A lawsuit that I worked on last year involved an interesting issue. May a business plaintiff use a confidentiality agreement to prevent its former salesperson from continuing business relationships with the plaintiff’s customers? Yes, an employer can use a properly crafted non-competition agreement to achieve this goal. But if there is no such agreement, can a plaintiff achieve the same end by relying upon a confidentiality agreement?
In the written opinion denying the plaintiff’s request for a preliminary injunction, the court made a distinction between information the defendant retains in memory and information stored in documents or files. The court found that a confidentiality agreement cannot justify an injunction prohibiting a former salesperson from using or disclosing information about customers serviced by the salesperson to the extent the information is in the salesperson’s memory. This conclusion arose from the principle that Texas non-competition agreements may not prohibit employees from using, in competition with the former employer, general knowledge, skill and experience gained during employment. The court explained:
“In the employment context presently under consideration, the Court considers the network of acquaintances one comes to know through employment to be an aspect of the ‘general knowledge . . . and experience acquired in former employment’ that one could utilize in competition with one’s former employer. An agreement prohibiting a former employee in this field from disclosing his acquaintances would therefore be a noncompetition agreement in disguise, and would be unenforceable as such. The situation may be different with respect to tangible documents or computer files produced by [the plaintiff] because such documents do not constitute general knowledge and experience.”
In other words, a plaintiff may be able to use a confidentiality agreement to prevent a former employee from using confidential documents or files taken from the office. However, the court held that a plaintiff cannot use a confidentiality agreement to prevent the former salesperson from contacting the customers met while working for the plaintiff if the salesperson can do so based on information committed to memory.
Finally, as an aside relevant to this blog, the court considered whether the Texas and federal trade secret statutes could support the plaintiff’s injunction application. The court rejected that effort by the plaintiff on the basis that the plaintiff failed to establish that the information about the plaintiff’s customers was secret. The interesting “sound bite” from this portion of the opinion is:
“Customer relationships do not qualify as trade secrets just because a company invests time and money to cultivate those relationships. This is the very reason why many employers insist upon non-compete agreements: to protect their goodwill and to prohibit former employees (for a reasonable period of time) from being able to take advantage of that time and investment to their detriment. [Plaintiff] cannot rely on DTSA or TUTSA to protect the relationships because the DTSA and TUTSA protect an employer’s secrets, not its relationships.”