When a company learns that its former employees are releasing or using the company’s trade secrets, it needs to act fast. No company, therefore, wants to spend precious time and money trying to obtain a temporary injunction preventing the release of the confidential information, only to have it overturned by a Court of Appeals because it was not detailed enough. Yet, that’s exactly what happened in Ramirez, et al. v. Ignite Holdings Ltd., et al., where the Texas Fifth Court of Appeals reversed a temporary injunction because it failed to describe specifically what trade secrets and proprietary information the company’s former employees were prohibited from releasing.
In Ramirez, Stream Energy, a provider of electricity and natural gas, and its marketing subsidiary, Ignite Holdings, employed independent sales associates, who had signed non-compete and non-solicitation agreements. When Stream Energy and Ignite found out that Ramirez and several other sales associates were working for their competitors, they fired them and, shortly thereafter, filed a lawsuit. The companies had no trouble obtaining a temporary injunction because of plentiful evidence of violations, but the sales associates appealed the injunction under Texas Civil Practice and Remedies Code Ann. § 51.014(a)(4), arguing that it was not detailed enough.
Most of the restrains in the temporary injunction had expired by the time the appellate court considered them, but the following provision remained in force, prohibiting defendants from: “possessing, disclosing to any third party, or using for their own benefit or to the detriment of Ignite and Stream Energy any of Ignite’s or Stream Energy’s Proprietary Information/Trade Secrets (including but not limited to proprietary information, confidential information, training materials, templates, or sales or customer lists.)” The injunction defined “Proprietary Information/Trade Secrets” as “valuable business, training, and sales techniques, methods, forms, materials, guides, lists, downline associate and customer lists, including personal identifying information, and other confidential and proprietary information as discussed above.”
The Court of Appeals found that this prohibition failed to pass the muster under the Texas Rule of Civil Procedure 683, which requires an injunction to “describe in reasonable detail and not by reference to the complaint or other document, the act or acts sought to be restrained,” and reversed and remanded the injunction to the trial court. The ruling explained that “techniques,” “materials,” “proprietary information,” and “confidential information” were too broad and general to give the sales associates adequate notice of the type of information they were restrained from releasing or using. In contrast, the categories of information such as “downline associate and customer lists” and “organizational reports” were detailed enough to meet the requirements of Rule 683. The Court of Appeals explained that the broad description of the types of the information that the sales associates were prohibited from releasing required them to infer whether any particular information or item in their possession was “proprietary information” or “confidential information” covered by the injunction, and this was “impermissible.”
Since this ruling, the Texas Uniform Trade Secrets Act (TUTSA) has become effective. It now provides a definition of “trade secrets” as “information, including a formula, pattern, compilation, program, device, method, technique, process, financial data, or list of actual or potential customers or suppliers.” It appears that under Ramirez, simply including the TUTSA definition of a trade secret in an injunction will most likely not meet the requirements of Rule 683.
CONCLUSION: If you do not want your injunction reversed on appeal, make sure to specify in detail the categories of trade secrets you want to be protected. Broad phrases such as “confidential information,” “proprietary information,” or “trade secrets” will most likely result in a reversal of the injunction, and even if they do not, they will be useless when it comes to determining whether a party is complying with the injunction. The Texas Courts of Appeals have found that attaching a customer list or an example of protected trade secret to an injunction meets the requirements of Rule 683. Any confidentiality concerns associated with such practice, may be assuaged by using the TUTSA‘s new “preservation of secrecy” procedures under Section Sec. 134A.006, which authorizes courts do what is necessary to preserve the secrecy of trade secrets.
Leiza Dolghih is a partner at Lewis Brisbois Bisgaard & Smith LLP in Dallas, Texas and a Co-Chair of the firm’s Trade Secrets and Non-Compete Disputes national practice. His practice includes commercial, intellectual property and employment litigation. You can contact her directly at Leiza.Dolghih@LewisBrisbois.com or (214) 722-7108.