Update on Non-Competes and Disclosure of Trade Secrets
July 2017 Newsletter Article
Here are some updates on three cases, two of which involved confidentiality and disclosure of trade secrets, and one which related to noncompete agreements.
*Limiting a non-compete to certain customers can substitute for a geographic limitation
Orchestratehr, Inc. v. Trombetta, No. 3:13-CV-2110, 2016 WL 4563348 (N.D. Tex. Sept. 1, 2016).
In Orchestratehr, the employee argued that the non-compete was not ancillary to an enforceable agreement since the employer provided no actual confidential information to the employee. The court rejected the employee's argument for two reasons:
- The agreement had a standard clause that defined essentially everything as confidential information.
- The employee admitted in his deposition that the information was confidential.
Thus, significant evidence may be reflected in admissions by employees that confidential information was provided and received. Further, the court inserted its own "geographic limitation" into its ruling by limiting the noncompete agreement to existing customers since the noncompete clause in the employee's contract contained no geographic limitation.
*First verdict under the federal Defend Trade Secrets Act (DTSA)
Dalmatia Import Group v. Foodmatch, Inc. et al.
, 16-cv-02767 (E.D. Pa. Feb. 24, 2017)
The first verdict under the Defend Trade Secrets Act (DTSA) was rendered in Pennsylvania in February of 2017. Dalmatia sued for breach of contract, trademark infringement, counterfeiting, and misappropriation of trade secrets. The major contentions of Dalmatia's suit alleged that Defendants' fig jam not only impersonated Plaintiff's product, but Defendants stole the recipe from Dalmatia.
A federal jury found Defendants liable for misappropriation of trade secrets, trademark infringement, and counterfeiting. The jury awarded Plaintiffs $2.5 million in damages, which may double to nearly $5 million after a portion of the damages are trebled. The court also issued an injunction enjoining Defendants from future use of the trade secrets by the Plaintiff in the future.
*Position to use trade secrets is sufficient under the Texas Uniform Trade Secrets Act (TUTSA)
Hughes v. Age Industries, Ltd.
, 04-16-00693-CV, in the Court of Appeals of Texas (San Antonio)
An employer was granted a temporary injunction against a former employee after it sued him for misappropriation of trade secrets after he joined a competing company. The injunction ordered the employee to produce documents and proprietary information owned by the Plaintiff in his possession while enjoining him from using or disclosing any of it. The employee contended that the employer failed to show evidence of a probable, imminent, and irreparable injury, only possible injury.
Evidence was presented at the temporary-injunction hearing that demonstrated the employee had downloaded a substantial amount of employer data prior to his resignation. The employee agreed that he had property of the Plaintiff on his personal computer.
The Court of Appeals of Texas (San Antonio) affirmed the temporary injunction and reasoned that there was some evidence that "Hughes was in a position to use AI's trade secrets to gain an unfair market advantage."
The end result: Being in a position to use trade secrets is sufficient to grant temporary injunctions. Under the Texas Uniform Trade Secrets Act, an applicant for a temporary injunction is not required to present evidence of trade-secret use; mere possession and opportunity to use is sufficient. The trial court did not abuse its discretion in concluding that AI established a probable, imminent, irreparable injury.
If you are a party to a non-compete agreement and believe the other party may be in violation of such an agreement, the Metcalf Adair Law Firm may help determine if an actionable cause of action exists while ensuring that you receive a full and just recovery. We can also assist any employer in any business situation, including when an employee misappropriates or a competitor steals trade secrets.