UnIP (UnIntellectual Property): Trade Secrets for Scope of Work Document and Product List

In this Texas state court matter, the Plaintiff, a company specializing in custom audio-visual design and installation of interactive, media-driven classrooms, successfully acquired a TRO against Defendants, a Texas school district and a competitor based upon allegations of trade secret misappropriation. The Plaintiff alleged that Defendants, including its competitor that was ultimately awarded the contract with the school district for the technology installation despite Plaintiff having initially been selected, had misappropriated the following trade secrets:

1. the contract price list containing the list of parts proposed for the project and their part numbers as well as the specific pricing of those parts; and
2. the scope of work document, containing the description of the digital classrooms project, Plaintiff’s warranty, training offering, and best practices.

However, after a temporary injunction hearing, the court refused to grant the injunctive relief sought and dismissed all of Plaintiff’s claims against the Defendant school district. Plaintiff sought interlocutory appeal.

The court analyzed whether Plaintiff had established a viable cause of action for trade secret misappropriation under Texas law. In doing so, the court applied a six-factor test: (1) the extent to which the information is known outside of the business; (2) the extent to which it is known by employees and others involved in the business; (3) the extent of the measures taken by the claimant to guard the secrecy of the information; (4) the value of the information to the claimant company and its competitors; (5) the amount of effort or money expended by the company developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. However, the court noted that the party claiming a trade secret is not required to satisfy all six factors because trade secrets do not fit neatly into each factor every time and recognized that other circumstances could be relevant to the trade secret analysis.

It appears that Plaintiff’s own testimony, through one of its directors, led to the court’s refusing to grant the preliminary injunction. In particular, it was admitted that the product list, product parts, and warranty information were not trade secrets. Moreover, Plaintiff failed to identify what it later claimed to be trade secrets as trade secrets initially, and it also failed to protect them as such by not identifying them in agreements, requiring non-disclosure agreements (NDAs), or restricting access to them. Given these admissions and the evidence as a whole, coupled with a lack of imminent and irreparable injury, the court affirmed the trial court’s denial of the preliminary injunction.

While Plaintiff may ultimately still prevail in its underlying lawsuit, both the trial court’s initial refusal to recognize the trade secrets, and this court’s confirmation of the same on appeal, it appears Plaintiff faces an uphill battle.

Ultimately, a “shopping list” of what could go into a classroom, including specific products and their pricing, is not surprisingly public and not subject to trade secret protection. However, could the scope of work document, which presumably selected, arranged, and proposed to deliver a comprehensive solution have been a protectable trade secret if it were treated as such (e.g. identified in RFP as proprietary, subject to NDAs and other security measures, etc.)? Once again, it appears that the Plaintiff may have been overzealous in trying to protect everything and, as a result, wound up with nothing.

Delcom Group, LP v. Dallas Indep. Sch. Dist., 05-11-01259-CV, 2012 WL 3552672 (Tex. App. Aug. 17, 2012).


 

Leave a Reply

Your email address will not be published. Required fields are marked *