is anything inevitable? · 2017. 7. 5. · cle for demonstrating that an injunction is necessary to...

757 Texas Bar Journal • September 2013 texasbar.com

BY ALEX HARRELL

ON MAY 2, 2013, GOV. RICK PERRYSIGNED INTO LAW S.B. 953, A BILLADOPTING A TEXAS VERSION OFTHE UNIFORM TRADE SECRETS ACT(TUTSA).1 In many respects, TUTSA is astep in the right direction. Among otherthings, it aligns Texas with the 46 other statesthat have already adopted some incarnationof the Uniform Trade Secrets Act.2 But inas-much as it represents an advancement in thelaw, TUTSA also leaves unanswered a piv-otal question raised by its enactment: Doesthe inevitable disclosure doctrine now applyin Texas? If so, the result is a major departurefrom existing Texas law that will loom largein future cases.3

Is Anything Inevitable?The impending clash between the

inevitable disclosure doctrine and theCovenants Not to Compete Act.

INEVITABLE

DISCLOSURE DOCTRINECOVENANTS NOT TO

COMPETE ACT

texasbar.com/tbj Vol. 76, No. 8 • Texas Bar Journal 758

The inevitable disclosure doctrine is essentially a the-ory of relief that has been used by employers “as a vehi-cle for demonstrating that an injunction is necessary toprevent the misappropriation of trade secrets” by a for-mer employee.4 Under the doctrine, “a former employeris entitled to enjoin even anticipated employment orother business activity that would result in inevitabledisclosure in order to protect the former employer’s con-fidential and proprietary information from disclosure.”5

Thus, the doctrine enables an employer to prohibit a for-mer employee from working for a competitor, evenwhere the employee has not signed a non-competeagreement and there is no showing that he has actedother than in the utmost good faith.6

But “[i]n Texas, to resign from one’s employment and gointo business in competition with one’s former employer is,under ordinary circumstances, a constitutional right.”7 If anemployer wishes to restrain an employee from quitting toopen a competing business or work for a competitor, theemployer “may seek to accomplish that goal through a non-competition agreement”8 that complies with the Covenantsnot to Compete Act (the “Act”).9 Proponents of theinevitable disclosure doctrine may therefore find it diffi-cult to persuade Texas courts that the doctrine should beapplied in TUTSA cases.

THE INEVITABLE DISCLOSURE DOCTRINEThough the origins of the theory date back much fur-

ther,10 the leading case discussing the inevitable disclo-sure doctrine is PepsiCo, Inc. v. Redmond, 54 F.3d 1262(7th Cir. 1995).11 The PepsiCo defendant, William Red-mond, worked for PepsiCo’s North American divisionfrom 1984 to 1994, eventually becoming general managerof PepsiCo’s business unit covering the state of Califor-nia.12 His high-level position allowed Redmond access toinside information and trade secrets.13 Like other PepsiComanagement employees, Redmond signed a confidential-ity agreement, in which he agreed not to “disclose at anytime, to anyone other than officers or employees of [Pep-siCo], or make use of, confidential information relatingto the business of [PepsiCo] ... .”14

In 1994, Quaker Oats Company began recruiting Red-mond for its Gatorade division.15 After a few months ofnegotiations,16 Quaker offered Redmond a senior execu-tive position with Gatorade, which Redmond accepted.17

Shortly thereafter, Redmond notified PepsiCo that he wasresigning and accepting Quaker’s offer.18

PepsiCo quickly filed a lawsuit seeking “to enjoin Red-mond from assuming his duties at Quaker and to preventhim from disclosing trade secrets or confidential informa-tion to [Quaker].”19 At the temporary injunction hearing,PepsiCo offered evidence of a number of trade secrets to

which Redmond had been privy.20 PepsiCo argued thatRedmond would “inevitably disclose [its trade secret]information to Quaker in his new position” and “couldgive Quaker an unfair advantage” over PepsiCo.21 Thetrial court issued an order enjoining Redmond fromassuming his position at Quaker for six months and per-manently restraining him from using or disclosing anyPepsiCo trade secrets or confidential information.22

On appeal, the 7th Circuit affirmed noting that underthe Illinois Trade Secrets Act (ITSA),23 a “court mayenjoin the ‘actual or threatened misappropriation’ of atrade secret.”24 The court acknowledged the competinginterests at stake in all trade secret litigation: “Trade secretlaw serves to protect ‘standards of commercial morality’and ‘encourage[ ] invention and innovation’ while main-taining ‘the public interest in having free and open com-petition in the manufacture and sale of unpatentedgoods.’ ” 25 But “the same law should not prevent workersfrom pursuing their livelihoods when they leave theircurrent positions.”26 The court also recognized that “[t]histension is particularly exacerbated when a plaintiff suesto prevent not the actual misappropriation of trade secretsbut the mere threat that it will occur.”27


In deciding where the line on “threatened misappro-priation” should be drawn, the court analyzed two priortrade secrets cases.28 In the first case, Teradyne, Inc. v.Clear Commc’ns Corp., the court found that “ ‘ threatenedmisappropriation can be enjoined under Illinois law’ wherethere is a ‘high degree of probability of inevitable andimmediate ... use of ... trade secrets.’ ” 29 In the other case,AMP Inc. v. Fleischhacker, the 7th Circuit “emphasizedthat the mere fact that a person assumed a similar posi-tion at a competitor does not, without more, make it‘inevitable that he will use or disclose ... trade secretinformation’ so as to ‘demonstrate irreparable injury.’ ” 30

The PepsiCo court read ITSA, Teradyne, and AMP as“lead[ing] to the same conclusion: a plaintiff may prove aclaim of trade secret misappropriation by demonstratingthat defendant’s new employment will inevitably leadhim to rely on the plaintiff ’s trade secrets.”31 The courtobserved that “PepsiCo presented substantial evidence atthe preliminary injunction hearing that Redmond pos-sessed extensive and intimate knowledge about” PepsiCo’strade secrets.32 The court also emphasized that PepsiCosought an injunction to keep its “particularized plans andprocesses”—not Redmond’s “general skills and knowl-edge”—from falling into Quaker’s hands.33 The danger,according to the court, was that Quaker, “unfairly armed”by Redmond with knowledge of PepsiCo’s plans, would beable to anticipate PepsiCo’s “distribution, packaging, pric-ing, and marketing moves.”34 The court upheld the pre-liminary injunction, finding that “the demonstratedinevitability that Redmond would rely on [PepsiCo] tradesecrets in his new job at Quaker” coupled “with the dis-trict court’s reluctance to believe that Redmond wouldrefrain from disclosing these secrets in his new position(or that Quaker would ensure Redmond did not disclosethem)” supported the district court’s order.35

THE RUGEN “PROBABLE USE” DOCTRINEWhile no Texas court has endorsed the inevitable dis-

closure doctrine,36 in Rugen v. Interactive Business Systems,the Dallas Court of Appeals adopted a modified ruleallowing for a temporary injunction restraining a defen-dant from using his former employer’s confidential infor-mation where: (1) the defendant is in possession ofconfidential information; and (2) it is probable that hewill use the confidential information for his or his newemployer’s benefit, or to the detriment of his formeremployer.37 Applying this test, the Rugen court upheld atemporary injunction restraining the defendant from“calling on, soliciting, or transacting business with” theplaintiff ’s customers since he had been provided access tothe plaintiff ’s confidential customer information whilestill employed by the plaintiff.38

Although Texas appellate courts continue to apply theRugen doctrine,39 there is substantial reason to questionwhether it is good law. The Rugen court reasoned that aninjunction barring a defendant from “calling on, solicit-ing, or transacting business” with his former employer’scustomers is “not analogous to [a] non-competition agree-ment, nor does it enjoin competition.”40 Since Rugen,however, courts have repeatedly found that non-solicita-tion agreements are tantamount to covenants not to com-pete and are therefore subject to the strictures of theCovenants not to Compete Act.41 Thus, the Rugen court’sultimate conclusion was based largely on a premise that isinconsistent with more recent case law.

Setting aside the question of whether the case waswrongly decided,42 it is important to note the limited reachof the Rugen doctrine. Under Rugen, a temporary injunc-tion barring a defendant from actually using his formeremployer’s trade secrets is proper, provided that the plain-tiff submits proof that the defendant actually possessesthe trade secrets and it is probable that he will use them.43

But an order restraining a person from competing withhis former employer or working for a competitor is out-side the bounds of the injunction approved in Rugen.44

Regardless, trade secrets plaintiffs continue to cite Rugenwhen seeking injunctions that would restrain a formeremployee from competing or working for a competitor.45

Such efforts to transform Rugen into something moreakin to the inevitable disclosure doctrine have thus farbeen unsuccessful.46 Indeed, the Dallas Court of Appeals,post-Rugen, dissolved a temporary injunction in a tradesecrets case because it did “not focus on protecting anyspecific information” but rather “barr[ed] appellants fromtrying to develop or pursue any acquisitions or otheropportunities, rather than only those opportunitiesappellants learned about through confidential informa-tion while employed at [their former employer].”47 Thecourt concluded that the injunction was therefore overlybroad and “essentially created a non-compete restriction.”48

THE INEVITABLE DISCLOSURE DOCTRINEVS. THE COVENANTS NOT TO COMPETE ACT

Like the Illinois statute examined in PepsiCo, injunc-tive relief is available under TUTSA for “actual or threat-ened” misappropriation.49 And while the case law is by nomeans uniform,50 courts in other states have applied theinevitable disclosure doctrine, at least in part, becausethe applicable version of the Uniform Trade Secrets Actpermits an injunction to prevent “threatened” misappro-priation.51 A reasonable argument could thus be madethat the Texas Legislature intended to adopt theinevitable disclosure doctrine by including “threatenedmisappropriation” as a basis for injunctive relief under


TUTSA. Because the statute leaves the question unan-swered, it will be up to the courts to discern the Legisla-ture’s intent.52

In deciding whether the inevitable disclosure doctrineapplies in TUTSA cases, courts will undoubtedly considerthe strong public policy in this state that “[e]very con-tract, combination, or conspiracy in restraint of trade orcommerce is unlawful.”53 This policy protects everyTexan’s “right to earn a living ...[,]” a right which theTexas Supreme Court recognized long ago is “a propertyright within the meaning of our Constitution ... .”54 Italso “promote[s] economic competition in trade and com-merce ...” and “provide[s] the benefits of that competitionto consumers in the state.”55 Texas’s public policy disfa-voring restraints on trade, however, is not absolute. TheCovenants not to Compete Act carves out an exceptionto the general rule. But the Act “is just that—an excep-tion—with the rule favoring robust competition.”56 Theinevitable disclosure doctrine, if adopted, would establisha second exception allowing an individual to berestrained from practicing his chosen trade if doing sowould unavoidably compromise his former employer’strade secrets.

For two decades, Texas courts have wrangled over therequirements a non-compete agreement must meet to beenforceable under the Act.57 There has been substantialdisagreement even within the Texas Supreme Courtregarding the appropriate standards to apply in non-com-pete cases.58 It is well-established, however, that acovenant not to compete is enforceable under the Actonly if it is supported by adequate consideration; anemployer may not “spring a non-compete covenant on anexisting employee and enforce such a covenant absentnew consideration ... .”59 Opponents of the inevitable dis-closure doctrine will likely contend that the doctrineundermines the Act in that it enables an employer tospring a covenant not to compete on an employee afterthe employment relationship is terminated and withouthaving to provide the employee any new consideration.

If the inevitable disclosure doctrine is to be applied inTUTSA cases, another important question should also beconsidered: Is an injunction that restrains competitionbased on a trade secrets theory—rather than on the exis-tence of a covenant not to compete—subject to any ofthe constraints in the Act? The Act provides that allcovenants must “contain[ ] limitations as to time, geo-

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graphical area, and scope of activity to be restrained thatare reasonable and do not impose a greater restraint thanis necessary to protect the goodwill or other businessinterest of the [employer].”60 The prevailing view amongthe courts is that restrictive covenants in a non-competeagreement are “reasonable” where they “bear[ ] some rela-tion to the activities of the employee.”61

A court applying the inevitable disclosure doctrinecould ostensibly enjoin a defendant, for example, fromworking for a competitor in a geographic region where thedefendant has never worked.62 This sort of restriction, ifincluded in a non-compete agreement, would almost cer-tainly be held unenforceable under the Act.63 Defendantswill no doubt assert that the Legislature could not haveintended to enact a new law that enables circumventionof an existing one. Trade secrets plaintiffs, however, couldrespond that this seeming inconsistency is easily resolvedsimply by applying inevitable disclosure but incorporatingin the injunction reasonable limitations as to the time,geographical area, and scope of activities to be restrained.

The inevitable disclosure debate also implicatesanother fundamental public policy long recognized bythe Texas Supreme Court: the freedom of contract.64

“ ‘As a rule, parties have the right to contract as they seefit as long as their agreement does not violate the law orpublic policy.’ ” 65 Generally speaking, Texas courts do“ ‘not lightly interfere with this freedom of contract.’ ” 66

Where an employer and employee have negotiated a sim-ple agreement contemplating that the employee will pro-vide personal services in exchange for compensation,Texas courts may be loath to enter an injunction thateffectively adds a covenant not to compete that wasnever even a part of the parties’ negotiations.

The inevitable disclosure doctrine was rejected in Cal-ifornia principally for these same reasons.67 California hasenacted its own version of the Uniform Trade SecretsAct68 that likewise allows for injunctive relief where“threatened misappropriation” is shown.69 But Californiahas declined to apply the inevitable disclosure doctrinebecause, according to the California courts, it results inan impermissible ex post facto non-compete agreement:

The chief ill in the covenant not to compete imposedby the inevitable disclosure doctrine is its after-the-factnature: The covenant is imposed after the employmentcontract is made and therefore alters the employmentrelationship without the employee’s consent. When ...a confidentiality agreement is in place, the inevitabledisclosure doctrine in effect converts the confidentialityagreement into such a covenant not to compete. ... [A]court should not allow a plaintiff to use inevitable dis-closure as an after-the-fact noncompete agreement to

enjoin an employee from working for the employer ofhis or her choice. ... As a result of the inevitable disclo-sure doctrine, the employer obtains the benefit of a con-tractual provision it did not pay for, while the employeeis bound by a court-imposed contract provision with noopportunity to negotiate terms or consideration.70

In California, “threatened” misappropriation cannotbe inferred from the fact that an employee began workingfor a direct competitor of his employer immediately afterterminating his employment, even where it appears theemployee will perform duties for the competitor that arethe same or similar to his job duties to his formeremployer.71 Neither can an individual be enjoined fromcompeting with his former employer simply because hehad access to and acquired his former employer’s tradesecret information.72 Rather, a plaintiff may only obtainan injunction against a former employee by submitting“evidence beyond its former employee’s knowledge oftrade secrets and subsequent change of employers.”73 Toprove “threatened” misappropriation, a California plain-tiff must show “a threat by a defendant to misuse tradesecrets, manifested by words or conduct, where the evi-dence indicates imminent use.”74 Only after the plaintiffhas shown that its former employee “violate[d] the trade-secrets law in a nontrivial way” may it obtain an injunc-tion restraining the employee from competition.75

There are significant distinctions, however, betweenthe laws and public policies of Texas and California, andtherefore the California approach may not be transferable.Most notably, California views covenants not to competewith a gimlet eye.76 Whereas in Texas “[t]he hallmark ofenforcement is whether or not the covenant is reason-able[,]”77 California law “generally prohibits covenants notto compete, and California public policy strongly favorsemployee mobility.”78 California courts have determinedthat non-compete agreements are enforceable in limitedcircumstances “if necessary to protect the employer’s tradesecrets”79 but it is evident that California has struck a bal-ance between the interests of employers and employeesthat is not entirely congruent with Texas public policy.Thus, California’s rejection of inevitable disclosure maynot inform the analysis of Texas courts.

CONCLUSIONUltimately, each state must find its own answer on

inevitable disclosure that is consistent with its laws andprevailing public policies. To that end, Texas courts haveso far not been warm to the inevitable disclosure doc-trine. But the enactment of TUTSA, with its allowancefor injunctive relief in the face of “threatened misappro-priation,” breathes new life into the inevitable disclosure

debate and may portend a shift in judicial thinking. Tradesecrets plaintiffs can—and no doubt will—argue that byenacting TUTSA, the Legislature signaled its recogni-tion that “there are times when an employment contractis not a feasible alternative with regard to the protectionof intellectual capital of a trading enterprise.”80 In suchinstances, shouldn’t “an employer ... have judicial recourseto enjoin the potential theft of its intellectual property”?81

Regardless, inevitable disclosure adherents may stillencounter resistance from Texas courts. The Covenantsnot to Compete Act already provides employers with ameans for protecting against the possibility that anemployee with access to trade secret information mightlater use that information to compete in the market.82

And opponents of inevitable disclosure have ample basisfor arguing that the doctrine is antithetical not only tothe Act but also to long-standing public policies in thisstate favoring robust competition and freedom of contract.

In the end, the Legislature’s decision to leave this issueopen will likely lead to more litigation until the courtsreach a consensus and either expressly adopt or reject theinevitable disclosure doctrine in TUTSA cases. And so,for the time being, the only thing that seems “inevitable”is uncertainty. TBJ

NOTES1. See http://www.capitol.state.tx.us/BillLookup/History.aspx?LegSess=83R&Bill=SB953

(legislative history of S.B. 953).2. Joseph F. Cleveland Jr. and J. Heath Coffman, Should Texas Adopt the Uniform

Trade Secrets Act?, State Bar of Texas Litigation Section: News for the Bar, p. 17(Spring 2013).

3. TUTSA will apply only to claims alleging that a trade secret was misappropriatedon or after the effective date of the bill, or Sept. 1, 2013. S.B. 953 at § 3. Prior Texaslaw on trade secret misappropriation will continue to control claims relating to anyalleged misappropriation occurring before Sept. 1, 2013, and to any acts of contin-uing misappropriation that began prior to Sept. 1, 2013. Id.

4. Interbake Foods, L.L.C. v. Tomasiello, 461 F.Supp.2d 943, 970 (N.D. Iowa 2006).5. Orthovita, Inc. v Erbe, 2008 U.S. Dist. LEXIS 11088, *29 (E.D. Penn. 2008)

(emphasis original) (citations omitted).6. See, e.g., Moore v. Comm. Aircraft Interiors, LLC, 278 P.3d 197, 202 (Wash Ct.

App. 2012) (noting that the inevitable disclosure doctrine is applicable withoutregard to whether there is any evidence of affirmative misconduct by the employee);LeJeune v. Coin Acceptors, Inc., 849 A.2d 451, 468 (Md. 2004) (observing thatthe inevitable disclosure doctrine is “based on the original employer’s claim thata former employee who is permitted to work for a competitor will—even if actingin the utmost good faith—inevitably be required to use or disclose the formeremployer’s trade secrets in order to perform the new job”).

7. Abetter Trucking Co., Inc. v. Arizpe, 113 S.W.3d 503, 510 (Tex. App.—Houston[1st Dist.] 2003, no pet.) (citing Ledel v. Bill Hames Shows, Inc., 367 S.W.2d 182,184 (Tex. Civ. App.—Fort Worth 1963, no writ)).

8. Id.9. Tex. Bus. & Com. Code §§ 15.50-.52.10. See Eastman Kodak Co. v. Powers Film Prods., Inc., 179 N.Y.S. 325, 330 (N.Y. App.

Div. 1919) (noting that a former employee’s rendition of services along the speciallines of training provided by his former employer would almost necessarily impartthe former employer’s trade secrets).

11. See LeJeune, 849 A.2d at 469 (observing that PepsiCo is “the most notable caseinvolving ‘inevitable disclosure’”); Whyte v. Schlage Lock Co., 125 Cal. Rptr. 2d 277,290 (Cal. Ct. App. 2002) (describing PepsiCo as “the leading case on inevitable dis-closure”); Del Monte Fresh Produce Co. v. Dole Food Co., 148 F.Supp.2d 1326, 1336(S.D. Fla. 2001) (noting that PepsiCo is “the principal case on inevitable disclo-sure”); Ryan M. Wiesner, A State-by-State Analysis of Inevitable Disclosure: A Need forUniformity and a Workable Standards, 16 Marq. Intell. Prop. L. Rev. 211, 216 (2012)(“The Seventh Circuit’s decision in PepsiCo, Inc. v. Redmond is considered theprominent case discussing inevitable disclosure after adoption of the UTSA.”).

12. PepsiCo, 54 F.3d at 1264.

13. Id.14. Id.15. Id. The Quaker Oats executive leading the charge to obtain Redmond’s services was

also a former PepsiCo employee. Id.16. Redmond kept these negotiations secret from PepsiCo. Id.17. Id. On the same day Redmond accepted the Quaker offer, he falsely represented

to PepsiCo that he had received an offer from Quaker but had not yet accepted.Id. Redmond also misrepresented his situation to at least two other PepsiCoexecutives. Id.

18. Id.19. Id. at 1265. The court granted the TRO “but dissolved the order sua sponte two

days later, after determining that PepsiCo had failed to meet its burden of estab-lishing that it would suffer irreparable harm” and finding that “the likelihood thatRedmond would improperly reveal any confidential information did not ‘riseabove mere speculation.’” Id.

20. Id. at 1265-66. These trade secrets included PepsiCo’s strategic plan, its annualoperating plan, and certain trade secrets regarding innovations in its selling anddelivery systems. Id.

21. Id. at 1266.22. Id. at 1267. “The court, which completely adopted PepsiCo’s position, found that

Redmond’s new job posed a clear threat of misappropriation of trade secrets andconfidential information that could be enjoined under Illinois statutory and com-mon law.” Id.

23. ITSA, adopted in 1988, represents Illinois’s adaptation of the Uniform TradeSecrets Act. 765 ILCS 1065/1, et seq.; United States Gypsum Co. v. LaFarge N.Am., Inc., 508 F.Supp.2d 601, 623 (N.D. Ill. 2007) (noting that there is “sub-stantial variance” between ITSA and UTSA but acknowledging that ITSA is“patterned after” UTSA).

24. PepsiCo, 54 F.3d at 1267 (citing, inter alia, 765 ILCS 1065/3(a)).25. Id. at 1268 (quoting 2 Melvin F. Jager, Trade Secrets Law § IL.01[7] IL-[7], IL-12

(Clark Boardman Callaghan, rev. ed. 1994)).26. Id. (citation omitted).27. Id.28. Id. (citing Teradyne, Inc. v. Clear Commc’ns Corp., 707 F.Supp. 353 (N.D. Ill.

1989) and AMP Inc. v. Fleischhacker, 823 F.2d 1199 (7th Cir. 1987)).29. Teradyne, 707 F.Supp. at 356. The Teradyne court determined, however, that “the

defendants’ claimed acts, working for [plaintiff], knowing its business, leaving itsbusiness, hiring employees from [plaintiff] and entering the same field (though ina market not yet serviced by [plaintiff]) do not state a claim of threatened misap-propriation.” Id. at 357. Rather, the plaintiff had merely alleged “that defendantscould misuse plaintiff ’s trade secrets, and plaintiff[ ] fear[s] they will.” The courtheld that “[t]his is not enough” to support injunctive relief; “[i]t may be that littlemore is needed, but falling a little short is still falling short.” Id.

30. PepsiCo, 54 F.3d at 1269 (quoting AMP, 823 F.2d at 827).31. Id. (citing 1 Jager, Trade Secrets Law at § 7.02[2][a] at 7-20 (noting claims where

“the allegation is based on the fact that the disclosure of trade secrets in the newemployment is inevitable, whether or not the former employee acts consciously orunconsciously)).

32. Id. Based on that evidence, the district court had concluded “that unless Red-mond possessed an uncanny ability to compartmentalize information, he wouldnecessarily be making decisions about Gatorade and Snapple by relying on hisknowledge of [PepsiCo] trade secrets. Id.

33. Id. (quotation omitted).34. Id. at 1270. The court explained its view of the facts with a sports analogy: “Pep-

siCo finds itself in the position of a coach, one of whose players has left, playbookin hand, to join the opposing team before the big game.” Id.

35. Id. at 1271.36. Cardinal Health Staffing Network v. Bowen, 106 S.W.3d 230, 241 (Tex. App.—

Houston [1st Dist.] 2003, no pet.) (“We have found no Texas case expresslyadopting the inevitable disclosure doctrine, and it is unclear to what extent Texascourts might adopt it or view it as relieving an injunction applicant of showingirreparable injury.”).

37. 864 S.W.2d 548, 552 (Tex. App.—Dallas 1993, no writ); see also Conley v. DSCCommc’ns Corp., 1999 Tex. App. LEXIS 1321, *10-11 (Tex. App.—Dallas 1999,no pet.).

38. Rugen, 864 S.W.2d at 552.39. See, e.g., Mabrey v. Sandstream, Inc., 124 S.W.3d 302, 319 n. 44 (Tex. App.—Fort

Worth 2003, no pet.); Sweet v. Inkjet Int’l, 2003 Tex. App. LEXIS 8539, *4-5(Tex. App.—Dallas 2003, no pet.).

40. Rugen, 864 S.W.2d at 550.41. See, e.g., Shoreline Gas, Inc. v. McGaughey, 2008 Tex. App. LEXIS 2760, *29 (Tex.

App.—Corpus Christi 2008, no pet.) (“[N]on-solicitation agreements are subject tothe same analysis as covenants not to compete. ... A non-solicitation agreement issufficiently analogous to a covenant not to compete such that the provisions of theAct must apply fully to such agreements.”) (citations omitted); Miller Paper Co. v.Roberts Paper Co., 901 S.W.2d 593, 599-600 (Tex. App.—Amarillo 1995, no pet.)(“Both [nonsolicitation covenants and noncompetition covenants] prevent theemployee from soliciting customers or business enjoyed by the employer. Both con-



tain geographic and durational parameters. Both effectively restrict competition.Moreover, both allegedly serve to protect goodwill.”); Guy Carpenter & Co., Inc. v.Provenzale, 334 F.3d 459, 465 (5th Cir. 2003) (noting that “non-solicitationcovenants restrain trade and competition” and are governed by the Act); RimkusConsulting Gp., Inc. v. Cammarata, 255 F.R.D. 417, 438-39 (S.D. Tex. 2008) (“Tothe extent that the nonsolicitation provisions constitute a separate covenant, sucha nonsolicitation covenant is also a restraint on trade and competition and mustmeet the criteria of [the Act] to be enforceable.”).

42. See Bowen, 106 S.W.3d at 241 (declining to adopt the Rugen doctrine) (dictum).43. 864 S.W.2d at 552; but see Variable Annuity Life Ins. Co. v. Miller, 2001 Tex. App.

LEXIS 8340, *14-17 (Tex. App.—Amarillo 2001, no pet.) (noting that the Rugencourt did not specifically address whether its “possession” requirement includedinformation retained only in a defendant’s memory and upholding a temporaryinjunction restraining the defendant only from using or disclosing “written infor-mation, information downloaded from computers, or computer software, but notinformation retained by [the defendant] or which was generally available to thegeneral public or competitors of [the plaintiff]”).

44. Rugen, 864 S.W.2d at 551 (finding that “[t]he temporary injunction does not pre-vent Rugen from competing with IBS” or “organizing a competing firm and devel-oping her own clients and consultants”).

45. See, e.g., Reliant Hosp. Partners, LLC v. Cornerstone Healthcare Gp. Holdings, Inc.,374 S.W.3d 488, 502 (Tex. App.—Dallas 2012, pet. filed) (noting plaintiff ’sreliance on Rugen in seeking to uphold an injunction barring defendants, plain-tiff ’s former employees, from, among other things, “engaging in, or attempting toengage in, the development, acquisition, merger, partnership, or joint or sharedservice with any post-acute care facility, information about which was presentedor disclosed to Defendants ... while employed” with plaintiff).

46. Id. at 502-03 (concluding that “[i]n a case involving trade secrets or confidentialinformation, the injunction must be narrowly tailored to address the improper useof confidential or proprietary information” and must not be framed so broadly asto prohibit the enjoyment of lawful rights”); T-N-T Motorsports, Inc. v. HennesseyMotorsports, Inc., 965 S.W.2d 18, 25-26 (Tex. App.—Houston [1st Dist.] 1998,pet. dism’d) (finding the trial court’s injunction overly broad and modifying it toprohibit the defendants only from “directly or indirectly disclosing ... any Hen-nessey Trade Secret information” and from “working on … and/or providing anytypes of services using Hennessey Trade Secret information”).

47. Reliant, 374 S.W.3d at 502.48. Id. at 502-03.49. S.B. 953 at § 1 (language of Tex. Civ. Prac. & Rem. Code § 134A.003(a))

(emphasis added). S.B. 953 does not define “threatened misappropriation.” Seegenerally id.

50. See Wiesner, supra, 16 Marq. Intell. Prop. L. Rev. at 217 (noting that the states’applications of the inevitable disclosure doctrine have been inconsistent).

51. See, e.g., Interbake Foods, 461 F.Supp. 2d at 973 (applying the Iowa Uniform TradeSecrets Act and finding that “the inevitable disclosure doctrine is just one way ofshowing a threatened disclosure in cases where additional evidence showing theexistence of a substantial threat of impending injury is unavailable to themovant.”); Nucor Corp. v. Bell, 2008 U.S. Dist. LEXIS 119952, *55-56 (D.S.C.2008) (predicting that “the South Carolina Supreme Court would recognize theinevitable disclosure doctrine” and noting that the South Carolina Uniform TradeSecrets Act “allows injunctions in cases presenting threatened misappropriation oftrade secrets”); United Prods. Corp. of Am. v. Cederstrom, 2006 Minn. App. Unpub.594, *14 (Minn. Ct. App. 2006) (recognizing that “[a]ctual or threatened misap-propriation may be enjoined” under the Minnesota Uniform Trade Secrets Act butnoting that “the moving party must demonstrate a high degree of probability ofinevitable disclosure”) (quotations omitted); but see Del Monte, 148 F.Supp.2d at1335 (“Courts that have adopted inevitable disclosure apply traditional trade secretmisappropriation principles to situations where there has been no actual or threat-ened misappropriation.”).

52. Steak & Ale of Tex., Inc. v. Borneman, 62 S.W.3d 898, 905 (Tex. App.—FortWorth 2001, no pet.) (“In construing a statute, [the court’s] primary purpose is todiscover and give effect to the legislature’s intent in enacting it.”). This will nodoubt be a difficult task since there is nothing in the legislative history of S.B. 953suggesting that the Legislature even considered the issue. See Cleveland and Coff-man, supra, Texas State Bar Litigation Section: News for the Bar, pp. 19-20 (not-ing that “[t]he proposed legislation does not address the inevitable disclosuredoctrine” and would instead “allow the courts to develop this area of the law on acase-by-case basis”).

53. Tex. Bus. & Com. Code § 15.05(a); see Marsh USA, Inc. v. Cook, 354 S.W.3d764, 782 (Tex. 2011) (Willett, J., concurring in the judgment only) (noting thatTex. Bus. & Com. Code § 15.05(a) “declares the public policy of Texas”).

54. Smith v. Decker, 312 S.W.2d 632, 633 (Tex. 1958) (citing Slaughter-House Cases,83 U.S. (16 Wall) 36, 21 L.Ed. 394 (1873)).

55. Tex. Bus. & Com. Code § 15.04; see Marsh USA, 354 S.W.3d at 769 (noting that“[u]nreasonable limitations on employees’ abilities to change employers or solicitclients or former co-employees, i.e., compete against their former employers, could hin-der legitimate competition between businesses and the mobility of skilled employees”).

56. Marsh USA, 354 S.W.3d at 782 (Tex. 2011) (Willett, J., concurring in the judgmentonly).

57. See id. at 768-80; Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289S.W.3d 844, 848-52 (Tex. 2009); Alex Sheshunoff Mgmt. Servs., L.P. v. Johnson,209 S.W.3d 644, 648-57 (Tex. 2006); Light v. Centel Cellular Co. of Texas, 883S.W.2d 642, 643-48 (Tex. 1994).

58. See Marsh USA, 354 S.W.3d 780-95 (Willett, J., concurring in the judgment only,and Green, J., joined by Jefferson, C.J., and Lehrmann, J., dissenting).

59. Sheshunoff, 209 S.W.3d at 651; see also Powerhouse Productions, Inc. v. Scott, 260S.W.3d 693, 696-97 (Tex. App.—Dallas 2008, no pet.).

60. Tex. Bus. & Com. Code § 15.50(a).61. Wright v. Sport Supply Gp., 137 S.W.3d 289, 298 (Tex. App.—Beaumont 2004, no

pet.); see also Garcia v. Oilfield Mud & Chem. Servs., Inc., 2012 Tex. App. LEXIS9465, *8-9 (Tex. App.—Eastland 2012, no pet.) (“Although the injunction is lim-ited to the performance of work involving products and services substantially simi-lar to those provided by [plaintiff], it is not limited to customers with whom[defendant] had dealt while he was employed at [plaintiff]. In that respect, theinjunction is overbroad and constitutes an unreasonable restraint of trade.”); Cobbv. Caye Publishing Gp., Inc., 322 S.W.3d 780, 783 (Tex. App—Fort Worth 2010, nopet.) (“A covenant not to compete with a broad geographical scope is unenforce-able, particularly when no evidence establishes that the employee actually workedin all areas covered by the covenant.”); APRM, Inc. v. Hartnett, 2002 Tex. App.LEXIS 4779, *13 (Tex. App.—Houston [1st Dist.] 2002, no pet.) (not designatedfor publication) (restraint that was “not limited to the capacity in which [theemployee] worked for [the employer]” held overbroad and unreasonable); Butler v.Arrow Mirror & Glass, Inc., 51 S.W.3d 787, 793 (Tex. App.—Houston [1st Dist.]2001, no pet.) (holding that “[t]he breadth of enforcement of territorial restraints incovenants not to compete depends upon the nature and extent of the employer’sbusiness and the degree of the employee’s involvement” but also noting that“[g]enerally, a reasonable area ... is considered to be the territory in which theemployee worked while in the employment of his employer”); CDx Holdings, Inc. v.Heddon, 2012 U.S. Dist. LEXIS 86041, *29 (N.D. Tex. 2012).

62. See Whyte, 125 Cal. Rptr. 2d at 1458 (“The inevitable disclosure doctrine resultsin an injunction prohibiting employment, not just use of trade secrets.”).

63. Cobb, 322 S.W.3d at 784; Butler, 51 S.W.3d at 793.64. Marsh USA, 354 S.W.3d at 768; Fairfield Ins. Co. v. Stephens Martin Paving, LP,

246 S.W.3d 653, 664 (Tex. 2008) (“This Court has long recognized Texas’ strongpublic policy in favor of preserving the freedom of contract.”) (citing TEX. CONST.art. I, § 16).

65. Fairfield, 246 S.W.3d at 664 (quoting In re Prudential Ins. Co. of Am., 148 S.W.3d124, 129 & n. 11 (Tex. 2004)).

66. Id. (quoting Wood Motor Co. v. Nebel, 238 S.W.2d 181, 185 (Tex. 1951)).67. Whyte, 125 Cal. Rptr. 2d at 293.68. Cal. Civ. Code §§ 3426.-.11.69. Id. at § 3426.2(a).70. Whyte, 125 Cal. Rptr. 2d at 293 (internal citations, quotations, and brackets omitted).71. Les Concierges, Inc. v. Robeson, 2009 U.S. Dist. LEXIS 39414, *4 (N.D. Cal. 2009).72. Pellerin v. Honeywell Int’l, Inc., 877 F.Supp.2d 983, 989 (S.D. Cal. 2012).73. Les Concierges, 2009 U.S. Dist. LEXIS 39414, *5.74. FLIR Sys., Inc. v. Parrish, 95 Cal. Rptr. 3d 307, 316 (Cal Ct. App. 2009) (citing

Cen. Valley Hosp. v. Smith, 75 Cal Rptr. 3d 771, 791 (Cal. Ct. App. 2008) (not-ing that a claim for threatened misappropriation may be established by showingthat the defendant remains in possession of the plaintiff ’s trade secrets and hasactually misused or disclosed some of those trade secrets in the past)); Bayer Corp.v. Roche Molecular Sys., 72 F.Supp.2d 1111, 1120 (N.D. Cal. 1999) (“A tradesecrets plaintiff must show an actual use or an actual threat.”).

75. Bayer, 72 F.Supp.2d at 1120.76. See Marsh USA, 354 S.W.3d at 781 (noting that some “jurisdictions (most notably, Cal-

ifornia) champion freedom of competition and void virtually all noncompetes ....”).77. Id. at 777.78. Whyte, 125 Cal. Rptr. 2d at 292 (citing, inter alia, Cal. Bus. & Prof. Code § 16600).79. Id. at 293 (quotation omitted).80. Troy A. Martin, The Evolution of Trade Secret Law in Texas: Is it Time to Recognize

the Doctrine of Inevitable Disclosure?, 42 S. Tex. L. Rev. 1361, 1387 (Fall 2001).81. Id.82. See Marsh USA, 754 S.W.3d at 770 (“The Legislature ... crafted the Act to prohibit

naked restrictions on employee mobility that impede competition while allowingemployers and employees to agree to reasonable restrictions on mobility that are ancil-lary to or part of a valid contract having a primary purpose that is unrelated to restrain-ing competition between the parties”); Nacogdoches Heart Clinic, P.A. v. Pokala, 2013Tex. App. LEXIS 1066, *13 (Tex. App.—Tyler 2013, pet. filed) (same).

ALEX HARRELLpractices in the commercial litigation section of Brackett & Ellis,P.C., in Fort Worth. He regularly advises clients on issues relating tocovenants not to compete and represents plaintiffs and defendantsin non-compete and trade secrets cases.

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