Gardere Achieves ‘Precedent-Setting’ Verdict for Inhance Technologies

In what has been described as a precedent-setting verdict for Inhance Technologies LLC, on Jan. 9, the Texas 1st District Court of Appeals ruled that two former Inhance executives were in violation of the Texas Uniform Trade Secrets Act, upholding an injunction to prevent them from conducting business in the future plus awarding damages to the company. Gardere Wynne Sewell LLP labor and employment co-chair Rachel Powitzky Steely and partner Jessica Glatzer Mason were the lead attorneys representing Inhance, a client of partner Kenneth C. Broodo.

The matter originated after Inhance learned that its former chief administrative officer David Molthen and vice president of engineering Paul Banks established a plant using an electrochemical process Inhance developed for the plastics industry. Furthermore, the company Molthen and Banks founded, TMRJ Holdings, built their plant in an area where Inhance recruits its employees and develops business. By misappropriating Inhance’s technologies and engaging in unfair competition, Molthen and Banks were in violation of the act.

According to Mason and Steely, this verdict not only impacts Texas law, but also has the potential to influence the law’s interpretation in the 47 other jurisdictions where a similar act is in place, as this ruling clarifies that a plaintiff can recover both a reasonable royalty, as well as the forward-looking remedy of a permanent injunction preventing future use of the trade secret for a TUTSA violation.

“In our research, we’ve not come across an instance in Texas or any other location with a trade secrets act where both reasonable royalty damages and a permanent injunction were awarded on facts similar to ours,” said Mason. “It’s normally one or the other. So, this outcome proves that business owners who have been wronged can now seek both damages under the uniform trade secrets act.”

The dual-layer verdict isn’t the only aspect of the case with double elements. Regarding the facts of the matter, this was not only a labor and employment action in a sense that the former executives violated their fiduciary duty but also an intellectual property one in that they repurposed proprietary technologies for their benefit.

In order to assist with the engineering and technological components, Steely and Mason enlisted the expertise of Gardere intellectual property partner Terrell R. Miller.