade secrets case, the higher pleading standard in federal court is unlikely to change your decision.

M.C. Dean does provide a good reminder that lawyers who file trade secrets claims in federal court need to be careful to plead enough specific facts to state a plausible basis for the essential elements of the claim. If you find yourself struggling to plead facts establishing a plausible claim, that is a good sign that maybe you shouldn’t be filing the lawsuit in the first place.

Lesson 3: Use a checklist to make sure you adequately plead your federal trade secrets claim.

So, if you are filing a lawsuit in federal court under the Defend Trade Secrets Act, how can you make sure that you are alleging facts sufficient to avoid having your case dismissed? The only way to be certain is to use my special checklist, available for free here.

I’m kidding, of course (sort of). You can get the same points by reading the key provisions of the statute and making your own checklist.

But hey, like the Beatles said, “I need a job, and I want to be a paperback writer.”

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Zach Wolfe practices business litigation with Fleckman & McGlynn, PLLC, a Texas law firm with offices in Austin, Houston, and The Woodlands. His wife does the graphics (at least the good ones).

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.

[1] M.C. Dean, Inc. v. City of Miami Beach, 2016 WL 4179807, at *7-8 (S.D. Fla. Aug. 8, 2016).

Public Speaking Tips for Lawyers and Other Humans: Part 2 – Watch Your Tone!

Public Speaking Tips for Lawyers and Other Humans: Part 2 – Watch Your Tone!

In Part 1, I definitively resolved the debate over leading with a joke when you have to speak in front of a group of people. For most of us, it is better to ditch the jokes and focus on making the presentation engaging. Merriam-Webster says “engaging” means “attractive or pleasing in a way that holds your attention.”  In other words, you want people to pay attention to what you’re saying and to enjoy listening to you.

Step one to holding people’s attention is your tone. This is true whether you are a lawyer making an argument in court, a teacher in front of a classroom, or a pastor preaching from the pulpit. It is no accident that “tone” is also a musical term. It means the sound of your voice, apart from the particular words you are saying. Imagine someone who doesn’t speak your language listening to your speech or presentation. What would it sound like to that person? That’s your tone.

Fortunately, just as there are many different musical instruments that can sound good (or bad), there is no single “engaging” tone. But there are two common tones that are most definitely not engaging.

The first one is “Seminar Tone.” You’ve all heard it. It’s the tone that comes from someone trying to convey the impression that “I am a very serious expert in this topic addressing something very detailed and esoteric.” It is flat. It is monotone. It is uniformly mezzo-forte. It delights in acronyms, sections, and sub-sections. It’s what you would sound like if you had to read an excerpt from a textbook on a subject that bores you.

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There is no single “correct” tone, but there are tones to avoid

The problem with Seminar Tone is that it sounds like the adults in the Charlie Brown cartoons you watched on TV when you were a kid. Waa-waah-waa-waa-waaaah. What do kids do when adults talk? They tune out. And if you talk in Seminar Tone your audience will do the same.

The other common tone that most people should avoid is what I call “Speech Tone,” which sounds like someone giving a speech. Whereas Seminar Tone tries too hard to say “I’m a very serious person,” Speech Tone tries too hard to say “what I’m saying is very important.” It just doesn’t sound right when someone stands in front of a group of 20 people and speaks as if it were a political rally in a stadium. In 1956.

Don’t get me wrong. Speech Tone works for some people in some situations. But for those of us not named John F. Kennedy or Martin Luther King, Jr., it is usually not very engaging. Even for politicians, these days Speech Tone doesn’t work that well. You need to talk loud enough to be heard, but there is no need to shout, especially if you are amplified.

Speech Tone is common in the courtroom, especially with less experienced lawyers. Perhaps younger lawyers are nervous and don’t want to come across as inexperienced. To compensate, they adopt a tone that is too stiff and formal. Even seasoned litigators can lapse into Speech Tone, although when they do so it is usually in the form of an overly aggressive, argumentative tone.

The problem is that Speech Tone—whether the stiff variety or the overly aggressive variety—tends to make the judge tune out. If the judge wanted to hear a canned presentation that repeats what is in your brief, she could just read the papers. And if the tone is too argumentative, it starts to sound like mere rhetoric. In an effort to make your tone more persuasive, you can make it sound like propaganda.

Try a different tone. As one of my mentors would say, look at a hearing with the judge as a chance to “talk turkey.”[1] Rather than approaching a hearing like a high school debate contest where you try to rack up the most points, imagine that the judge walks into your office at the end of the day, sleeves rolled up, sits down and says “ok, tell me what this case is about and why I should rule in your favor.” It took me a while to learn this, but in most cases the judge is not asking herself “who can make a better argument?” but is asking “who can I trust on the facts and the law to tell me how to get this right?”

Concert Audience
Use the right tone to keep your audience engaged

Lawyers and witnesses, please note: This does not mean you should be casual in the courtroom. There is a difference between informal and casual. Casual is how you talk to your friends at happy hour. Informal is how you talk when you visit your grandmother and she brings you a glass of iced tea and some cookies.

Strangely enough, this advice for the courtroom holds true for most kinds of public speaking, regardless of profession. It turns out the antidote for both “Speech Tone” and “Seminar Tone” is the same: adopt a conversational tone. Talk as if you are having a conversation with a friend about an important subject that intrigues you. Like who you should draft as your third fantasy football wide receiver.

If you want to make your tone even more engaging, then I invite you to graduate from a conversational tone to a musical tone. Borrow a concept from music and use dynamics. It’s no accident that people will rave about a “dynamic” speaker, even if they don’t really know what that means. A truly dynamic speaker has a tone that varies from loud to soft and in between. It has crescendos and diminuendos. Like a good Van Halen song.

Try this next time, especially if you have a microphone: When you get to a key point, instead of talking louder, build up to it and then state the conclusion very softly. I bet people will be leaning forward eager to hear what you have to say. This is just one technique. The point is to vary your tone to keep your presentation engaging.

Of course, a great tone is not going to help much if your content is frivolous or boring. You could read the phone book like a virtuoso, but it wouldn’t hold anyone’s attention. So you need to prepare content that is as engaging as your tone. Tune in to Part 3 to find out how.

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Zach Wolfe practices business litigation with Fleckman & McGlynn, PLLC, a Texas law firm with offices in Austin, Houston, and The Woodlands.

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case. You can, however, rely on it as public speaking advice.

[1] I love the expression “talk turkey” because in just two words it conveys both getting to the point and being frank. Apparently, the origin of the expression is not entirely clear.

Does What Happens to a Vegas Non-Compete Stay in Vegas?

Does What Happens to a Vegas Non-Compete Stay in Vegas?

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When I recently wrote about how Texas courts decide which state’s law will apply to a non-compete, I worried if anyone would care, or understand why they should care. Three days later, as if on cue, the Nevada Supreme Court issued Golden Road Motor Inn, Inc. v. Islam, a non-compete decision that directly conflicts with Texas law, illustrating that choice of law can make all the difference in determining whether a non-compete will be enforced. Thanks, Nevada.

The Nevada case embraced the “all or nothing” view of enforcement of non-competes, holding that an unreasonably broad non-compete is totally unenforceable and will not be “reformed” by a court. In other words, Nevada rejected the “blue pencil” rule, under which a court will rewrite an unreasonable non-compete to make it reasonable. This stands in stark contrast to Texas, where the non-compete statute requires the judge to rewrite an unreasonably broad non-compete.

This contrast raises some great questions:

  • Is the Nevada decision a sign of a national trend? Maybe.
  • If so, is the trend likely to come to Texas? Yeah, right (that was sarcastic).
  • Can Texas employers rest easy and draft their non-competes as broadly as they want, secure in the knowledge that if a judge finds the non-compete too broad, the judge will rewrite it to the extent necessary to enforce it? More about this later.

First the Nevada case itself. Golden Road Motor Inn, Inc. v. Islam had the typical non-compete litigation fact pattern:

  • Employee signs non-compete with Employer
  • Employee becomes unsatisfied with her work
  • Employee does things she shouldn’t (accessing, altering, and copying customer information from Employer’s computer system)
  • Employee goes to work for Competitor
  • Employee provides customer information to Competitor
  • Employer sues Employee and Competitor, alleging breach of non-compete and other claims

In this case, the employee was a casino hostess.  The non-compete barred her from employment with any other “gaming establishment” within 150 miles of the casino for one year following the end of her employment.  All seven justices of the Nevada Supreme Court agreed that this was an unreasonably broad non-compete and therefore not enforceable as written. But the court split 4-3 on whether the employer was entitled to reformation, with the majority holding that the court will not rewrite an unenforceable non-compete to make it enforceable.[1]

Why would a court adopt this “all or nothing” approach? The best argument for this approach is what I call the Narrowly Tailored Incentive. In most cases, the employee signs whatever the employer puts in front of her. If reformation is available, the employer can write the non-compete as broadly as it wants, knowing that a judge will save an unreasonable non-compete. But if reformation is not available, the employer has an incentive to narrowly tailor the non-compete, which is better for competition and the employee.

blue pencil
Unlike Texas, Nevada refuses to apply the “blue pencil” rule

The Nevada Supreme Court cited this argument but, strangely, focused more on the point that courts should not rewrite the unambiguous terms of the parties’ private agreement. This is a common argument in other contexts, but it is out of place in non-compete law. The whole point is that non-compete agreements are restraints of trade that affect the public interest in free competition, not just the private parties’ interests. Courts will refuse to enforce an overly broad non-compete not because of the parties’ intent, but because of public policy.

The court also went off track by citing the principle that courts should respect the terms the private parties freely agreed to. That is usually a rationale for enforcing a contract as written. It makes less sense to cite that principle as a reason for not enforcing the contract at all.

The better rationale for not allowing reformation is the Narrowly Tailored Incentive, as some other courts have recognized. One Delaware court, for example, criticized reformation because it gives the employer “every reason to start with an overbroad provision.”[2]

Nationwide, there is a spectrum of views on the blue pencil rule:

  • Some states, including Georgia and Wisconsin, simply do not allow reformation of an overbroad non-compete.[3]
  • Others, such as Louisiana, disfavor reformation and limit it to striking the offending language, rather than rewriting the non-compete.[4]
  • Some states, including Delaware and New York, allow rewriting the non-compete if the employer acted in good faith, but it is discretionary with the judge.[5]
  • The Texas legislature, in its wisdom, has by statute made reformation of an overbroad non-compete mandatory.[6]

The majority of states allow reformation to some extent. But is Nevada’s “all or nothing” rule a sign of a trend? There has been a growing chorus of criticism of excessive use of non-competes. It is possible that other states could follow Nevada as part of an effort to enact “non-compete reform.”

But don’t expect Texas to join the chorus. Texas judges must follow the Texas non-compete statute which, as noted above, makes reformation mandatory. And you don’t need a political science degree to know there is virtually zero chance the current Texas legislature would go against powerful business lobbies and make it harder to enforce non-competes, even if it was inclined to do so.

So Texas employers can do what they want with non-competes, right? Not so fast. The Texas non-compete statute does have some advantages for employees. Texas may be pro-business, but it also has a tradition of rugged individualism. While the Texas statute gives the employer the right to reformation, it also provides an important incentive to narrowly tailor the non-compete: if the non-compete is unreasonably broad, the employer cannot recover damages that occur before reformation.

Thus, in Texas the second best kind of compete is one that is tailored as narrowly as possible to protect the employer’s confidential information and customer relationships. To maximize the right to seek an injunction and damages in the event of a breach, Texas employers should narrow the non-compete “until it hurts.” For example, a six-month non-compete limited to the company’s customers in the employee’s sales territory may feel too skimpy to the employer, but it is more likely to be enforceable.

If that’s second best, what is the best kind of Texas non-compete? Look for that in a future edition of Five Minute Law.

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Zach Wolfe practices business litigation with Fleckman & McGlynn, PLLC, a Texas law firm with offices in Austin, Houston, and The Woodlands.

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.

[1] Golden Road Motor Inn, Inc. v. Islam, 2016 WL 3940950, at *8 (Nev. July 21, 2016).

[2] “In my view, a court should not allow an employer to back away from an overly broad covenant by proposing to enforce it to a lesser extent than written. More importantly, a court should not save a facially invalid provision by rewriting it and enforcing only what the court deems reasonable. Doing so puts the employer in a no-lose position. If an employer knows that the court will enforce a reasonable covenant as a fallback, the employer has every reason to start with an overbroad provision.” Delaware Elevator, Inc. v. Williams, 2011 WL 1005181, at *10 (Del. Ch. 2011).

[3] Allied Informatics, Inc. v. Yeruva, 554 S.E.2d 550, 553 (Ga. Ct. App. 2001); Wis. Stat. § 103.465 (2007).

[4] L&B Transp., LLC v. Beech, 568 F. Supp. 2d 689, 693-94 (M.D. La. 2008); Lobrano v. C.H. Robinson Worldwide Inc., 2011 WL 52602, at *7-9 (W.D. La. Jan. 7, 2011).

[5] Elite Cleaning Co., Inc. v. Capel, 2006 WL 1565161, at *8 (Del. Ch. June 2, 2006); RHIS, Inc. v. Boyce, 2001 WL 1192203, *7 (Del. Ch. Sept. 26, 2001); BDO Seidman v. Hirshberg, 93 N.Y.2d 382, 388 (1999); Marsh USA Inc. v. Schuhriemen, 2016 WL 2605014, at *4 (S.D.N.Y. May 2, 2016).

[6] Tex. Bus. & Com. Code § 15.51(c).

Public Speaking Tips for Lawyers and Other Humans: Part 1 – Should You Lead With a Joke?

Public Speaking Tips for Lawyers and Other Humans: Part 1 – Should You Lead With a Joke?

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It is reported that many people fear public speaking more than death. If you are a lawyer, I hope that isn’t true of you, because speaking effectively in front of groups is an important part of what you do. Personally, I love standing up in front of people and talking. On the other hand, mingling at a cocktail party where I don’t know anyone – now that scares me to death.

Even if you are not a courtroom litigator like me, at some point you will find yourself speaking to an audience, whether it is a client conference, a meeting with your law firm partners, or a presentation at a seminar. In fact, regardless of your profession, it is probable that at some point you will need to speak to an assembled group of multiple human beings. You need to be able to inform, to persuade, and sometimes even to entertain. And to do these things effectively, you’re going to need some advice.

What qualifies me to give this advice? Well, I do a lot of public speaking, whether it’s in a courtroom or at a seminar, and I listen to a lot of public speaking. But that’s not why I’m qualified. It comes down to the fact that I pay attention to what works and what doesn’t, and trust me, I have learned as much from what didn’t work for me as anything else. As Yogi Berra said, “you can observe a lot just by watching.”

So what works? First, don’t imagine your audience members in their underwear. That’s just weird.

Second, you have to decide whether you’re going to try to be funny. There is an intense debate over whether it is good practice to start a speech or presentation with a joke or a funny story. I will now settle this debate once and for all. To decide whether to lead with a joke, ask yourself this: Am I funny?

If the answer is yes, then have at it, lead with a joke. There is probably no better way to break the ice, get your audience’s attention, and get them on your side right off the bat. If that works, keep the jokes coming (at least until you get to a serious point).

But if the answer is no, then don’t lead with a joke, and don’t try to be funny. There is no better way to stop the momentum of a presentation than to tell a joke that doesn’t get any laughs.

The problem, of course, is that every person thinks he or she is funny. How many people have ever said “no, I really don’t have a good sense of humor”? It reminds me of writer Dave Barry’s line that “the one thing that unites all human beings, regardless of age, gender, religion, economic status, or ethnic background, is that, deep down inside, we all believe that we are above-average drivers.”

Just as some of us are below-average drivers, not all of us are actually funny. In fact, very few of us are funny. (On the very serious subject of what makes people funny, I  recommend Jerry Seinfeld’s web series Comedians in Cars Getting Coffee.)

So how do you know if you’re actually funny? Try this experiment. The next time you tell a joke in front of a group, observe the reaction carefully. (For more accurate results, your sample audience should not be drinking.) If there is laughter, is it the “polite laughter” that you get from a courteous audience when they know that someone just said something that was supposed to be funny? Or is it real laughter, the kind that comes more from the gut than from the head? The proof is in the pudding, and the difference is pretty obvious.

Chances are, you are not all that funny. If your ambition is to be a standup comedian, then this could lead to a major existential crisis. But if you are in some other profession, it’s ok, because once you figure out that you are not as funny as you thought you were, it takes some of the pressure off. Rather than trying to come up with something funny to kick off your next presentation, now you can focus on something else. For example, how about starting off with a somewhat provocative question to the audience that invites a show of hands?

And don’t feel bad. I’m not that funny either. True, my mom thinks I’m really funny, but she also thinks I should be the President.

Now, in fairness to myself, occasionally I might hit on something humorous that gets a few laughs. But generally, the things I crack myself up with in my own mind usually fall flat in front of an audience. Most of you are probably like me. So when you give a presentation, focus more on trying to be engaging than trying to be funny. If you’re interested, I will share some advice on that in the next part of this series.

Just don’t make me go to another cocktail party.

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Zach Wolfe practices business litigation with Fleckman & McGlynn, PLLC, a Texas law firm with offices in Austin, Houston, and The Woodlands.

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case. You can, however, rely on it as public speaking advice.

Customer List Confusion: The Pesky Persistence of the “Brummerhop” Rule in Texas Trade Secrets Litigation

Customer List Confusion: The Pesky Persistence of the “Brummerhop” Rule in Texas Trade Secrets Litigation

As Patrick Keating recently reported on his excellent trade secrets blog, some Texas courts seem to be ignoring the definition of “misappropriation” in the Texas Uniform Trade Secrets Act (TUTSA).  Despite the plain language of the statute, some Texas courts have held there is no “misappropriation” in the common situation where an employee initially acquires the secret through proper means but later uses or discloses it in violation of a duty to maintain its secrecy. As Vince Lombardi might say, “what the ****’s going on out here?!”

I’ve noticed that some Texas courts are also confused about customer lists as trade secrets. They think that a misappropriated customer list can be a “trade secret” even if the information in the list is “readily ascertainable” by competitors. This view persists despite the fact that the Texas Uniform Trade Secrets Act defines a “trade secret” as not “generally known” and not “readily ascertainable” to others in the industry.[1] How can Texas courts be getting this so wrong?

There seem to be two sources of confusion: (1) failing to distinguish between misappropriation of trade secrets and common law causes of action, and (2) failure to recognize that enactment of the Texas Uniform Trade Secrets Act in 2013 superseded any conflicting common law rules.

But I’m getting ahead of myself. Let’s go back in time and look at Texas common law on customer lists.

Prior to TUTSA, Texas courts disagreed on whether a readily ascertainable customer list could be a trade secret. Some courts held that if the information in the customer list was “readily accessible” by industry inquiry, then the list was not confidential information deserving protection. Others, held that even if the information was readily accessible in the industry, an employee could be held liable if she gained the information while working for the former employer.

In a case called Dannenbaum v. Brummerhop, the Houston Court of Appeals described this conflict and sided with the courts holding that an employee is liable for misappropriating an employer’s customer list even if the information is readily ascertainable.[2]

Some Texas courts have since applied the “Brummerhop rule” to misappropriation of trade secrets and other causes of action, such as breach of a confidentiality agreement or breach of fiduciary duty.[3]

Law school students take note: Investigating the origins and rationale of the Brummerhop rule would an interesting project. But this is “Five Minute Law,” so it will suffice to say that I’m skeptical of the original rationale for this curious common law rule.

The more pressing question for Texas litigators and their clients is whether the Brummerhop rule has any viability after the adoption of the Texas Uniform Trade Secrets Act. As to common law causes of action such as breach of fiduciary duty, the answer is a matter of opinion. But as to misappropriation of trade secrets, the answer is a clear “no”—or at least it should be.

TUTSA makes two things very clear. First, the statute expressly defines what is required to make a customer list a “trade secret,” and that includes the requirement that the information is not “readily ascertainable.” Second, TUTSA supersedes any common law trade secrets claim.[4] Therefore, Texas cases that applied the Brummerhop rule to a common law trade secrets claim should no longer apply.

Surprisingly, some have suggested that the Brummerhop rule continues to apply to a claim for misappropriation of trade secrets, despite the clear language of TUTSA.[5] This is a mistake.

This is not to say that a customer list is never a trade secret. It just means that a customer list—like any kind of information—must be “not readily ascertainable” to qualify as a trade secret under the statute.

Whether the Brummerhop rule should continue to apply to common law claims is more debatable. Like I said, I’m skeptical. How can it be a violation of a confidentiality agreement or a breach of the common law duty of confidentiality to take a customer list if the information in it is not really confidential? There is also an obvious causation problem. How can taking a customer list cause damage to the employer if the competitor could have readily ascertained the same information without the benefit of the list?

On the common law claims, there is at least room for argument. Therefore, when I represent the plaintiff-employer, I will reserve the right to argue that the Brummerhop rule still applies to common law claims. But don’t get confused and think that the rule should still apply to a claim for misappropriation of trade secrets under TUTSA. Read the statute. In the immortal words of Yogi Berra, “you can observe a lot just by watching.”

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Zach Wolfe practices business litigation with Fleckman & McGlynn, PLLC, a Texas law firm with offices in Austin, Houston, and The Woodlands.

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.

[1] Tex. Civ. Prac. & Rem. Code § 134A.002(6). The recently enacted federal Defend Trade Secrets Act has substantially the same definition. See 18 U.S.C. § 1839(3).

[2] Dannenbaum, Inc. v. Brummerhop, 840 S.W.2d 624, 632-33 (Tex. App.—Houston [14th Dist.] 1992, writ denied).

[3] See, e.g., 360 Mortgage Group, LLC v. Homebridge Fin. Servs., Inc., 2016 WL 900577, at *4 (W.D. Tex. Mar. 2, 2016); Tendeka, Inc. v. Glover, 2015 WL 2212601, at *14 (S.D. Tex. May 11, 2015); Rimkus Consulting Group, Inc. v. Cammarata, 688 F. Supp. 2d 598, 667 (S.D. Tex. 2010).

[4] Tex. Civ. Prac. & Rem. Code § 134A.007.

[5] For example, in Castle & Co. v. Byrne, 123 F. Supp. 3d 909, 920 (S.D. Tex. 2015), the court agreed with the plaintiff that “some Texas courts have held that even if customer information is readily available in the industry, liability will be upheld if the defendant gained the information in usable form while working for the former defendant” and said that “[t]his Court has found that a number of courts in Texas have continued to recognize the viability of [the] B[r]ummerhop rule.”  However, the court was addressing TUTSA and common law claims together. The court did not address whether TUTSA’s definition of “trade secrets” supersedes the Brummerhop rule.