Texas Trade Secret Law: Pre-Suit Depositions Not Automatic in Trade Secret Cases
Recently, the Austin Court of Appeals showed the heavy burden on an employer who attempts to use pre-suit depositions to investigate possible misappropriation of trade secrets by former employees. In the case, the former employer sought to take pre-suit depositions of former employees based on suspicions that the former employees were misappropriating trade secrets for the benefit of a competitor that hired the former employees. The former employer had each of the former employees sign an employment agreement which limited their disclosure of confidential information during and after their employment.
At the hearing on the issue, the trial court granted the former employer’s request, based on a finding that the likely benefit of allowing the former employer to take the depositions to investigate potential claims outweighed the burden or expense of taking the depositions. The former employer argued that if there was a misappropriation of trade secrets, then the depositions were worth taking, and if it turned out that the depositions revealed a legitimate explanation, then there would have been no waste because it saved the time and energy of dealing with a lawsuit.
On appeal, the Austin Court of Appeals conditionally granted mandamus relief in order to stop the depositions. The court considered the burden to the deponent and stated that requiring an individual to sit for a deposition and disclose information to a former employer, under oath, as to why the person left their former employer, as well as what the person was doing for the competitor, was a substantial burden. The court also stated that allowing a company to conduct pre-suit depositions based solely on the possibility that a lawsuit might be avoided would allow companies to use pre-suit depositions to gain access to the trade secrets of competitors under the pretext of investigating suspected, but unknown, claims.
In addition, the court recognized that trade secrets receive heightened protection during discovery. The requesting party must establish that the information is necessary for a fair adjudication of its claims. Here, the former employer was unsure whether a valid claim even exists. By its very nature, a Rule 202 proceeding to investigate claims does not involve the adjudication of any claim or defense; it involves only the investigation of potential claims.
Observation:
When the issue of discovery of trade secrets arises in the context of a Rule 202 deposition request, it may be difficult for the petitioner to show the information is necessary for a fair adjudication of its claims. At any rate, based upon the holding in this case, getting the deposition will not be automatic.
In re Hewlett Packard, No. 03-06-00028-CV, 2006 WL 1295502, (Tex. App.—Austin, May 12, 2006).
