When confidential information or trade secrets are provided to a government agency in a bid for a public contract, they might wind up being disclosed to a competitor or others unless great care is taken by the bidder. Non-disclosure agreements are essential. Of course, all pages containing a trade secret should be designated as “confidential.” Examples of other protective measures that might be utilized include placing on each such page limitations on permissible access, and referring in all written and oral communications relating to any of those pages that they contain proprietary data. If there are mock-ups or models embodying a trade secret, a non-disclosure agreement should be obtained from anyone permitted to see them. When, of necessity, a trade secret needs to be disclosed in court papers, an attempt should be made to submit them under seal.

Under contract with school districts, Delcom designs and installs customized, interactive, and media-driven equipment used in classrooms. Delcom submitted two multi-million dollar bids in response to a RFP from a Dallas school district (“DISD”). A competitor, Prime, submitted one bid. Delcom was the highest ranked bidder, and contract negotiations with DISD commenced. About three weeks later, however, DISD notified Delcom that (a) the Texas Education Code disqualified the company because of its failure to disclose that one of its employees had been convicted of a felony, and (b) DISD intended to enter into contract negotiations with Prime.

Delcom promptly filed suit in a Texas court against DISD and Prime, asserting various tort and contract claims including misappropriation of trade secrets contained in Delcom’s bidding documents and in a model classroom it built as part of its RFP bid. Delcom asked for injunctive relief. In the course of a TRO hearing, Prime returned to Delcom all of its documents that Prime had received from DISD, and Prime assured the court that none had been used. For these and other reasons, the trial court denied Delcom’s request for injunctive relief against both of the defendants and dismissed the case against DISD. These rulings were affirmed on appeal. Delcom Group, LP v. Dallas Indep. School Dist., Case No. 05-11-01259-CV (Tex. Court of Appeals, Aug. 17, 2012).

Delcom’s litigation effort failed largely because of a number of facts unique to this case. The part of the decision most useful to attorneys and clients interested in trade secret law is the court’s discussion, summarized in the first paragraph of this blog, of actions that can be taken to protect confidential information contained in a bid submitted in response to a RFP.