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

September 17, 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.

A few other cases bear noting with respect to the issue of whether Texas courts have adopted the inevitable disclosure doctrine:

In Conley v. DSC Communications Corp., No. 05-98-01051-CV, 1999 WL 89955, at *3 (Tex. App.–Dallas Feb. 24, 1999, no pet.) (not designated for publication) the Dallas Court of Appeals adopted what might be viewed as a modified version of the inevitable disclosure doctrine, holding 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. Conley, 1999 WL 89955, at *4 (emphasis in original); see also Rugen, 864 S.W.2d at 552 (“Rugen is in possession of IBS’s confidential information and is in a position to use it. Under these circumstances, it is probable that Rugen will use the information for her benefit and to the detriment of IBS.”); Williams, 704 S.W.2d at 471 (applying doctrine, but not by name). The court also rejected the notion that the new employer’s alleged efforts to protect against the disclosure or use of the ex-employer’s trade secrets defeated the ex-employer’s right to an injunction. As the court stated, “[w]e reject Conley’s suggested factor of the new employer’s efforts to protect the trade secrets of the former employer. At best, relying on the new employer to protect the trade secrets of the former employer when those trade secrets could work to the new employer’s advantage is little better than asking the fox to guard the henhouse. The richer the henhouse, the less wise it is to trust even the most responsible and reliable of foxes.” Id. at *6. Likewise, the court held that an injunction was proper notwithstanding the lack of proof of misconduct against the ex-employee, and the fact that there was no non-competition agreement.

In Rugen, 864 S.W.2d at 552, the court held that it was not an abuse of discretion to enter a temporary injunction against a former employee, a sales account manager, prohibiting the employee from using any confidential information obtained from her former employer to solicit or transact business with the employer’s consultants or customers, where the evidence indicated that the employee possessed confidential information of the employer and operated a firm in direct competition with employer, so it was “probable” that she would use the confidential information. The employee worked as an account manager for a personnel company providing computer consulting and contracting services. She left the former employer and started her own firm in the same business. The former employer sought an injunction against the employee to enforce a noncompetition agreement she had signed, and to prevent her from using confidential information she had gained while working for the former employer. The trial court determined that the noncompetition agreement was unenforceable, but enjoined the employee from calling on, soliciting, or transacting business with consultants employed or retained by the former employer or customers of the former employer, and from using confidential business information, methods, and trade secrets that she learned while employed by the former employer. The court recognized that an injunction was appropriate when necessary to prohibit an employee from using confidential information to solicit the former employer’s clients. The employee argued that the injunction should not have been granted because the evidence did not show that she had wrongfully used and would continue to so use any confidential information. However, the court found evidence indicating that the employee possessed confidential information of the former employer and operated a firm in direct competition with the former employer. She was in possession of the former employer’s confidential information and was in a position to use it. Under these circumstances, the court found it probable that the employee would use the information for her benefit and to the detriment of the former employer. The court noted that at times, an injunction was the only effective relief that an employer had when a former employee possessed confidential information, and it did not believe that the trial court abused its discretion by granting the temporary injunction.

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