When you learn a former employee has stolen your trade secrets to take them across the street to benefit a competitor, your quickest remedy is to sue him and try to shut him down through an injunction. Oftentimes, the new employer is also sued because it may have helped him breach his agreement not to unfairly compete. An important consideration in deciding whether to sue the new employer and your competitor is whether it is worth the risk that you may be forced to disclose the very trade secrets you are seeking to protect. This issue is pending before the highest court in Texas in a dispute between National Oilwell Varco LP (NOV) and M-I SWACO (M-I). In that case, M-I filed an action against a former employee and his new employer – NOV – claiming the former employee stole trade secrets and had disclosed (or would disclose) them to NOV.
During the preliminary injunction hearing, M-I requested that NOV’s trial representative leave the courtroom while its trade secrets were discussed. The judge denied M-I’s request and, instead, simply told NOV’s representative that he could not use or disclose M-I’s trade secrets.
M-I appealed, arguing before the Texas Supreme Court that the judge “imposed a Hobson’s choice” on it by forcing it to either (1) disclose its trade secrets to a competitor in an effort to protect them from future use; or (2) choose not to enforce its rights and keep its trade secrets close to the vest.
This case highlights the difficult situation employers can find themselves in when trying to protect trade secrets. They don’t want to disclose their trade secrets to a competitor, but the competitor may claim that it cannot defend itself unless it knows what the trade secrets are that the party is trying to protect.
Employers should carefully consider whether they are willing to disclose their trade secrets to their competitor before suing that competitor for stealing trade secrets. Of course, as part of any trade secrets lawsuit, employers should obtain a strong protective order, ensuring that any trade secrets divulged as part of the lawsuit will only be disclosed to attorneys involved in the case, and their experts. But, employers must realize that, to prove their trade secrets claim, they will likely have to talk freely about their trade secrets in the courtroom, which a judge may require be done right in front of a competitor’s representative.
This is another reminder of the importance of taking a careful and measured approach to litigation before initiating a lawsuit, and how the failure to do so can actually put you in a worse position than you were in when you started.