The Fifth Circuit Chimes In on Inevitable Disclosure
We’ve discussed the inevitable disclosure doctrine in previous posts. It’s a powerful claim and whether adoption of the uniform trade secrets act makes it viable in Texas remains to be seen. What is it? Assume that in your prior job you were exposed to certain trade secrets of your employer that you would “inevitably” use in new employment. The argument goes from the former employer that you should not be able to work at your new job because of inevitable use. In practice, the employer would not need an agreement to enforce this type of claim, only the existence and provision of trade secrets. Wow. Many courts are reticent to invoke such a doctrine.
Whether such a concept is enforceable in Texas remains an open question. This is especially true with adoption of the Texas Uniform Trade Secrets Act. It provides that “Actual or threatend misappropraiation may be enjoined.” So, could a court use this provision to prevent a former employee from working somewhere else in order to protect a trade secret? In theory, yes. There is no reported case of a Texas court doing so.
Last week the Fifth Circuit Court of Appeals waded into the state of the law in Texas on inevitable disclosure. The results were mixed, but the Court was clear to say that Texas has not adopted inevitable disclosure as a “categorical rule”. Here is a really long but helpful quote from the case:
It is thus not surprising that more recent Texas case law has rejected the notion of a categorical rule. See Cardinal Health Staffing Network, Inc. v. Bowen, 106 S.W.3d 230, 242–43 (Tex. App.—Houston [1st Dist.] 2003, no pet.) (observing that “no Texas case expressly adopt[s] the inevitable disclosure doctrine” and holding that it need not decide whether to follow Rugen and Conley’s “modified version of the doctrine” because the employee produced evidence that “raise[d] a reasonable inference . . . that disclosure and use [of former employer’s confidential information] was not probable”); see also M-I, L.L.C. v. Stelly, H-09-cv-01552, 2009 WL 2355498, at *7 (S.D. Tex. July 30, 2009) (stating that “inevitable disclosure” is not yet the law in Texas, and refusing to order an injunction due to lack of evidence that former employees “took any confidential informationwith them or that they are using such information” at their new employers); see also Troy A. Martin, Comment, The Evolution of Trade Secret Law in Texas: Is It Time to Recognize the Doctrine of Inevitable Disclosure?, 42 S. TEX. L. REV. 1361, 1376 (2001) (concluding that “the functional premise behind the doctrine itself is clearly at odds with Texas jurisprudence” and noting that “very few courts in Texas have advanced the theory”).
We’ll continue to montior the state of the law on inevitable disclosure in Texas. The bottom line is our state courts have been quiet on the subject and the Texas Supreme Court has not addressed the issue. Here is a link to the opinion.
