Trade Secrets and Injunctions

Trade secrets can lose their protection under Texas law once they are disclosed. Disclosure of a trade secret can also destroy the value of its competitive edge. If a trade secret holder has reason to believe a competitor, employee, or former employee has wrongfully acquired or may wrongfully use confidential information, a trade secret injunction may be an option to prevent disclosure and preserve protection of its value.

Trade secret injunctions generally result in a temporary order from a court that requires the person wrongfully in possession of the trade secret to cease using and disclosing confidential information.

Value of a Trade Secret Preliminary Injunction

Trade secret litigation can be a lengthy process. A preliminary injunction may be available even before the court or jury finds that a trade secret in fact exists, and that the defendant is liable for misappropriation. Preliminary injunctive relief carries a fairly substantial burden. The party seeking an injunction must prove all of the following elements: 1) a substantial likelihood exists that the plaintiff will succeed on the merits; 2) the threat that irreparable injury will be inflicted on the plaintiff if the injunction is not granted; 3) the threatened injury to the plaintiff outweighs the threatened injury to the defendant; and 4) the granting of the injunction will not be a disservice to the public interest.

Abandoned Claims in Which Trade Secrets Are Disclosed

If a competitor discloses confidential information in a patent application, a trade secret injunction may also be useful if the defendant abandons claims in which trade secrets are disclosed. Abandoned claims in patent applications are treated as open to the public and unpatentable. Trade secret holders have successfully moved for trade secret injunctions restoring abandoned claims that contain trade secrets and allowing the trade secret holder’s attorney to prosecute the restored claims. Trade secret injunctions are even possible after a party voluntarily discloses trade secrets (which usually destroys trade secret status) if the defendant used the confidential information in violation of a confidential relationship that existed prior to the wrongful disclosure.

Violation of Trade Secret Injunction

If valuable, confidential information falls into the wrong hands, trade secret injunctions are powerful tools because the court has wide discretion to protect the value of the trade secret by ordering the defendant to stop using or disclosing it. If a party violates a trade secret injunction, he or she is subject to being held in contempt of court until the judge decides that the contempt has been purged. Trade secret injunctions can therefore be an effective deterrent against the often irreparable consequences of disclosure.

About the firm:

Klemchuk LLP is an Intellectual Property (IP), Technology, Internet, and Business law firm.  The firm offers comprehensive legal services including litigation and enforcement of all forms of IP as well as registration and licensing of patents, trademarks, trade dress, and copyrights.  The firm also provides a wide range of technology, Internet, e-commerce, and business services including business planning, formation, and financing, mergers and acquisitions, business litigation, data privacy, and domain name dispute resolution. 

Klemchuk LLP hosts Culture Counts, a blog devoted to the discussion of law firm culture and corporate core values with frequent topics about positive work environment, conscious capitalism, entrepreneurial management, positive workplace culture, workplace productivity, and corporate core values.