Inevitable Disclosure in Texas: Are Companies Protected from Employee Movement that Threatens Their Trade Secrets?
Imagine an employee who has access to valuable information regarding how your business is run. That employee then accepts a position with a competitor in which he would perform similar job duties and in which the sensitive or proprietary information he knows about would be helpful (and probably made him a strong candidate in the first place). Moreover, it is almost certain that the sensitive or proprietary information will be revealed by virtue of that position. Even without a non-compete or confidentiality agreement, the former employer may have a claim that his former employee is violating trade-secret laws in the new job. This concept — that the employee will necessarily divulge his former employer’s confidential information in a subsequent job — is called “inevitable disclosure.”
This particular theory of trade secret theft has been panned by a number of courts for its amorphous nature, difficulty to apply in practice, and potential restraint on worker freedom of movement. Inevitable disclosure has rarely been argued since Texas passed the Texas Uniform Trade Secrets Act (“TUTSA”), but a federal district court in Texas, applying Texas law, may have recently breathed new life into the doctrine. In Accruent, LLC v. Short, No. 1:17–CV–858–RP (W.D. Tex. Jan. 4, 2018), the court relied on the inevitable disclosure doctrine in granting a temporary injunction to find that the former employer was likely to succeed on the merits of their misappropriation claim at trial. The Court concluded that based on the similarity between the defendant’s new and old employers and the similarities in his roles at both companies, it was unlikely he could perform his new job without using confidential information belonging to his former employer.
This recent example of reliance on the inevitable disclosure doctrine post-TUTSA not only reflects that employers may have more options than they initially think when a key employee leaves for a competitor, but also indicates that greater risk may exist when hiring a competitor’s former employee.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.