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Shut Down: Claims of Trade Secret Infringement Can Paralyze Businesses

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When an employee leaves a company after learning proprietary knowledge, he or she bound to make a few people in management a little nervous. When that former employee takes a job with a competitor or opens a new business in the same field, chances are great that he or she will be watched very carefully.

Take for example, a thirty-five year old chemical engineer who develops a new process to synthesize a petrochemical for a Houston, Texas company. This process becomes a trade secret for that employer. The chemical engineer then resigns from the corporation and works in a different market—outside of Texas—for a few years. When he returns to Houston, he establishes a petrochemical lab and develops a new, substantially different process for synthesizing the petrochemical. He has not used his former employer’s proprietary knowledge in any way. However, seeing the product that his new company is manufacturing, his former employer may surmise that the chemical engineer is utilizing their trade secret and move to stop it. In a situation like this, the larger, better established petrochemical company might seek injunctive relief through the Texas courts. A frivolous move like this could destroy the fledgling startup business.

If you are suspected of violating a non-disclosure covenant, the Texas courts may grant an ex parte injunction against you. This could not only require you to stop doing business, but it may also compel you to turn over any electronic device where information can be recorded or stored. That means that all papers, computer hard drives, external hard drives, thumb drives, and cell phones may be seized for a period of time long enough to copy the data on those devices.

In addition to this being an operational disaster for the defendant, the plaintiff is now able to gain a view of the inner workings of your company and its processes. To put it in terms of the above example, not only would the chemical engineer lose his records and equipment for a period of time, and may even be ordered to refrain from doing business, but his former employer now gets a look at his proprietary petrochemical synthesizing process.

Recently, Houston, TX attorney Ashish Mahendru defended a client in very similar circumstances. In this case, the plaintiff alleged that Mr. Mahendru’s client utilized protected trade secrets in his own business. The ex parte order issued by a Texas judge, directed U.S. Marshalls to impound “personal computers, servers, hard drives, floppies, CDs, DVDs, backup tapes, server files, peripheral devices, removal media (such as Zip/Jack Disks and SYQuest), data cartridges, and other backup devices and storage media located in/and or around the premises . . .” Imagine being confronted with US Marshalls at your place of business or residence, coming to seize all of your data. The application of the law to a certain set of facts can be harsh, and in a civil dispute, US Marshall’s powers could be invoked.

Because these cases can be make or break for the company suing or the former employee being sued, it is important to have counsel from experienced lawyers, who can help navigate the complicated legal waters that may completely shut down one’s business. Call the firm toll free at 866-558-8149 or 713-391-8247 to discuss your needs.

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