It’s Positioning That Matters: Texas Court of Appeals Holds Proof Of Actual Use Not Required At The Temporary Injunction Phase

Christopher Hughes worked for Age Industries, Ltd. (“AI”) for nearly 20 years. He was the general manager of one of AI’s branch facilities and a limited partner of the company.  In this role, Hughes had access to much of AI’s proprietary and trade secret information, including specialized customer pricing information, financial reports, and business strategies.  After leaving AI, Hughes became the operations manager of a new competitor in the corrugated packing materials market—Diamondback Corrugated Container, LLC.

But as is oft the case, where there is smoke, there is fire. Two months after Hughes’ departure, AI sued Hughes and Diamondback alleging, among other things, misappropriation of trade secrets under the Texas Uniform Trade Secrets Act.  AI learned that, prior to Hughes tendering his resignation, Hughes was in cahoots with Diamondback’s founders.  And, the month before he defected, Hughes downloaded a large amount of data from his AI work computer.  Hughes also had confidential AI information on his personal computer and, when pressed, was unable to confirm that none of his emails to a now-Diamondback colleague contained such information.

The trial court granted AI’s application for a temporary injunction restraining Hughes from using or disclosing AI’s proprietary or trade secret information. Hughes thereafter appealed, arguing that AI had not set forth any evidence of a probable, imminent and irreparable injury – there was no proof he actually used such information.  (If Hughes wasn’t using such information, why would he appeal the order preventing him from doing so?  We digress.)

On March 8, 2017, the San Antonio Court of Appeals upheld the order, determining that AI was not required to show actual use.  Rather, it had to show Hughes had possession of the trade secrets and was merely in a position to use them.  Because the record contained evidence that Hughes had possession of AI’s trade secrets and was in a position to use them— that is, he admitted to having AI’s confidential information and was operating as Diamondback’s operations manager—the appellate court upheld the temporary injunction.