HOUSTON – The Texas 1st District Court of Appeals has reversed a permanent injunction and remanded a lower court’s ruling of injunctive relief for further proceedings in a trade secrets lawsuit.
The court, however, upheld the district court ruling Jan. 9 awarding Inhance Technologies LLC $4 million in reasonable royalty damages and $10,500 in lost profits.
Justice Jane Bland wrote the opinion with justices Laura Carter Higley and Harvey G. Brown concurring.
The competing company, TMRJ Holdings, appealed the decision from the 269th District Court of Harrison County. On appeal, TMRJ argued the trial court erred in awarding both damages and permanent injunctive relief, maintaining that the two remedies are duplicative and to award both violates the one-satisfaction rule.
TMRJ also argued that the trial court’s injunction is overly vague, failing to define the conduct it bans.
According to the opinion, Inhance developed a proprietary method for developing fluorine gas that reduces the cost of its surface fluorination process. This enabled the company to grow its business and offer lower prices than its competitors.
Founders Bill Brown and Monty Ballard "invested 30 years of research and development in the process for producing fluorine gas in-house," the opinion states.
Two executives – Paul Banks and David Molthen – left Inhance and formed their own company.
From 2012 to mid-2013, Banks and Molthen developed a business plan to form TMRJ and were considering facilities close to an existing Inhance plant that served some of Inhance’s largest customers.
Inhance fired Molthen in June 2013. Banks left the company later that month and the pair quickly developed their first fluorine-gas production cell, the opinion states.
After three months of business, Inhance suspected Banks and Molthen were using their knowledge of the company and its processes without permission, the opinion states. In July 2015, Inhance sued TMRJ, Banks and Molthen, alleging trade-secret misappropriation, breach of contract, and other claims, and seeking temporary and permanent injunctive relief, the opinion states. Inhance also received a temporary restraining order against TMRJ, preventing the company from using Inhance’s processes, specifications, designs and pricing.
"In October 2015, the trial court entered a temporary injunction against TMRJ, Banks and Molthen, preventing them from using or disclosing Inhance’s proprietary processes and equipment," the opinion states.
Inhance maintains that despite any imprecision in the injunction, TMRK, Banks and Molthen understand the boundaries in the trade secrets case because they know what is restricted.
“But the injunction, by failing to precisely describe the restrained conduct, arguably prohibits any and all involvement in the fluorination business,” the court wrote in its Jan. 9 opinion.
The decision noted the injunction in the case is much broader than others that have been upheld in other cases, including IAC LTD v. Bell Helicopter Textron Inc.
“Because the injunction does not adequately identify the acts that it restrains, we hold that it does not comply with the requirements of Texas Rule of Civil Procedure 683,” the court wrote in its opinion. “We therefore reverse the portion of the judgment containing the permanent injunction and remand the case to the trial court for further proceedings consistent with this opinion.”
As a result, the panel also affirmed the remainder of the judgment.