Trade Secret Plaintiffs Need Affirmative Evidence of Harm to Get Injunctive Relief

The recent decision Legacy Home Health Agency, Inc. v. Apex Primary Care, Inc., 13:0087, 2013 Tex. App. LEXIS 11782 (Tex. App. Corpus Christi Sept. 19, 2013), is an example of how Texas courts are making it more difficult to get a temporary restraining order in a theft of trade secrets case to protect one’s business. This follows a trend of limiting injunctive remedies in intellectual property cases, kicked off by the Supreme Court in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 288 (2006) which held that injunctive relief in patent infringement cases should not be so automatic or presumptive merely by showing patent validity and infringement.

Now, a trade secret plaintiff will likely  have to show all four prongs of injunctive relief: (1) imminent irreparable harm (i.e., harm that cannot be adequately remedied later with money damages); (2) likely success on the merits; (3) lack of injury or prejudice to the enjoined party that would outweigh irreparable harm the plaintiff would incur.

Borrowing from patent infringement doctrine, showing irreparable harm requires the party seeking the injunction to show evidence of things such as:

–  Losing clients or sales to the defendant because of some infringement that you can trade to;

–  The impact to the market for your product–the competitive landscape changes;

–  Use of your trade secret by the defendant;

–  The importance of the trade secret to your business’s revenues.

The flip side is that you’ll likely lose in your bid if you have publicly advertised your trade secret advantages, sought royalties for it elsewhere (i.e., you allowed others to use it for money), or have moved away from the products or services that heavily rely on it.

The injunction is an important tool in the IP business litigator’s toolbox. It is a powerful lever to use on a defendant who believes that they have to stop their business, invent around you and then go back to market all over again–they may rather pay you to buy you out of your injunction (what Posner called a “bilateral monopoly.”).

Now litigants have to be more careful when arguing over injunctions.