Unfair Competition and Trade Secrets
Whether its information related to customers, employees, suppliers, products, or processes, no business wants a competitor knowing what goes on inside. The Misra Legal Group advises Texas employers on how to protect this inside information, from preparing employment policies and employment agreements to prevent leaks before they happen to restraining former employees from stealing trade secrets and otherwise engaging in unfair competition after it becomes too late.
Texas law recognizes that businesses, consumers, employers, and employees all optimally benefit from a competitive, market economy based on the free enterprise system. This includes employees having the right to terminate their employment at will and work for a competitor. Of course, the maintenance of free enterprise requires the prevention of unfair competition.
Common Law Post-Employment Obligations
An employee may have the right to work for a competitor, but the employee cannot abuse an employer's confidence or trust on behalf of a competitor. Texas recognizes that an employee owes several reciprocal obligations at common law, even in the absence of any written agreement:
- The duty of loyalty — An employee cannot actively engage in competition or otherwise harm the employer's interest during employment.
- The duty of confidentiality — An employee cannot disclose information which the employer has provided in confidence.
- Fiduciary duty — An employee who has been entrusted with a special responsibility, such as managing a department or division, cannot usurp business opportunities which would otherwise belong to the employer.
Common Law Protection of Sensitive Information
Additionally, Texas specifically recognizes that an employee cannot use or otherwise disclose proprietary or trade secret information which the employee learns from an employer. Again, even in the absence of a written agreement, an employer may pursue claims for misappropriation of proprietary information or theft of trade secrets.
- Proprietary information includes any compilation of information or other information product which an employer creates through extensive time, labor, skill, and money.
- A trade secret includes any formula, pattern, device or compilation of information which is used in one's business and presents an opportunity to obtain an advantage over competitors who do not know or use it.
Importantly, while proprietary information need not be secret, Texas courts require the additional element of secrecy for a trade secret. That is, the trade secret cannot be generally known or readily ascertainable by independent investigation.
Contractual Post-Employment Obligations
Texas law also enforces nondisclosure and noncompetition obligations found in written employment agreements as a matter of contract law. While Texas courts could protect sensitive information from disclosure for even an unlimited duration, they have interpreted and applied the Texas Covenant Not To Compete Act to enforce only reasonable restrictions as to length of time, geographic area, and scope of activity. Effectively, a noncompetition agreement provides a means of preventing an employee from using an employer's sensitive information. Indeed, Texas courts require that an employee have a written and enforceable nondisclosure agreement as a prerequisite to enforcing a noncompetition agreement.
Depending on the facts, an employer could seek a temporary restraining order and temporary injunction, stopping the employee from misusing proprietary, confidential, and trade secret information and otherwise engaging in unfair competition. An employer could also recover lost profits or even have a constructive trust imposed on the competitor's unfairly earned profits.
Let The Misra Legal Group know if your business needs assistance in protecting its proprietary, confidential, and trade secret information from being used in unfair competition by former employees.