Tag Archives: contract

Has a Former Employee Stolen your Ideas? Protect Your Trade Secrets Part 3

Businesses that get caught up in trade secret disputes and litigation often have to disclose some aspect of their trade secrets in order to prove or disprove allegations and claims.  This potentially causes much risk in pursuing or defending against trade secret-stealing former employees, competitors, and other thieves.  Now that Texas has enacted the TUTSA, hopefully many of the protections built in the law will help positively address these ongoing concerns and encourage trade secret owners to protect their proprietary information in a proactive way.

Pursuant to TUTSA, actual and threatened misappropriation may be enjoined or stopped by a court order. Texas courts have traditionally been reluctant to expressly recognize the idea of “threatened misappropriation,” which is often linked to the “inevitable disclosure” doctrine, or the idea that the information will eventually become public knowledge and thus no longer secret. The inclusion of the “threatened misappropriation” language in TUTSA should be particularly useful for a company seeking to enjoin the activities of a former employee who joins a competitor or starts a competing business because the injunction may be applied before any trade secret information has been used to the company’s detriment. Moreover, TUTSA allows the continuation of an injunction for additional time to eliminate any commercial advantage derived from misappropriation, rather than termination of the injunction once the protected information is no longer secret. TUTSA also gives courts the power to compel “affirmative acts to protect a trade secret” under appropriate circumstances. This provision is great news for trade secret owners who can now stop the spread of their information before it starts with the help of the courts under TUTSA.

  1. Provision for Attorneys’ Fees and Monetary Damages

The ability to recover attorneys’ fees is a new form of relief available under TUTSA. Texas courts will now have discretion to award the prevailing party its reasonable attorneys’ fees where willful and malicious misappropriation is shown. Trade secret owners will be much more likely to pursue these claims because the threat of mounting legal fees will no longer be a deterrent. Further, attorneys’ fees may be awarded for misappropriation claims made in bad faith. Previously, any claim for attorneys’ fees relied on a separate cause of action such as breach of a confidentiality agreement or recovery under the Texas Theft Liability Act (“TTLA”).Caution must be exercised here, however, because claims brought in bad faith (or without merit) will require the trade mark owner to pay the attorneys’ fees of the other party if the owner loses.

With respect to monetary damages, TUTSA provides for the actual loss caused by the misappropriation, as well as any unjust enrichment not included in the actual loss computation. Unjust enrichment could include a defendant’s increased revenues and resulting profits, reduced production costs and resulting profits, and the avoided cost of development. Furthermore, a court has the power, in exceptional circumstances, to condition future use of the trade secrets upon payment of a reasonable royalty for no longer than the period of time for which use could have been prohibited. Alternatively, damages may be calculated by a reasonable royalty for the unauthorized use or disclosure of a trade secret. TUTSA also makes exemplary damages available for willful and malicious misappropriation proven by clear and convincing evidence. However, such an exemplary damages award is limited by TUTSA to no more than twice the amount of actual damages.

2. Enhanced  Protection for Trade Secrets during Litigation

In addition to the trade secret protections discussed above, TUTSA tasks courts with preserving the secrecy of an alleged trade secret, and it provides “a presumption in favor of granting protective orders to preserve the secrecy of trade secrets.” Among the means of protecting trade secrets through protective orders, TUTSA specifically includes “provisions limiting access to confidential information to only the attorneys and their experts” and ordering parties not to disclose alleged trade secrets during litigation.

3. Reverse Engineering Not Inherently Improper

Although TUTSA generally expands a company’s ability to protect its trade secrets, there are statutory limits. Excluded from the Act’s definition of trade secret is any information learned through the “reverse engineering” of a competitor’s product, which is defined as “the process of studying, analyzing, or disassembling a product or device to discover its design, structure, construction, or source code.” Thus, assuming the product was lawfully acquired, a company remains without legal recourse against a competitor that learns how it is made through reverse engineering.

TUTSA also provides examples of activities that are not considered improper means of acquiring a trade secret. However, TUTSA stipulates that a trade secret acquired or learned by “proper means” is not a source of liability for the learner.  “Proper means” includes independent development and reverse engineering, unless prohibited. Therefore, a license agreement which prohibits the reverse engineering of a licensed product will indeed protect the trade secrets of that product since any reverse engineering would therefore fall under the “unless prohibited” language.

What TUTSA Has Not Changed

The three-year statute of limitations on misappropriation of trade secrets remains unchanged.  Also note that TUTSA does not apply, however, to any trade secret misappropriation or continuing misappropriations that occurred prior to September 1, 2013.

For more information about how to further protect your business ideas and trade secrets, please call us today at (713) 574-8626.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Getting Married? Here’s What You Should Know

You’re in love. You’re ready to spend the rest of your life with the man or woman of your dreams, but you also know the terrible divorce rate in the U.S. and you’d sure hate to be in the category of the 49-51% of couples who end up divorced. The statistics, unfortunately, are simply not on your side. As unromantic as it may be, divorce is an incredibly common occurrence, and if you have property or children from a previous relationship, it is a good idea to consider a premarital agreement.

Texas is one of nine community property states. The one thing you need to remember about community property is that what you acquire during marriage (whether it’s income, equity, or interest) becomes community property or belongs to both you and your spouse 50-50. This means that if you and your beloved call it quits, it is very likely you’ll end up with only half of your stuff when the divorce is over. Most people assume this risk and get married anyway. Other people have taken a different route and decided to discuss this issue with their intended before saying “I do.” I strongly recommend the latter tactic. A premarital or prenuptial agreement is a contract that explains what you have decided to do with your property, finances, and debt as a couple during your marriage. It is drafted before the marriage and is binding throughout, unless it is revoked in writing.

Some people enter into a marriage and then decide that for some reason it would be best to partition or separate some of their community property and designate it as separate. Other times they may decide to separate some of their separate property and convert it into community. There are all kinds of reasons that couples decide to do this, but usually there are tax implications underlying these decisions. In this case, the couple contacts a lawyer who recommends a postmarital or postnuptial agreement. It has the same effect as a prenuptial agreement, but it is drafted during the marriage rather than before.

If you are considering marriage or are currently married and want to know more about community property laws and how they affect many aspects of a marital relationship, please contact this office. We’d be happy to discuss your rights and answer your questions.

Lawyering 101: When Weezy Meets Equity

On a rare occasion, I have come to funny conclusions about the law. Well, maybe not funny, but memorable. Once, when explaining the concept of equity and restitution to someone, I used an  example that is noteworthy  because it’s a useful way to explain things to clients who may not be familiar with the legal process. Many times in preparing for trial, the first obstacle to tackle is my client’s lack of information about how the law works, and it is my job to educate her from the beginning to ensure we are on the same page. This ensures that whatever lies next in the process, be it a hearing, mediation, trial date, or any stage in the litigation process, she has a clear understanding of what to expect from me and what I can expect from her. Some lawyers skimp on this stage in their relations with clients, and the unfortunate ones end up with ethics complaints because they didn’t take the time to explain the groundwork issues involving their case.

At this point, I’d like to focus on a groundwork issue in many cases. It’s a word bandied about more recklessly than “love,” and that word is “contract.”

Let me be clear: it’s most applicable to the folks dragging other folks into court because they owe them money for services rendered. So without further ado, I give you a short tale about unjust enrichment. Please enjoy, and as always, if you are looking for an attorney who is as smart as she is charming, call the number at the top right of this page. She is me, and I am sometimes hilarious but always reasonably priced to fit your legal needs.

Enjoy:

“It’s not that I don’t love you, ‘cause you know that I do, but there’s only one thing I want you to do. Put it on paper.” –Ann Nesby, soul singer

Long before Beyonce advised men to put a ring on it, people have been writing and singing songs about the most famous kind of contract there is: the marriage contract. But what is a contract? How is one created? What can go wrong in their creation? That’s the beginning of the topic to be digested at this point in our journey through Lawyering 101, so get the “Single Ladies” song out of your head (if you can), and pay attention!

The legal dictionary at www.law.com defines a contract as an agreement between two or more persons or entities in which there is a promise to do something in return for a valuable benefit known as consideration. This definition by itself is fine, but the important part to remember about contracts is that they are enforceable in court if one party meets its obligations under the contract and the other party doesn’t.

A contract can be created in one of two ways, either by express language or implied conduct. An express contract was created by the parties’ oral or written words. An implied contract is created by the parties’ conduct. Beware, however, of the quasi contract. It is not a contract, but rather a tool of the courts to ensure fairness and prevent unjust enrichment. Here’s what a quasi contract looks like:

In a world not unlike our own, Lil’ Wayne records a verse for Drake’s new album aptly named “Terrible Album.” Drake knowingly accepted the benefit of Lil’ Wayne’s rap services. Lil’ Wayne reasonably expects to be paid for his contribution to the project, and Drake would be unjustly enriched if Lil’ Wayne is not compensated for his verse because he would’ve effectively gotten something for nothing.

If Lil’ Wayne sues Drake, a court would likely give him the reasonable value of the benefit conferred because there is no contract price, although one could possibly be rendered if there were other mitigating facts like the parties’ expressed intentions. (It helps if those intentions are written, but since they are often not, remember our friend the implied contract which is formed by conduct. Not relevant here, but important to remember nontheless). Lil’ Wayne’s recovery in court is known as restitution.

In the example, Lil’ Wayne’s verse is a benefit conferred on Drake, but keep in mind, in this scenario, no contract was formed. Principles of equity intervened to prevent Drake from being unjustly enriched and to ensure fairness for Lil’ Wayne’s contribution to “Terrible Album,” which is probably still terrible, if only less so thanks to Mr. Carter.

Stay tuned for “Lawyering 101 part 2: That’s Not What I Bargained For” as we turn to the very important topic of consideration and a more thorough discussion of client expectations.