Texas Trade Secrets

Category: Injunctions

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.).

photo credit: Informedmag Writing Contract Business Relation – Credit to informedmag.com via photopin (license)

“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).

photo credit: ISB Meet via photopin (license)

© 2021 Patrick Keating

Theme by Anders NorenUp ↑