Patrick Keating

Texas Trade Secrets

Category: Injunctions

Texas Amends Trade Secrets Statute

The Texas legislature recently enacted an amendment to the Texas Uniform Trade Secrets Act, which becomes effective on September 1, 2017.  The substantive changes to the statute fall into three categories.

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Contractual Stipulation to Injunction

Parties to contracts often include text in the document stipulating that a breach of the agreement will cause “irreparable harm” and, therefore, justify an injunction.  These contract clauses are not a cure-all that relieves a plaintiff from the obligation to prove irreparable injury in court.  Texas courts merely consider the contract stipulation as one factor in favor of finding that a threat of irreparable injury exists.  The plaintiff must still prove that is the case with additional evidence.

The following are a few examples of court decisions following this rule: Texas Health & Human Svs. Commission v. USA, 166 F. Supp. 3d 706, 712 (N.D. Tex. 2016); Dickey’s Barbeque Restaurants, Inc. v. GEM Investment Group, LLC, No. 3:11-CV-2804-L, 2012 WL 1344352, *4 (April 18, 2012, N.D. Tex.).

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“Lead Time” Injunctions

In some circumstances, a defendant who misappropriated a trade secret can avoid entry of a perpetual injunction prohibiting use of the trade secret.  A “lead time” injunction bars use of a trade secret for a limited period of time adequate to prevent the defendant from gaining a competitive advantage through use of the stolen trade secret.  For example, if a plaintiff’s trade secret could be reverse engineered by a competitor in one year, the plaintiff might only be entitled to an injunction of one year duration (rather than a perpetual injunction).

There is Texas case authority placing the burden of proof at trial on the Defendant to establish that an injunction of lesser duration than a perpetual injunction is adequate to protect the plaintiff’s rights.  See Halliburton Energy Svs. V. Axis Technologies, LLC, 444 S.W.3d 251, 257 (Tex. App.—Dallas 2014, no pet.);  Hyde Corp. v. Huffines, 314 S.W.2d 763, 776 (Tex. 1958).

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