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Have Texas Courts Adopted The “Inevitable Disclosure” Doctrine? (Part III)

September 16, 2013

We are blogging on “Non-competes, Trade Secrets, Fiduciary Duties, and the Inevitable Disclosure Doctrine.” Mark Oberti has prepared a detailed paper on all of these issues, which can be found here.

Last Friday, we discussed Baker Petrolite Corp. v. Spicer, No. 06-1749, 2006 WL 1751786 at *10-11 (S.D. Tex. 2006), which applied the “inevitable disclosure” doctrine without expressly using the phrase.

Spicer relied on FMC Corp., 677 F.2d at 503 and Weed Eater, Inc., 562 S.W.2d at 901. In FMC Corp., the defendant, Best Industries, having tried unsuccessfully to develop its own version of FMC’s technology, recruited an FMC engineer involved in research and product development to come work for Best. See id. FMC and the former employee, Witt, had no covenant not to compete, but Witt had signed FMC’s standard nondisclosure agreement as part of his employment. See id. at 505. FMC sought a preliminary injunction enjoining Witt from using or disclosing any FMC trade secrets, and enjoining Best from placing Witt in a position that would create the threat of inherent disclosure. See id. at 501.

The district court denied the application, but the Fifth Circuit Court of Appeals reversed, holding that FMC had proved all four requirements necessary for preliminary injunctive relief. See id. at 502. The Fifth Circuit rejected the defendant’s assertion that Witt would be able to decide for himself what information he could or could not properly disclose to Best while working on the same technology he had worked on for FMC. See id. at 504. Instead, the Court noted that “[e]ven assuming the best of good faith, Witt will have difficulty preventing his knowledge of FMC’s ‘Longsweep’ manufacturing techniques from infiltrating his work.” Id. In the Court’s view, the only way to safeguard FMC’s trade secrets was to grant the requested injunction, enjoining Witt from divulging any of FMC’s trade secrets, and enjoining Best from placing or maintaining Witt in a position that would pose an inherent threat of disclosure or use of FMC’s trade secrets. Id. at 505.

In Weed Eater, Inc. v. Dowling, a former employee of the plaintiff was enjoined from working for a competitor who manufactured and developed lawn and garden products. The defendant was a former vice president of manufacturing who had designed and organized an assembly line for the production of string-line trimmers. He left the plaintiff’s employment to supervise an assembly line at a company that wanted to start producing the trimmers itself, rather than buy them from Weed Eater. The court found that prohibiting the defendant from using the plaintiff’s trade secrets would be insufficient because the defendant inevitably would disclose his knowledge of the trade secrets if allowed to work in the same area of production. Thus, the court prohibited the defendant from working in any capacity relating to the manufacturing of trimmers. As the court reasoned:

Even in the best of good faith, Dowling can hardly prevent his knowledge of his former employer’s confidential methods from showing up in his work. The only effective relief for Weed Eater is to restrain Dowling from working for Hawaiian Motor Company in any capacity related to the manufacture by Hawaiian Motor Company of a flexible line trimming device.

562 S.W.2d at 902.

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