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Dallas Court of Appeals Holds that the Inevitable Disclosure Doctrine Cannot Be Used to Create a Fact Issue on Misappropriation of Trade Secrets

By Heath Coffman

Under trade secrets law, the inevitable disclosure doctrine is the idea that a defendant’s new employment will lead to the inevitable disclosure of a former employer’s trade secrets.  Texas courts have issued mixed holdings on the subject.  After the Texas Uniform Trade Secrets Act (TUTSA) was enacted in 2013, some speculated that its language permitting injunctive relief for “threatened misappropriation” was an implicit adoption of the inevitable disclosure doctrine.  In a recent decision, the Dallas Court of Appeals seemed to reject that speculation.

In Global Supply Chain Solutions, LLC v. Riverwood Solutions, Inc., No. 05-18-00188-CV, 2019 WL 3852661 (Tex. App.—Dallas Aug. 16, 2019, no pet.), the Dallas Court of Appeals explored whether a party could rely on the inevitable disclosure–without more–to survive a motion for summary judgment.  Specifically, the Court held that a threatened misappropriation for purposes of a temporary injunction is not a substitute for evidence of the “actual loss caused by misappropriation and the unjust enrichment caused by misappropriation that is not taken into account in computing actual loss” to raise a fact issue on damages in response to a motion for summary judgment.  The Court also noted that TUTSA does not prohibit the “use of the general, knowledge, skill, and experience a person acquired during employment.”  The only evidence plaintiff provided for misappropriation of trade secrets was one of its representative’s “speculative testimony that [defendant employee] must have disclosed [plaintiff’s] confidential or proprietary information in order to do her job at [new employer].”  The Court held that such evidence, standing alone, is insufficient to raise a fact issue for a motion for summary judgment.

The Dallas Court of Appeals opinion is the most definitive expression yet on the status of the inevitable disclosure doctrine under Texas law.