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Trade Secrets Litigation: Q&A with Leiza Dolghih
Posted By Godwin Bowman & Martinez || May 6, 2016
Q: What is trade secrets litigation?
A: In Texas, a company's whose trade secrets are stolen or taken by improper means can bring a legal claim against the thief, called a trade secrets misappropriation claim. Texas defines trade secrets very broadly. Customer lists, pricing, manufacturing designs, financial data, food recipes – are just a few examples of common trade secrets.
Q: What usually prompts trade secret lawsuits?
A: There are three common situations where trade secrets claims usually arise: (1) an employee leaves and takes confidential information with him or her; (2) a vendor, a service company, or a third-party that provides products or services to a company, takes that company's confidential information and uses it to cut the company out of the picture; or (3) a potential party or investor is given information to conduct due diligence and they end up using it for an improper purpose. There are other situations, but those are the most common ones.
Q: How is this litigation different from other types of litigation?
A: Trade secrets lawsuits usually involve an application for a temporary restraining order and temporary injunction, which are meant to immediately stop the company or the person who stole trade secrets from using them or giving them to a competitor while the lawsuit goes on. Filing an application for a temporary injunction and preparing for a hearing is intense because it requires a great amount of preparation and a laser focus on legal issues in a very short amount of time – days or weeks – leading up to the hearing.
Q: What are some of the challenges of this type of litigation?
A: Temporary injunction hearings, collecting and persevering evidence from multiple mobile and digital sources, and protecting such evidence from falling into the hands of a competitor during litigation are some of the challenges peculiar to this type of lawsuits.
Q: Is there a particular industry where trade secrets lawsuits happen more often?
A: All industries are vulnerable to trade secrets theft since all companies have some sort of trade secrets. However, across all industries, smaller companies usually spend fewer resources on protecting their trade secrets and, consequently, are more vulnerable to trade secrets theft.
Q: What are some of the trends that you see in trade secret litigation?
A: The Federal Defend Trade Secrets Act (DTSA) is about to become the law, giving employers an alternative of bringing trade secrets lawsuits in federal court rather than a state court. Other hot issues include technology advances that allow employees or competitors to steal trade secrets as well as forensic technology advances that allows owners to detect theft. Custom-tailoring of protective orders to protect trade secrets during litigation is another area that has been receiving a lot of attention recently.
Q: Is there anything that companies can do to minimize the risk of trade secrets lawsuits?
A: Absolutely. All companies should conduct an audit of their trade secrets – identify what they are and identify the protection methods currently in use. Then, devise a system that reasonably protects each type of trade secret. Being able to prevent trade secrets theft or detect their misappropriation when it occurs can be the difference between a company surviving or going under in the competitive market.
Q: What do general counsel need to know about trade secrets litigation?
A: Ultimately, preventing trade secrets theft is a lot cheaper than trying to recover them once they are stolen, which sometimes is not even possible. There is always a risk that a trade secrets lawsuit may involve disclosure of information through discovery that the party on the other side does not have, or possibility of plaintiffs' clients being involved in a suit is witnesses. There are, of course, ways to minimize those risks, but it's something that general counsel should consider before deciding whether to file a trade secrets lawsuit.
Leiza Dolghih is a Senior Attorney in Godwin Bowman & Martinez's Unfair Competition, Trade Secrets and Copyright Section. She has over a decade of experience in commercial litigation and has handled multiple temporary restraining order and temporary injunction hearings in trade secrets lawsuits. If you have any questions regarding trade secrets protection in Texas, email LDolghih@GodwinLaw.com or call (214) 939-4458.