The San Antonio Court of Appeals recently held that an applicant for a temporary injunction in a trade-secret-misappropriation case under the Texas Uniform Trade Secrets Act is not required to show the defendant is actually using trade-secret information. Instead, the applicant need only show that the defendant possesses trade secrets and is in a position to use them.
Age Industries, Ltd. (“AI”) is a manufacturer of packaging materials for whom Christopher Michael Hughes worked for nearly 20 years as a general manager. In late June 2016, Hughes resigned his employment with AI. Hughes never signed an agreement restricting him from competing with AI. Prior to resigning, Hughes had discussed creating a business to compete with AI. In early June, Diamondback Corrugated Container, LLC (“Diamondback”) was created and, shortly after his resignation, Hughes was hired to be its operations manager.
Two months later, AI sued Hughes and Diamondback for, inter alia, misappropriation of trade secrets under the Texas Uniform Trade Secrets Act, and obtained a temporary restraining order. Following the hearing on AI’s application for a temporary injunction, the trial court granted a temporary injunction against Hughes that (1) required Hughes to account for all documents in his possession belonging to AI, and (2) enjoined Hughes from disclosing AI’s proprietary or trade-secret information, including AI’s sales journals, customer lists, or pricing information.
Hughes appealed the trial court’s temporary injunction against him, contending, among other things, that AI failed to produce sufficient evidence of a probable, imminent, and irreparable injury, because AI only established a fear of possible misappropriation of trade secrets. The court of appeals noted that “the very purpose of an injunction is to prevent disclosure of trade secrets pending trial, [so AI] is not required to show [Hughes] is actually using the information.” Relying on authority from the Dallas, Austin, and Fort Worth Courts of Appeals, the San Antonio Court of Appeals required AI to instead show only that Hughes possesses the trade secrets and is in a position to use them.
Drawing all legitimate inference in favor of the trial court’s order granting the temporary injunction, the court of appeals concluded that AI made the proper showing under this standard. AI presented evidence during the temporary-injunction hearing that shortly before he resigned, Hughes downloaded a large quantity of data from his AI computer onto a USB storage device. Additionally, AI offered evidence that certain financial information Hughes maintained while working for AI could not be located after his resignation, and that Hughes had some of AI’s confidential information on his home computer. Moreover, at the temporary-injunction hearing, Hughes could not testify that emails he sent to a co-worker at Diamondback did not contain AI’s proprietary information.
This evidence—combined with the fact that Hughes left AI to become the operations manager of a company that was formed to compete with AI—established that Hughes was in a position to use AI’s trade secrets to gain an unfair market advantage. Therefore, the appellate court held the trial court did not abuse its discretion in concluding that AI established a probable, imminent, irreparable injury.
This case demonstrates that it is not necessary to present evidence of trade-secret use; mere possession and an opportunity to use is sufficient at the temporary injunction stage.
Hughes v. Age Industries, Ltd., 04-16-00693-CV, 2017 WL 943423 (Tex. App.—San Antonio Mar. 8, 2017, no. pet. h.)