While preliminary injunctions are not uncommon in trade secret misappropriation cases, a recent decision by the Fifth Circuit Court underlined the importance of movant’s bringing forth colorful evidence of trade secret misappropriation in preliminary injunction cases. AT KAE INTEGRATED, LLC; Capital Asset Exchange and Trading, LLC vs. MOOV TECHNOLOGIES, INCORPORATED; Nicholas Meisner – F.5th — (2022) 2022 WL 3210358 The Fifth Circuit upheld the denial of a preliminary injunction due to lack of evidence to support such use. In this case, CAE sued Meisner, a former employee, and MOOV, his successor employer, for misappropriation of trade secrets in the Western District of Texas under the Trade Secret Protection Act (DTSA) and the Texas Uniform Trade Secret Act (TUTSA) . CAE also applied for a preliminary injunction, which was denied. The CAE appealed the denial to the Fifth Circuit.
While working at CAE, Meisner used his personal MacBook, which was synced with Google Drive. When CAE later gave Meisner a corporate laptop, Meisner allowed CAE to take a picture of his personal MacBook and erase his hard drive. Meisner later took the MacBook to CAE for repairs; CAE never returned it. After CAE fired him, Meisner discovered that CAE had only moved his work files to the trash, not permanently deleted them, and restored them to his Google Drive.
After waiting out a year-long absence from competition, Meisner joined Moov as head of sales. But before joining Moov, he deleted any documents he thought might contain CAE data. He also confirmed to Moov that he has not saved and will not use the CAE data.
Meisner’s rapid success at Moov prompted CAE’s CEO to announce that CAE was “going to war” with Moov. As a result, CAE conducted a forensic examination of a picture of Meisner’s MacBook. CAE discovered a Google Drive-synced folder of thousands of documents while Meisner was working at CAE. But further forensic analysis also showed that Meisner had not synced his Google Drive since he started at Moov, and neither Meisner nor Moov found access to Google Drive. Meisner deleted all CAE information from his active Google Drive, so he didn’t have the data that appeared in the picture. And in the months leading up to the preliminary injunction hearing, Meisner completely withdrew access to his Google Drive. These facts proved fatal to CAE’s preliminary injunction.
CAE also alleged that Meisner and Moov misappropriated transaction documents and customer lists. But after reviewing the facts, the court concluded that the district court was right in finding that the CAE failed to prove that Meisner and Moov had access to trade secrets in the transaction documents. Regarding client lists, CAE claims that Moov’s knowledge of some of CAE’s clients shows that Moov misappropriated trade secrets. The Court concluded that this knowledge, in the absence of other evidence, was insufficient to support the conclusion that he misappropriated the trade secret.
The court also found that, even if CAE found that Meissner or Moov misappropriated the trade secret, it failed to prove the use or potential use of the trade secret. CAE argued that such usage could be inferred from the success of Moov. The court found this finding by itself insufficient to show that Moov was using CAE’s trade secret.
As regards the preliminary injunction, the court cited SEC vs. Blatt, 583 F.2d 1325, 1334 (5th Cir. 1978): “The critical issue in issuing an injunction, and also the ultimate test in review, is whether the defendant’s past behavior indicates a reasonable likelihood of further violations in the future.” Since there was no permanent access to the MacBook or Google Drive, the court ruled that there was no threat of trade secrets being exploited in the future. And because CAE was unable to prove the likelihood of success in its trade secret suit, the court upheld the District Court’s denial of a preliminary injunction.
StrAU serves as an important reminder that preliminary injunctions require more than a conclusion; they require evidence to support the necessary elements of a trade secret claim.