About the author: PJ Kee is an associate at the Jones Walker law firm in New Orleans. He and a few colleagues recently launched Trade Secret Insider, which chronicles legal insights on trade secrets, non-competes, computer fraud and confidential data theft. This article was originally posted on tradesecretsinsider.com.
————————————————————————————————————————————–
An employer in Texas did nearly everything right to protect its stolen trade secrets—except adequately specify what the injunction restrained the employee from doing. The opinion in Lasser v. Amistco Separation Products Inc., No. 01-13-00690 (Tex. App.—Houston Feb. 6, 2014), highlights the need for clearly defining restraints in any injunctive relief sought.Amistco Separation Products, Inc., entered into an asset purchase agreement with Robert Lasser’s former employer ACS Industries, LP. One asset was Lasser’s non-compete agreement. Within a year-and-a-half, Lasser resigned from Amistco to work for a “sideline” competitor. Amistco conducted a forensic examination of Lasser’s company laptop shortly after he resigned and discovered that Lasser had downloaded Amistco’s confidential information. Amistco also discovered that Lasser’s new employer was opening a new division that would compete directly with Amistco’s products. Amistco filed suit in the Texas District Court for Harris County, requesting an injunction to order the return of its trade secrets and confidential information and to restrain Lasser from disclosing/using its information and from soliciting Amistco’s customers. The district court granted Amistco’s request, and the restraints read, in pertinent part:
- Lasser is ordered to return to Amistco, and to cease and desist from using, any of Amistco’s confidential information and trade secrets; and
- Lasser is restrained from directly or indirectly disclosing, copying or otherwise reproducing, or giving access to any of Amistco’s confidential information and trade secrets.
On appeal, Lasser complained that it’s impossible “to determine from the injunction what documents or information constitutes [Amistco’s] confidential information and has instead been forced to guess what items if any the Court is seeking to be returned and not disclosed.” The Court of Appeal agreed. It reasoned that, “[b]y failing to identify, define, explain or otherwise describe what constitute [Amistco’s] confidential information and trade secrets, the order compels Lasser to ‘make inferences or conclusions about which person might well differ’ regarding what particular information or item in his possession constituted ‘confidential information’ subject to the injunction.” The Court of Appeal ultimately held that those provisions were void and dissolved the injunction.
This opinion hits an important point that can sometimes get lost in a fast-paced trade-secret/non-compete litigation. After undertaking the laborious work of investigating and then prosecuting employee theft/non-compete claims, employers and their counsel must ensure that any proposed injunction signed by the judge sufficiently defines the sought-after restraints. Doing so not only protects against appellate attacks but also—and just as an importantly—will form the basis for any contempt-of-court finding if the employee violates the injunction’s restraints. You don’t want to give a “free pass” to an employee who violates what appears to be a valid injunction.