If a windmill kills a bird in the forest, and there is no one there to hear it, does it make a sound?

That has always struck my literal mind as a silly question. Of course it makes a sound. It doesn’t make a difference whether someone is there to hear it or not.

But obviously there is more to it than that. There are more philosophical points embedded in the question. Is our reality determined by our experience of reality? Does it matter whether something happens, if no one experiences it?

The same kind of point comes up in trade secrets litigation. I see it a lot. (But disclaimer: my hypothetical is not based on any particular case; if it seems similar to your case, that’s just because the same kind of thing tends to happen in a lot of cases.)

Let’s say our favorite hardworking sales person, Dawn Davis, gets frustrated with her employer, Paula Payne Windows, and decides to quit to join a competitor, Real Cheap Windows.

During her last week on the job, Dawn logs into the Paula Payne computer system using her password and opens six months of sales reports. She downloads them to her personal laptop (which she uses for work), or transfers them to a USB drive, or emails them to her personal Gmail account. This kind of thing happens a lot.

Dawn goes to work for Real Cheap the next week. When Paula Payne finds out that Dawn joined a competitor, she has Fred, her “IT guy,” investigate. Fred discovers that Dawn downloaded the sales reports. Paula Payne Windows sues Dawn and Real Cheap, claiming misappropriation of trade secrets and asking for an injunction to stop Dawn from working for Real Cheap.

Let’s assume for the sake of argument that the sales reports contain trade secrets, although this is usually a contested issue. See When Is a Customer List a Trade Secret. Let’s also assume that Dawn had authorization to access the computer system but was not authorized to access the particular sales reports at issue.

“Yes, I told Real Cheap’s President I had the sales reports,” Dawn says, “and we discussed generally what kind of information they contained.” But Dawn claims she never provided any of the Paula Payne Windows documents to Real Cheap, and that she never used them for any purpose.

Of course, Paula Payne Windows is skeptical. Paula Payne suspects that Dawn provided the documents to Real Cheap and used the confidential pricing information in the sales reports to undercut Paula Payne and poach some of its customers. But Paula Payne Windows has no evidence to prove this.

This fact pattern is similar to the scenario in the Waymo v. Uber case, one of the biggest trade secrets trials in recent years.

Variations on this theme are common. Employee behaves badly and takes confidential documents, Employer sues, and Employee denies using or disclosing the documents.

It raises several key practical and legal issues.

1. If the defendant wrongfully acquired the trade secrets but did not use or disclose them, is there “misappropriation”?

Let’s start with acquisition of the trade secrets. If the defendant wrongfully acquired the trade secrets, does the plaintiff have to prove the defendant also used or disclosed them?

The short answer is no. Here is the definition of “misappropriation” in the Texas Uniform Trade Secrets Act:

Tex. Civ. Prac. & Rem. Code § 134A.002(3). The federal Defend Trade Secrets Act has the same definition. 18 U.S.C. § 1839(5).

In short, TUTSA “provides six theories under which a plaintiff can establish misappropriation of trade secrets.” Six Dimensions, Inc. v. Perficient, Inc., 969 F.3d 219, 230 (5th Cir. 2020). These six theories can be grouped under two categories: (1) “acquisition of a trade secret” and (2) “disclosure or use of a trade secret.” Id.

So there you have it. “Acquisition” can be misappropriation, even without use or disclosure, if it meets the definition of misappropriation in the statute.

Yet courts have struggled with this question. In StoneCoat of Texas, LLC v. ProCal Stone Design, LLC, 426 F. Supp. 3d 311 (E.D. Tex. 2019), Judge Mazzant carefully surveyed Texas case law on whether “use” is an essential element of a trade secrets claim. He noted that some Texas cases say use is required, while others say it is not. Id. at 340-44. But ultimately, it was unnecessary to resolve that question because there was sufficient evidence to raise a fact issue on whether two defendants used the secret “French formula” at issue. Id. at 344-45.

Judge Mazzant returned to this issue in Accresa Health LLC v. Hint Health Inc., No. 4:18-cv-00536, 2020 WL 3637801, at *8-11 (E.D. Tex. July 6, 2020), discussing the StoneCoat opinion and other Texas opinions in detail. Again, he found that even assuming “use” is required, there was sufficient evidence to create a fact issue on whether the defendant used the alleged trade secrets. Id. at *11.

The cases stating that “use” is an element of a trade secret claim should be taken with a grain of salt. You have to start with the plaintiff’s theory of the case. If the plaintiff’s theory is that the defendant used or disclosed the trade secrets, then it will be accurate for the court to say evidence of “use” or “disclosure” is required. If, on the other hand, the plaintiff relies on an “acquisition by improper means” theory, then evidence of use may not be required.

In short, under the plain language of the statute’s definition of “misappropriation,” the “acquisition” theory is still a potentially viable theory.

But persuading a judge that “use” of the trade secrets is not required may be an empty victory. Because there is an obvious follow-up question: if the defendant didn’t use the trade secrets, how was the plaintiff damaged? Isn’t it the proverbial tree falling in the forest that no one hears?

2. If the evidence proves that Real Cheap Windows acquired the trade secrets from Dawn Davis but did not use them, what are the actual damages?

In theory, it may be possible to prove that Dawn Davis’s acquisition of the trade secrets—without any use or disclosure—caused actual damages to Paula Payne Windows. But in practice it will be difficult. Let’s say Paula Payne Windows cannot show that it lost any customer sales as a result of Dawn downloading the confidential sales reports. In that case it may have no actual damages.

But wait, Paula Payne, will protest. How can you say we were not damaged? Suppose our IT guy had to spend many hours investigating Dawn’s computer activity, and then we had to pay a forensic expert to investigate further. Then we had to pay our lawyer a huge amount of fees to send Dawn a demand letter, file a lawsuit, seek a Temporary Restraining Order, etc. How can you say we were not damaged?

Paula would have a point, but there’s a threshold problem with her argument. Generally, under Texas law a plaintiff cannot recover attorneys’ fees as actual damages. Worldwide Asset Purchasing, L.L.C. v. Rent-A-Center East, Inc., 290 S.W.3d 554, 570 (Tex. App.—Dallas 2009, no pet.). There are some exceptions, but none that fit the typical trade secrets dispute.

What about the forensic expert fees? Could Paula Payne Windows recover those expert fees as actual damages? The argument would be that but for the acquisition by improper means, the forensic investigation would not have been necessary.

If there is evidence that the employee’s misconduct naturally led to the company needing to hire a forensic expert to investigate, the fees may be recoverable as actual damages. See Sandberg v. STMicroelectronics, Inc., 600 S.W.3d 511, 528-29 (Tex. App—Dallas 2020, pet. filed) (forensic expert fees were recoverable as actual damages where they resulted from employee taking laptop computer with confidential information on it home after termination and not returning it for four days).

But whether the misappropriation caused those fees will depend on the specific facts. Was the forensic investigation caused by Dawn’s improper acquisition of the trade secrets, or did the forensic investigation cause the company to discover the improper acquisition? If it’s the latter, that may not be a viable actual damages theory. Similarly, if the internal IT guy is on salary, it’s probably an uphill battle to claim damages for time spent on the investigation.

So, when the misappropriation theory is acquisition by improper means, rather than use or disclosure, there may be some viable arguments for recovering actual damages, but usually those damages will be relatively minor. (I say “relatively,” because forensic expert fees, like attorneys’ fees, can add up quickly, easily reaching six figures or more in some cases.)

That’s good news for the employee, but it doesn’t lessen the sting of attorneys’ fees the employee will have to pay to defend a lawsuit.

Most of my trade secrets cases are not Google vs. Uber. They’re more like Jim Bob’s Oilfield Supply vs. Vince’s Valves. That means the cost of defense is sometimes a bigger factor than the amount of actual damages.

In many cases, that’s exactly what the plaintiff is counting on. If the company suing my client has more money and more determination, it may try to use the cost of litigation to bully my client into submission.

That brings up the next question.

3. If Dawn really didn’t use or disclose the information in the documents, how can she get the lawsuit dismissed without spending a small fortune on attorneys’ fees?

I encounter this practical problem a lot. There are several procedural options, but most of them have a low success rate.

a. Rule 12(b)(6) Motion in Federal Court

If Paula Payne Windows sues Dawn Davis in federal court and doesn’t allege specific facts establishing that Dawn used or disclosed the trade secrets, Dawn’s lawyer can file a Rule 12(b)(6) motion to dismiss. I cover this in Set Phazrs to Stun: Motions to Dismiss in Texas Trade Secrets Litigation.

(Practice Tip: This is one factor that favors filing your trade secrets suit in state court. But of course there are many factors.)

As I wrote in the Phazr post, I’m usually not a big fan of filing a motion to dismiss, but in this scenario it makes some sense. If the plaintiff does not allege specific facts establishing that the defendant used or disclosed the trade secrets, there is a decent chance the court will grant the motion. See, e.g., Phazr, Inc. v. Ramakrishna, No. 3:19-CV-01188-X, 2019 WL 5578578, at *1-2 (N.D. Tex. Oct. 28, 2019).

On the other hand, all the plaintiff has to do is allege facts sufficient to make a plausible case that the defendant used or disclosed the trade secrets. See, e.g., Computer Sciences Corp. v. Tata Consultancy Servs., Ltd., No. 3:19-cv-970-X(BH), 2020 WL 2487057, at *6 (N.D. Tex. Feb. 7, 2020) (denying motion to dismiss where plaintiff alleged facts sufficient to plausibly allege misappropriation by unauthorized disclosure and use to develop a competing software platform).

So, even in federal court it’s usually difficult to get a motion to dismiss granted.

In Texas state court? Forget about it. At least, that’s what people used to say.

b. Rule 91a Motion in Texas State Court

Times have changed. Texas now has Rule 91a, which allows you to file a motion to dismiss a cause of action on the grounds that it has “no basis in law or fact.” A cause of action has no basis in law “if the allegations, taken as true, together with inferences reasonably drawn from them, do not entitle the claimant to the relief sought.” That’s pretty similar to the federal standard, so even if Dawn Davis gets sued in state court, her lawyer could give it a try.

But it’s probably an uphill battle. It’s not clear that Rule 91a incorporates the “Twiqbal” plausibility standard that applies in federal court. See Reaves v. City of Corpus Christi, 518 S.W.3d 594, 610 n.10 (Tex. App.—Corpus Christi 2017, no pet.) (“this Court has rejected the argument that rule 91a replaced Texas’s notice-pleading standards with federal fact-pleading standards”). And if the court denies Dawn’s motion to dismiss, it could order her to pay Paula Payne’s attorneys’ fees. Tex. R. Civ. P. 91a.7.

c. TCPA Motion in Texas State Court

There was a brief, exhilirating era when you could file a motion to dismiss a trade secrets claim under the Texas Citizens Participation Act (TCPA), the Texas “anti-SLAPP” statute, but those days are over. Texas courts have been steadily narrowing the scope of the TCPA, and the legislature has now carved trade secrets claims out of the TCPA. See my post Shrinkage: TX Legislature and 5th Circuit Cut the TCPA Down to Size. Or if you want something more scholarly, see Targeting the Texas Citizen Participation Act: The 2019 Texas Legislature’s Amendments to a Most Consequential Law.

d. Special Exceptions in Texas State Court

If you were a defense lawyer in Beaumont in 1979, you probably loved special exceptions. They’re delightfully old-fashioned. A special exception usually asks the court to order the plaintiff to plead a vague claim more specifically, or else to go hence without day.

Special exceptions are something of a throwback. These days, when there is so much pretrial discovery, judges tend to say that the better way for the defendant to pin down the plaintiff on specifics is through discovery devices like interrogatories, Rule 194 disclosures, and depositions.

But in this case, special exceptions may be just what the doctor ordered. If the plaintiff has no specific evidence of use or disclosure and just relies on broad conclusory allegations, I’ll file a special exception that asks the court to order the plaintiff to plead the specific facts supporting the allegation and, if the plaintiff cannot do so, to dismiss the trade secrets claim. If nothing else, it sets me up to try to spike the ball with a later motion to dismiss or motion for summary judgment.

e. Motion for Summary Judgment

This is the grand-daddy. If Paula Payne Windows has no real evidence that Dawn Davis used or disclosed the alleged trade secrets, then a motion for summary judgment is the most direct way to attack that defect.

The problem, in a word, is discovery.

If Dawn’s lawyer files a motion for summary judgment at the start of the case, the lawyer for Paula Payne Windows is going to object that discovery has to come first. That means serving and responding to requests for production of documents, scheduling and taking depositions, and fighting over discovery disputes in pretrial hearings. All of that takes a lot of time and money. So it usually defeats the purpose of trying to get an unfounded claim dismissed quickly and inexpensively.

This is a problem in all kinds of litigation, not just trade secrets litigation. The Texas legislature and Texas courts have tried to do something about it—such as passing the TCPA—but there’s no easy answer. Unless you’re going to cut off a plaintiff’s right to seek discovery to support its claim, litigation is just going to be expensive. There’s no way around it.

Kind of like a forest.

______________________________________

Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation. Thomson Reuters named him a 2020 Texas Super Lawyer® for Business Litigation.

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.

When you hear “misappropriation of trade secrets,” you might picture some elaborate heist where the thief is lowered into the secure underground vault from an opening in the AC duct, like Tom Cruise in Mission Impossible. The thief hacks into the company’s server, downloads the secret weapons technology, then boards a plane to China where he hands the flash drive to a shadowy figure in exchange for a briefcase full of cash.

Of course, most trade secrets lawsuits are nothing like that.

For one thing, the typical trade secrets claim involves boring “soft” trade secrets like customer lists, pricing, and other customer information. And even in cases involving “hard” trade secrets like the literal or figurative secret sauce, the parties to the dispute usually had some legitimate business or employment relationship with each other before things went south.

That means in most trade secrets lawsuits, the person who allegedly “misappropriated” the trade secrets initially acquired them lawfully.

For example, in the typical departing employee dispute, an employee legitimately acquires the company’s trade secrets while working for the company. Another typical scenario is a contract between two companies containing an NDA. It might be an agreement between a vendor and a customer, or an agreement between two companies pursuing some kind of joint venture. They voluntarily share confidential information with each other, agreeing not to use it outside of that particular transaction.

In these situations, the initial acquisition of the trade secrets is not tortious. The claim is that misappropriation happened later, when the person did something with the trade secrets that he wasn’t supposed to do.

Both the Texas trade secrets statute and the federal trade secrets statute anticipate this kind of claim in the same way: a complicated multi-pronged definition of “misappropriation.”

“Misappropriation” means stealing, using, or disclosing

The definition of “misappropriation” is the same in both the Texas and federal trade secrets statutes. See Tex. Civ. Prac. & Rem. Code § 134A.002(3); 18 U.S.C. § 1839(5).  I would quote it but that would just confuse you. Instead, I’ll just sum it up as Wolfe’s Second Law of Trade Secrets Litigation: You can’t steal a trade secret, and you can’t use or disclose a trade secret without the owner’s consent.

(In case you missed it, Wolfe’s First Law of Trade Secrets Litigation says whatever company information the employee takes on the way out the door will be the alleged “trade secrets” in the company’s subsequent lawsuit.)

My Second Law is, of course, an oversimplification. And the statute doesn’t use the word “steal.” But Wolfe’s Second Law does capture the essence of “misappropriation.”

What I call stealing is what the statute calls “acquisition” of a trade secret by someone who knows or has reason to know that the trade secret was acquired by “improper means.”

The statute has a non-exclusive definition of “improper means” that includes “theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, to limit use, or to prohibit discovery of a trade secret, or espionage through electronic or other means.”

As you can see, “acquisition” through “improper means” is not limited to stealing a trade secret. It also includes getting a trade secret from someone you know (or should know) stole it. But for simplicity, let’s stick with “stealing.”

Stealing is fundamentally different from the other kind of misappropriation, use or disclosure. If you steal a trade secret, you can be held liable, even if you never do anything else with it. In other words, if you steal a trade secret in the woods and nobody hears it, it still makes a sound.

This distinction between stealing and using/disclosing becomes important in litigation. If you’re thinking ahead, you can see where this is going: the use or disclosure of a trade secret will often cause compensable damages to the owner of the trade secret, but how does mere acquisition of a trade secret harm the owner?

To make this more concrete, suppose an employee walks out the door on his last day with the company’s entire secret customer list, throws it in a drawer, and never looks at it again. How does that cause any damages?

Hold that thought.

The Casteel problem in jury trials

In most cases, the trade secrets damages question will be for a jury to decide, if the case gets that far. The Court’s Charge will give the jury questions, definitions, and instructions to guide the decision.

Typically, a trade secrets charge will have three key questions: (1) is the information actually a trade secret? (2) did the defendant “misappropriate” the trade secret? (3) what damages, if any, did the misappropriation cause?

But why only three questions? What if there are multiple trade secrets at issue in the case? And what if there are multiple ways the defendant allegedly “misappropriated” the trade secrets? In cases like that, it seems like it would be more precise to break these broad questions down into more specific questions.

Well, that’s not the way we typically do it. Texas law requires “broad-form” submission of questions to the jury, at least when “feasible.” There is a mountain of literature on what broad-form submission means, but to save you time I’ll sum it up as follows: the trial court should submit one broad question on each element of a cause of action, except when there is a good reason not to.

Let’s apply this to the most ordinary kind of lawsuit, a personal injury claim arising from a car accident. Typically, there will be one damages question that combines multiple elements of recoverable damages. The instruction might look like this:

In determining the damages Big Trucking caused Ms. Smith, you may consider:

1. 1. Physical pain and mental anguish.
   2. Loss of earning capacity.
   3. Physical impairment.
   4. Medical care.

Yawn. What could be more ordinary?

But suppose during the trial Ms. Smith’s lawyer offered no evidence whatsoever regarding loss of earning capacity. And suppose Big Trucking’s lawyer specifically objected to this instruction ahead of time, saying “Your Honor, you can’t include loss of earning capacity in the instruction because there’s no evidence.”

The judge brushes aside the objection, the jury returns a verdict for $90,000 in damages, and the trial court enters judgment for Ms. Smith in that amount. What should the Court of Appeals do with that?

A. Affirm the judgment. Any error is harmless, because the jury could have based the $90,000 on the other three elements of damages.

B. Reverse the judgment and order that Ms. Smith gets nothing. Her lawyer shouldn’t have included loss of earning capacity in the charge.

C. Reverse the judgment and remand for a new trial. Including an element for which there was no evidence is reversible error because there is no way for Big Trucking to show whether the $90,000 improperly included some amount for loss of earning capacity.

There is a case to be made for A, emphasizing judicial economy and respect for jury verdicts. If you picked B, you might be a sociopath. But if you picked C, you are in sync with the Texas Supreme Court.

These were essentially the facts of Harris County v. Smith, 96 S.W.3d 230 (Tex. 2002), except the defendant was Harris County, not Big Trucking. Harris County held that it was an error for the trial judge to submit a broad-form question that included an element for which there was no evidence, and that this was a harmful error because it prevented the appellate court from determining whether the jury based its verdict on an invalid element of damages. Id. at 234.

The court based this decision on a precedent from two years earlier, Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378 (Tex. 2000). Casteel had followed the same reasoning, except that Casteel involved a liability question (not damages), and the objectionable element in Casteel was improper because it was legally invalid (not because of lack of evidence).

In Harris County the Texas Supreme Court found these distinctions immaterial. It therefore established a general principle for Texas jury trials: If a question to the jury includes an element that should not have been submitted, either because it is legally invalid or there is no evidence to support it, and if the complaining party timely and specifically objects to that defect, then the jury’s affirmative answer cannot stand.

Appellate lawyers now call this a Casteel error. They could call it a Harris County error, but that doesn’t have the same ring to it.

Ok, but what does this appellate procedure detour have to do with trade secrets litigation?

The definition of “misappropriation” is custom-designed to create a Casteel problem

It is easy to see how a trade secrets lawsuit could create a Casteel error. This is likely to happen in several ways.

First, suppose the plaintiff claims that it has two kinds of trade secrets. Maybe one is a customer list and the other is a proprietary software program. Suppose there is evidence that the software is a trade secret, but insufficient evidence that the customer list is a trade secret. If the judge submits a single broad question asking whether the plaintiff owned a trade secret and the jury answers “yes,” how do we know if the jury improperly based that answer on the customer list?

Second, let’s assume the court submits a single damages question, but the plaintiff advances multiple theories about what was a trade secret and how the trade secrets were misappropriated, some of which have no evidence to support them. How do we know which theory the jury based the damages on?

Third, and most to the point here, there is the question on “misappropriation.” Let’s say the plaintiff claims both kinds of misappropriation, i.e. stealing and using/disclosing. What if there is no evidence of stealing? If the jury answers yes, there was misappropriation, there is no way to know if the jury based that answer on stealing or not.

In other words, a Casteel problem.

Fortunately, we have the Texas Pattern Jury Charges to help.

The Texas Pattern Jury Charge tracks the statute’s definition of “misappropriation”

A committee of the State Bar of Texas publishes the Texas Pattern Jury Charges, affectionately known as the PJC. The PJC provides standardized jury questions, definitions, and instructions. It is not legally binding on judges, but most judges will follow it most of the time.

In 2016 the PJC added new questions specifically addressing trade secrets claims. These questions line up with the three questions I outlined earlier, i.e. (1) existence of a trade secret, (2) “misappropriation” of a trade secret, and (3) damages.

Reviews were largely positive. See Book Review: The New Texas Pattern Jury Charge on Trade Secrets. As one reviewer wrote:

The new questions and instructions on trade secret misappropriation do what the Pattern Jury Charge is supposed to do. They provide a template for submitting trade secrets misappropriation questions that is consistent with Texas law and broad enough to apply to different kinds of cases.

Above all, the one thing you want to avoid in a jury instruction is misstating the law. The PJC question on misappropriation of trade secrets tries to avoid this by asking one simple question, “Did Don Davis misappropriate Paul Payne’s trade secret,” and following that question with instructions that track the statutory definition of “misappropriation.” This is a common PJC approach.

You can see the appeal of this. How can the other side complain about your proposed jury instruction if it quotes the language of the statute verbatim?

The problem with the Pattern Jury Charge approach to “misappropriation”

Still, tracking the language of the statute is not always the best approach, and sometimes it’s even the wrong approach, as we will see.

The problem is that the statutory language may not fit the facts of the case. As one reviewer noted back in March 2017:

There is a danger of rote use of the PJC questions when more specific questions tied to the facts of the case would be more appropriate and more understandable to the jury. . . . If the dispute is about whether the former employee used the employee’s customer list, why not just ask “did Don Davis use Paul Payne’s customer list?”

Ok, I confess. That reviewer was me. But still, it’s a valid point.

As I explained in my review, I tend to prefer more factually-specific trade secrets questions. “I like my questions better than the PJC questions,” I wrote. “They get right to the point and are easier for the jury to understand.”

But I neglected to mention another benefit of a trade secrets question that is specifically tailored to the facts of the case: it helps you avoid a Casteel problem.

A case study on “misappropriation” and the Casteel problem: Title Source v. HouseCanary 

The San Antonio Court of Appeals applied Casteel to a trade secrets claim in Title Source, Inc. v. HouseCanary, Inc., No. 04-19-00044-CV, 2020 WL 2858866 (Tex. App.—San Antonio June 3, 2020, no pet. h.). The jury question tracked three alternative elements of the statutory definition of “misappropriation” and quoted the statutory definition of “improper means.” The problem, Title Source argued, was that there was no evidence to support one of those elements.

The stakes for this technical issue of appellate procedure? Only a $706 million verdict, the largest in Bexar County history (according to Title Source’s brief).

The case arose from a contractual relationship in which acquisition of the alleged trade secrets was initially lawful. Title Source, a company affiliated with Quicken Loans that provides services including real estate appraisals, contracted with HouseCanary, a real estate analytics company, to develop an iPad app that could be used to perform appraisals more efficiently. The parties signed several contracts that included nondisclosure obligations.

The facts detailed in the opinion are worth reading, but suffice to say that Title Source claimed the app didn’t work, while HouseCanary claimed that in the course of the relationship Title Source misappropriated HouseCanary’s trade secrets to develop its own app, called MyAVM. The jury answered yes to the misappropriation question and then found actual damages of $235.4 million and punitive damages of $470.8 million. Id. at *1-6.

There were also some juicy allegations that came out after the trial, including alleged collusion between HouseCanary and a Title Source officer and “hush money” paid to HouseCanary employees. You can read about that in Title Source’s Brief. (I would also include HouseCanary’s brief, but it was filed under seal.)

The Court of Appeals didn’t need to reach these spicier issues, because it focused on the Casteel problem presented by the misappropriation question. That question told the jury it could find misappropriation based on either a “use” theory” or an “acquisition by improper means” theory (my “stealing”). Id. at *9.

HouseCanary argued that the evidence showed that Title Source used HouseCanary’s trade secrets by relying on the information to assist or accelerate its own research and development. Id. at *10. And there seemed to be at least some evidence to support this argument.

The problem was that the jury question on misappropriation included elements for which HouseCanary had no evidence, i.e. a Casteel error.

The question went wrong in two ways. First, it quoted the statutory definition of “improper means” verbatim. It was therefore a correct statement of the law, but the definition of “improper means” included “bribery” and “espionage,” and there was no evidence that Title Source acquired the trade secrets through bribery or espionage. Because there was no evidence to support those theories, they should have been omitted from the “improper means” definition submitted to the jury. Id.

Hold on a minute. In HouseCanary’s defense, what if no one ever said anything about bribery or espionage in the trial? What is the chance that the jury actually based its answer on a theory that was included in the definition but never argued? This seems like a hyper-technical application of Casteel.

HouseCanary argued this very point, citing a Casteel exception: “a Casteel issue is not reversible if the reviewing court can be ‘reasonably certain’ the jury did not base its findings on the invalid theories.” Id. (citing Romero v. KPH Consol., Inc., 166 S.W.3d 212, 227-28 (Tex. 2005)). HouseCanary never pursued bribery or espionage theories at trial, it argued, so it was reasonably certain the jury did not base its answer on those theories.

But the Court of Appeals sidestepped this argument by focusing on the second problem with the misappropriation question. The question allowed the jury to find misappropriation based on acquisition of the trade secrets through “breach of inducement of a breach of a duty to maintain secrecy, to limit use, or to prohibit discovery of a trade secret.” And HouseCanary argued that theory throughout the seven-week trial, and on appeal. Id.

“But there is no evidence that TSI actually acquired the trade secrets through those breaches,” the Court of Appeals said. “Instead, the evidence shows those breaches, if any, occurred after HouseCanary willingly turned over its data under the NDA, the licensing agreement, and Amendment One.” Therefore, “those breaches do not support a misappropriation finding.” Id.

This was harmful error under Casteel, especially considering the arguments made by HouseCanary’s counsel in the trial. “[B]ecause HouseCanary so heavily emphasized the evidence it presented to the jury of TSI’s alleged post-acquisition breaches, we cannot rule out the possibility that the jury found misappropriation based on those breaches.” Thus, including the acquisition by improper means language in the charge was reversible error. Id.

The result: the Court of Appeals poured out the $700+ million trade secrets verdict and remanded the trade secrets claim for a new trial. Id. at *11. (According to legal-lingo.net, “pour out” is slang for “to deny (a claimant) damages or relief in a lawsuit.”)

Suppose instead that HouseCanary had submitted a simpler misappropriation question like the one I suggested in my review of the PJC, something like “did Title Source use HouseCanary’s trade secrets to aid or accelerate development of its own app?”

Do you think the jury still would have answered yes? Would the verdict and judgment have stood up on appeal?

We’ll never know for sure, and most of my cases don’t involve $700 million verdicts, so what do I know. But I can at least say this simpler question might have avoided the Casteel problem that got the judgment reversed.

Does the Pattern Jury Charge do more harm than good?

To be fair, the PJC question on trade secrets misappropriation anticipates the kind of problem illustrated by Title Source v. HouseCanary. Tucked away in the Comment section to PJC 111.2 (Question and Instructions on Trade-Secret Misappropriation), you will find these nuggets:

For further discussion, see PJC 116.2 regarding broad-form issues and the Casteel doctrine.

The above instruction lists these six alternative improper methods of acquisition, use, or disclosure in brackets, but only the method(s) supported by the pleadings and evidence should be submitted. 

Only those [improper] means raised by the evidence should be submitted.

Only the methods or means raised by the evidence should be submitted! It’s right there in the PJC comments. They even mention Casteel by name.

So, defenders of the PJC could say, with some justification, that the problem in Title Source v. HouseCanary was not that the judge followed the PJC on “misappropriation,” but that the judge didn’t follow the PJC closely enough.

Still, it makes me wonder. Does the PJC question on misappropriation of trade secrets do more harm than good? Might it be better just to tell trial courts to look at the statute and then apply it to the specific facts in dispute?

Keep in mind, it is likely that most Texas trial court judges have never submitted a trade secrets case to a jury. This is based on purely anecdotal evidence, but I’d be willing to bet money on it. Even if I’m wrong, I guarantee most of them could count their trade secrets jury trials on one hand.

I don’t mean this as a criticism, just to point out that jury trials on trade secrets claims are very rare.

As a result, most trial court judges may feel a little unsure of themselves when deciding how to charge the jury on a trade secrets claim. They will tend to fall back on the PJC and the language of the statute, because that feels like the safer thing. It wouldn’t surprise me if that is what happened in Title Source v. HouseCanary.

But the safer thing is not always the best thing.

Just ask Tom Cruise in Mission Impossible.

*Update: The San Antonio Court of Appeals issued a new opinion on rehearing on August 26, 2020. Stay tuned for analysis.

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Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC.

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.

Recent case offers lessons on how to get (or avoid) a trade secrets injunction in Texas

When I say “drywall installation,” I’m guessing “trade secrets” is not the first thing that pops into your mind. Personally, I think of John Goodman’s character Dan Conner from the TV show Roseanne.

But a recent opinion from a federal district court in Dallas may change that. See Marek Brother Systems, Inc. v. Enriquez, No. 3:19-CV-01082, 2019 WL 3322162 (N.D. Tex. July 24, 2019).

Marek Brother Systems offered commercial and residential construction services, including ceilings, “acoustical solutions,” flooring, and paint. Juan Enriquez was a Marek project manager. Id. at *1. It does not appear that Enriquez signed any non-compete.

Enriquez did two typical things before resigning from Marek to run his own business. First, he formed an LLC, JP Acoustics and Drywall. Second, he sent a Marek customer list to his personal email address.

Let’s pause here for just a moment. Neither one of these things is necessarily wrongful, but both are a bad idea.

Under Texas law, it is not a breach of an employee’s limited fiduciary duty to make plans to compete with his employer. This can even include forming the entity the employee plans to use to compete. See Fiduciary Duty Lite: What Employees Can and Can’t Do Before Leaving.

But employees, why would you want to do this? Forming an LLC is relatively quick and easy. You can do it the day after you resign, and that’s one less thing for the employer to complain about.

Likewise, sending a company customer list to your personal email address is not necessarily wrong. In most businesses, it’s not unusual for employees to email or transfer company documents to their personal devices or accounts for work at home or on the road. This often happens, even when the company prohibits such personal use on paper. So, if a salesman emails himself an open orders list every week, it’s less suspicious if he does so the week before leaving, and if everybody at the company knows employees sometimes do this.

But again, unless you’re certain you will stay with the company until retirement, why would you do this? You should keep in mind Wolfe’s First Law of Trade Secrets Litigation: whatever company information the employee takes on the way out the door will be the alleged “trade secrets” in the company’s subsequent lawsuit.

Enriquez’s third mistake was naming the company “JP Acoustics and Drywall.” I would have called it “JP Drywall . . .” An “acoustics” company sounds like it has trade secrets; a “drywall” company doesn’t.

But let’s get back to the legal issues. Marek claimed that Enriquez’s email included confidential contact information for Marek’s customers and “proprietary notes” about the customers. Id. at *1. One of Marek’s customers was Muckleroy and Falls, id. at *1, which sounds like a business in a Frank Capra movie. Both Marek and JP Acoustics did work for Muckleroy and Falls after Enriquez left Marek. Id. at *4.

Marek claimed that Enriquez was using Marek’s confidential information to advance his business. Id. at *1. Marek sued Enriquez and JP Acoustics, claiming misappropriation of trade secrets, as well as breach of fiduciary duty, tortious interference with contract, and violation of the Computer Fraud and Abuse Act. Marek asked for an injunction to stop the defendants from doing business with any company that was a customer of Marek during the 12 months before Enriquez resigned. Id. at *2.

Marek claimed it spent years accumulating the customer information, and that it made diligent efforts to ensure the secrecy of its customer information, including restricted access to facilities, computer passwords, and disclosure to employees only on a “need to know” basis. Id. at *4.

The defendants responded that the customer information was readily available online or in the Yellow Pages. Id.

So was Marek entitled to a trade secrets injunction?

Let’s pause again to note that this is about as plain-vanilla a soft trade secrets case as you are going to find. You could have said to me “drywall manager leaves company, company files trade secrets suit,” and I could have guessed the essential facts (except maybe the name of the customer). So the outcome of the case may tell us something about how courts deal with typical customer list cases.

The federal district court judge said no, Marek was not entitled to an injunction.[1] First, the court said that the claims for breach of fiduciary duty and violation of the Computer Fraud and Abuse Act were based on conduct that occurred before termination of employment, any resulting damage was “readily quantifiable,” and therefore there was no threatened irreparable harm. Id. at *3. For the authoritative explanation of these concepts, see Injunction Junction, What’s Your Function?

Then the court turned to the claims of trade secrets misappropriation and tortious interference with contract. Illustrating Wolfe’s First Law, Marek claimed that its trade secrets were the customer information Enriquez emailed to himself.

But the court was not persuaded. It started by quoting the Trilogy Software case:

“[I]nformation that a firm compiles regarding its customers may enjoy trade secret status under Texas law.” Trilogy Software, Inc. v. Callidus Software, Inc., 143 S.W.3d 452, 466 (Tex. App.—Austin 2004, pet. denied) (citations omitted). “But this does not mean that trade secret status automatically attaches to any information that a company acquires regarding its customers; if it did, it would amount to a de facto common law non-compete prohibition.” Id. at 467. “Before any information can be a trade secret, there must be a substantial element of secrecy.” Id. (citation omitted). Secrecy requires that the information “is not generally known or readily ascertainable by independent investigation.” Id. (citations and quotation marks omitted). “It is the burden of the party claiming secrecy status to prove secrecy.” Id. (citations omitted).

If this sounds familiar, it might be because I discussed this case in my post When is a Customer List a Trade Secret?

Marek failed to persuade the court that the customer information was not “readily ascertainable.” The court cited several things missing from Marek’s case:

• Marek did not provide the court with the email attachments containing the alleged trade secrets.
• Marek did not describe the nature of the “proprietary notes” or why they should be considered proprietary information.
• Marek did not offer specific facts to support its allegation that it “spent years accumulating” the customer contact information.

Id. at *4.

Maybe Marek should have seen it coming. The same judge had denied a TRO two months earlier in Computer Sciences Corp. v. Tata Consultancy Servs. Ltd., No. 3:19-cv-970-L, 2019 WL 2058772, at *3-4 (N.D. Tex. May 9, 2019), finding there was no evidence the emailed confidential software source code was actually shared with software developers.

But let’s not be too quick to fault Marek’s counsel. The deficiencies in Marek’s evidence seem obvious, but maybe the email attachments were not that helpful to Marek’s case. Perhaps the proprietary notes were not that proprietary. Perchance there were no more specific facts to be offered. Or maybe there was just not enough time to get the evidence needed.

And even if Marek had proven the customer information was a trade secret, there was another big hole in Marek’s evidence: proof of some nexus between the use of the alleged trade secrets and loss of sales to customers. (Picture Marek saying “Causation!” the way Jerry Seinfeld says “Newman!”)

The court said Marek did not allege that Defendants outbid Marek for any particular job or otherwise took Muckleroy and Falls business from Marek. Rather, both parties were servicing Muckleroy and Falls “to neither’s detriment and without direct competition.” In the absence of evidence that the defendants were injuring Marek’s business relationship with the customer, the court said, it could not find that Marek was substantially likely to suffer an irreparable injury due to the defendants’ contact with the customer. Id. at *4.

Injunction denied.

Nevertheless, the story had a happy ending. The parties later signed this Agreed Injunction that barred Enriquez and JP Acoustics from initiating new business with a list of specified customers.

And the Marek case provides lessons for both employees and employers in trade secrets cases.

Employees:

• DON’T form an LLC for your future competing business any sooner than you really need to.
• DON’T send company documents to personal devices or email accounts, even for valid reasons.
• DON’T take customer lists when you leave. Is it really that hard to find the customers? (If so, the list might actually be a trade secret.)
• If you take a customer list, DO show that the information in it is readily ascertainable.
• If you do something you shouldn’t have before leaving, DO argue that it can be compensated with damages, so no injunction is warranted.
• DO watch my video Dumb Things Employees Do Before Leaving a Company for similar tips in convenient audiovisual form.

Employers:

• DO offer the misappropriated confidential documents as evidence, under seal if necessary.
• DO specifically explain why the customer information is valuable and not readily ascertainable.
• DO try to offer evidence that the employee has actually used the confidential information to take specific customer business from you (I know, this is often easier said than done).
• DON’T expect to get an injunction merely because an employee has taken confidential company documents.
• DO watch my video Smart Things Companies Can Do to Protect Confidential Information.

Finally, whether you’re an employee or employer, do get advice from a lawyer as early as possible, preferably one with experience handling departing employee disputes. That might help you avoid the common mistakes above. In the words of another John Goodman character, “Donny you’re out of your element!”

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Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. Thomson Reuters named him a 2020 Texas “Super Lawyer”® for Business Litigation.

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] To be precise, the court construed the motion for preliminary injunction as a motion for temporary restraining order, denied a TRO, and set a hearing on a preliminary injunction.

Does Texas law recognize the “inevitable disclosure” doctrine? Should it?

This strikes me as the wrong question. The right question is not “should Texas follow the inevitable disclosure doctrine?” but rather “what evidence is sufficient to establish imminent harm from the threatened use of trade secrets?” I propose the following dichotomy:

1. In a “soft” trade secrets case, the mere fact that a former employee knows a company’s trade secrets and has gone to work for a competitor should usually be insufficient to establish the “imminent harm” necessary to support a temporary injunction barring the employee from working for the competitor. There must be something more, such as evidence of a plan to use the trade secrets, or evidence that the employee has already used or disclosed the trade secrets.
2. But in a “hard” trade secrets case, “something more” might not be required if the trade secret is so super-secret and valuable the employee’s mere knowledge of it creates an imminent risk that the employee will disclose it to her new employer.

I admit that no. 2 is a little circular, but there’s really no getting around that. At least my test puts the emphasis on the degree of the threat, where it should be.

But what is a “soft” trade secret? Or a “hard” trade secret? And what is the inevitable disclosure doctrine in the first place? Let’s back up a bit.

The Inevitable Disclosure Doctrine

The inevitable disclosure doctrine is a concept in trade secrets law. It is the idea that a person who knows a company’s trade secrets can be enjoined from working for a competitor on the theory that the person will inevitably use that knowledge.[1] For example, in T-N-T Motorsports, Inc. v. Hennessey Motorsports, Inc.,[2] the court held that evidence that the defendants possessed the plaintiff’s confidential information and were “in a position to use it to compete” showed an “inherent threat” sufficient to support an injunction.

The Texas Uniform Trade Secrets Act (TUTSA) and the federal Defend Trade Secrets Act (DTSA) do not expressly refer to the inevitable disclosure doctrine. The doctrine can be seen as an application of the common-law “imminent harm” requirement for an injunction. The question is whether harm is imminent when a person with knowledge of the company’s trade secrets is working for a competitor.

The DTSA indirectly rejects—or at least constrains—application of the inevitable disclosure doctrine in two ways. First, it authorizes the court to grant an injunction “to prevent any actual or threatened misappropriation,” but with the important limitation that the court cannot “prevent a person from entering into an employment relationship.” The court can place conditions on such employment, provided the conditions are based on “evidence of threatened misappropriation and not merely on the information the person knows.” In other words, the court cannot limit a former employee’s work for a competitor based merely on the idea that the employee will inevitably disclose the employer’s trade secrets. Second, the injunction cannot conflict with an applicable state law “prohibiting restraints on the practice of a lawful profession, trade, or business.”[3]

Similarly, TUTSA codifies the common-law principle that an injunction may not prohibit a person from using “general knowledge, skill, and experience” acquired during employment.[4] This limitation emphasizes that injunctions should be narrowly tailored to prevent disclosure of trade secrets, not to unreasonably restrict employee mobility. Still, TUTSA at least leaves open the possibility that a risk of “inevitable disclosure” of trade secrets could establish the “imminent harm” needed to support a temporary injunction.

Texas law is unsettled on whether and to what extent the inevitable disclosure doctrine applies.[5] But we can draw some preliminary conclusions from the case law.

First, if there is evidence that the employee has already disclosed the alleged trade secrets to the competitor, or used the alleged trade secrets while working for the competitor, then resort to the inevitable disclosure doctrine is unnecessary. The doctrine only becomes a real issue when the evidence is that the employee possesses or knows the trade secrets but has not done anything wrong with them—yet.

Second, inevitable disclosure really goes to the question of an injunction, not damages.

Global Supply v. Riverwood

Both principles were apparent in Global Supply Chain Solutions, LLC v. Riverwood Solutions, Inc., No. 05-18-00188-CV, 2019 WL 3852661 (Tex. App.—Dallas Aug. 16, 2019, no pet.), a case showing the limits of the “inevitable disclosure” argument.

In that case, Global Supply and Riverwood were competitors in the supply chain management industry, including product data management (PDM) services. Id. at *1. They had merger discussions in which Global Supply provided a seven-page PowerPoint presentation containing financial information about Global Supply. Id. at *2. After these discussions were abandoned, Riverwood unsuccessfully solicited two customers of Global Supply and recruited Lori Austin, a consultant for Global Supply, to be Riverwood’s director of PDM services. Id. at *2-3.

Global Supply sued Riverwood and Austin in Collin County District Court, claiming misappropriation of trade secrets, but Global Supply never set a hearing on a temporary injunction. Id. at *4. After some discovery and designation of experts, the parties filed motions for summary judgment, including Riverwood’s motion for summary judgment on Global Supply’s trade secrets claim. Id.

The problem for Global Supply was that there was no “direct evidence” that Austin disclosed any trade secret to Riverwood. Id. at *7. So Global Supply argued that it was “inevitable” that Austin would disclose its trade secrets in the course of her employment at Riverwood. Id. In other words, the inevitable disclosure doctrine.

In support of its argument, Global Supply cited the Seventh Circuit’s statement that “a plaintiff may prove a claim of trade secret misappropriation by demonstrating that defendant’s new employment will inevitably lead him to rely on the plaintiff’s trade secrets.” Id. (citing PepsiCo, Inc. v. Redmond, 54 F.3d 1262, 1269 (7th Cir. 1995)).

But Collin County ain’t in the Seventh Circuit, and the trial court granted summary judgment for Riverwood and Austin.

The Dallas Court of Appeals affirmed, rejecting Global Supply’s inevitable disclosure argument. The court cited Cardinal Health Staffing Network, Inc. v. Bowen, 106 S.W.3d 230, 241-42 (Tex. App.—Houston [1st Dist.] April 3, 2003, no pet.), which said “[w]e have found no Texas case expressly adopting the inevitable disclosure doctrine, and it is unclear to what extent Texas courts might adopt it or might view it as relieving an injunction applicant of showing irreparable injury.” Id.

Global Supply argued that the adoption of TUTSA brought the inevitable disclosure doctrine to Texas, but the court disagreed. The court reasoned that the “ultimate merits” are not at issue in a temporary injunction hearing in a trade secret misappropriation case. Thus, whatever merit the inevitable disclosure argument may have in support of a temporary injunction, the court said the argument is insufficient to raise a fact issue on damages in response to a motion for summary judgment. Id. at *8.

The court then turned to whether Global Supply had offered sufficient evidence on the elements of its TUTSA claim. Global Supply offered the following:

• The idea that building supply sourcing could be operated as a standalone business was the trade secret misappropriated by Riverwood.
• Riverwood contacted a Global Supply customer about using Riverwood for sourcing building supplies, knowing he was a Global Supply customer.
• Austin was doing the same work at Riverwood that she did for Global Supply.
• Peck, Global Supply’s president, testified that Austin “must have” disclosed Global Supply’s confidential information in order to do her job at Riverwood.
• Peck also testified that building supply sourcing “was unlike anything Riverwood was doing at the time.”

Id. at *14-15.

So, the evidence of misappropriation was pretty thin, especially in light of controverting evidence:

• Global Supply did not share any information about its building supply sourcing business model with Riverwood.
• The seven-slide PowerPoint presentation did not include this information, and Global Supply conceded that the merger discussions did not involve delivery of trade secrets other than that delivered in writing.
• Riverwood had sourced building supplies before the merger discussions.
• Peck conceded Riverwood could have provided building supply sourcing without his being aware of it.
• Global Supply did not lose any business from the customer Riverwood contacted.
• Austin testified she returned all company property to Global Supply, did not retain Global Supply documents, complied with her confidentiality agreement, never disclosed Global Supply’s confidential information or trade secrets to Riverwood, and only used generally known information.
• Peck conceded he had no knowledge of the work Austin was actually doing at Riverwood.
• Austin testified about how she performed her job responsibilities at Riverwood without using Global Supply’s confidential information.

Id. at *14-15.

Based on the evidence, the Court of Appeals held that the trial court properly granted summary judgment against Global Supply’s trade secrets claim. Id. at *15-16. Thus, the “inevitable disclosure” argument could not fill the gaps in Global Supply’s evidence of misappropriation of trade secrets.

So did Global Supply reject the inevitable disclosure doctrine? Not really. Two significant factors limit the reach of Global Supply. First, it was not a temporary injunction case. Trying to use the inevitable disclosure doctrine as a substitute for direct evidence of damages was a stretch.

Second, the court seemed skeptical of Global Supply’s theory that its business model was a trade secret in the first place. This was apparent in the court’s statement that “Global supply does not point to any summary judgment evidence that it shared with Riverwood any information about its ‘business model’ that ‘took extensive effort to develop.’” Id. at *15.

A Harder Case

Imagine instead a temporary injunction case with evidence that the alleged trade secret is really secret and really valuable. Let’s say an oilfield services company develops a secret drilling technology that a competitor would pay millions for. The engineer who developed the technology for the company gets hired by a direct competitor as Director of Engineering. There’s no evidence that the engineer has disclosed the technology to the competitor, or even evidence that he plans to do so, but the trial court enters a temporary injunction barring the engineer from working for the competitor, citing the imminent risk that the engineer will disclose the technology.

Even then, you might question whether an injunction is warranted when the engineer hasn’t done anything wrong yet. But this scenario provides at least a stronger case for application of the inevitable disclosure doctrine, first because it involves an injunction and second because it involves a “hard” trade secret.

The two quintessential types of hard trade secrets are “secret sauce,” like the Colonel’s herbs and spices or the formula for Coke, and secret cutting-edge technology, like say, laser guidance for self-driving cars. When an employee runs off to a competitor with that kind of secret, it does seem a little unfair to require proof that employee has already given the secret to the competitor.

“Soft” trade secrets are different. Soft trade secrets are things like customer lists, customer information, and pricing information. Virtually every business has this kind of information. That doesn’t mean the information can’t be a trade secret. It can, as I explained in When Is a Customer List a Trade Secret?

But there’s a danger here. If courts grant injunctions too freely in soft trade secret cases, they risk turning trade secret law into a “de facto” non-compete for all employees who have customer information. And Texas courts have recognized we don’t want to do that. See Trilogy Software, Inc. v. Callidus Software, Inc., 143 S.W.3d 452, 466-67 (Tex. App.—Austin 2004, pet. denied) (“this does not mean that trade secret status automatically attaches to any information that a company acquires regarding its customers; if it did, it would amount to a de facto common law non-compete prohibition”); St. Jude Medical S.C., Inc. v. Janssen-Counotte, No. A–14–CA–877–S, 2014 WL 7237411, at *16 (W.D. Tex. Dec. 17, 2014) (“To the extent St. Jude S.C. contends there is probable or inevitable disclosure simply based on the fact Janssen acquired trade secrets while working at St. Jude Belgium/Netherlands, the Court rejects this notion. If accepted, non-disclosure obligations would morph into non-compete agreements.”) .

That’s why I say in a soft trade secrets case, there should be some evidence that the employee has used or disclosed the trade secrets—or plans to do so—before the court grants a temporary injunction. If Texas courts are going to embrace the notion of “inevitable disclosure” at all, it should be limited to cases involving hard trade secrets.

Of course, the distinction between hard and soft trade secrets is not in the statutes; it’s just my terminology. And you could always have borderline cases (“semi-soft” trade secrets?) But the underlying concept—that the degree of secrecy and value of the alleged trade secrets is a factor in determining whether a temporary injunction should be granted—is sound. At least it focuses on the right question.

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Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. Follow @zachwolfelaw on Instagram to keep up with his latest shenanigans.

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] See The Inevitable Disclosure Doctrine: A Necessary and Precise Tool for Trade Secret Law.

[2] 965 S.W.2d 18, 24 (Tex. App.—Houston [1st Dist.] 1998, pet. dism’d). Similarly, in Rugen v. Interactive Bus. Sys., Inc., 864 S.W.2d 548, 552 (Tex. App.–Dallas 1993, no pet.), the court affirmed a temporary injunction prohibiting use of confidential information, where the former employee was in possession of the employer’s confidential information and “in a position to use it.” But in Conley v. DSC Communications Corp., No. 05-98-01051-CV, 1999 WL 89955, at *4 (Tex. App.–Dallas 1999, no pet.), the court said: “Contrary to the parties’ arguments, this Court did not recognize a ‘doctrine of inevitable disclosure’ in Rugen; instead, we recognized that enjoining an employee from using an employer’s confidential information is appropriate when it is probable that the former employee will use the confidential information for his benefit (or his new employer’s benefit) or to the detriment of his former employer.”

[3] 18 U.S.C. § 1836(b)(3).

[4] Tex. Civ. Prac. & Rem. Code § 134A.003.

[5] Cardinal Health Staffing Network, Inc. v. Bowen, 106 S.W.3d 230, 241-42 (Tex. App.—Houston [1st Dist.] April 3, 2003, no pet.); DGM Services, Inc. v. Figueroa, No. 01-16-00186-CV, 2016 WL 7473947, at *5 (Tex. App.—Houston [1st Dist.] Dec. 29, 2016, no pet.) (mem. op.).

Ready for an early Christmas present?

I originally published my “Trade Secrets 101” memo in Trade Secrets 101: What Texas Businesses and Lawyers Need to Know. I designed it to give Texas businesses and their lawyers a helpful overview of Texas and federal trade secrets law.

With generous help from lawyer Paul T. Freeman, I have now updated that memo. You can download the new version here.

Regrettably, the new version is longer. But it has significant improvements, including:

• More case cites
• A new section on TCPA motions to dismiss
• Less of my unsupported editorializing

Finally, despite my general preference, the case cites have been moved to footnotes. Don’t @ me.

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Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. Follow @zachwolfelaw on Instagram to keep up with his latest shenanigans.

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.