In Graduate Medical Education Development, LLC v. St. George’s Univ., Ltd., No. CV H-15-2641, 2016 WL 5844707 (S.D. Tex. Oct. 6, 2016), the Southern District of Texas rejected a defendants’ argument that the receipt of trade secrets pursuant to a non-disclosure agreement (“NDA”) bars the plaintiff’s trade secrets claim. In Graduate Medical Eduation Development, plaintiff GMED disclosed various trade secrets to defendants pursuant to the terms of the parties’ NDA. Plaintiff alleged that Defendants then used that information to place a bid to purchase a hospital and to secure additional investors, all in violation of the NDA.
Defendants countered with a Rule 12(b)(6) motion, arguing, among other things, that Plaintiff had not properly pled that the trade secrets were misappropriated because Plaintiff admitted that Defendants received the secrets pursuant to the NDA.According to the Defendants, a Texas trade secrets claim requires a breach of a confidential relationship or discovery by improper means, and if Defendants learned of the trade secrets through a valid NDA, neither of those requirements can be satisfied. The Court found that that this analysis was incorrect under both Texas common law and TUTSA:
Under Texas common law, a party establishes a trade secret misappropriation claim by showing “(a) a trade secret existed, (b) the trade secret was acquired through a breach of a confidential relationship or discovered by improper means, and (c) use of the trade secret without authorization from the plaintiff.” Phillips v. Frey, 20 F.3d 623, 627 (5th Cir. 1994). Discovering by “improper means” “includes theft, fraud, unauthorized interception of communications, inducement of or knowing participation in breach of confidence, and other means either wrongful in themselves or wrongful under the circumstances of the case.” Astoria Indus. of Iowa, Inc. v. SNF, Inc., 223 S.W.3d 616, 636 (Tex. App.—Fort Worth 2007, pet. denied) (emphasis added); see Wellogix, Inc., 716 F.3d at 876 (citing Astoria for this definition). The statute relied upon by GMED also defines misappropriation to include trade secrets “acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use.” Tex. Civ. Prac. & Rem. Code Ann. § 134A.002(3). The court agrees with the Magistrate Judge that GMED has sufficiently pled misappropriation to survive a motion to dismiss.
Under the Court’s analysis, a breach of duty to maintain secrecy–such as misusing trade secrets that were properly disclosed under an NDA–is sufficient to support a trade secrets claims. Therefore, the mere fact that trade secrets were received pursuant to an NDA is not enough to bar a trade secrets claim when there are pleadings sufficients to allege that the secrets were used in violations of the terms of the NDA.