The Court’s Broad Power To Enjoin Trade Secret Violations Can Be Costly

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Explore:  Trade Secrets

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On June 27, 2012, we reported that TNA Entertainment, LLC (“TNA”), a local professional wrestling promotion company, sued its former employee, Brian Wittenstein, and a direct competitor, World Wrestling Entertainment, Inc. (“WWE”), for unlawfully using TNA’s trade secrets to unfairly compete against TNA.  (TNA Entertainment, LLC v. Wittenstein and World Wrestling Entertainment, Inc., Davidson County Chancery Court, Docket No. 12-746-III.)  The alleged trade secrets included information about TNA’s contracts with wrestling talent.  TNA alleged that WWE used TNA’s trade secrets to solicit wrestling talent already under contract with TNA.

In addition to the damages it claims to have suffered, TNA also requested that the Court enter a temporary restraining order (“TRO”) to prohibit WWE and Wittenstein from continuing to use TNA’s trade secrets.  Under Tennessee law, a Court may restrain an offending party from engaging in certain conduct when the injured party shows it will suffer immediate and irreparable harm.  TROs generally last for a short period of time, but may be extended if there is good cause to do so.  The Court may also issue a temporary injunction which can last during the life of the lawsuit.

On May 24, 2012, the Court in TNA Entertainment issued a comprehensive, far reaching TRO which could have had adverse effects on WWE’s business.  The restraining order prohibited WWE and Wittenstein from doing the following:

  1. Breaching or attempting to breach Wittenstein’s Separation Agreement with TNA, including disclosing, transmitting, or otherwise using TNA’s confidential, trade secret, and proprietary information;
  2. Retaining and failing to return TNA’s confidential, trade secret, and proprietary information or property in any form;
  3. Destroying, deleting, erasing, modifying, or otherwise failing to preserve TNA’s confidential, trade secret, and proprietary information;
  4. Soliciting or contracting wrestling talent identified in TNA’s confidential information or taken by Wittenstein; and
  5. Interfering with TNA’s contracts and prospective business relationships which WWE learned through TNA’s confidential, trade secret, and proprietary information.

In addition, the Court specifically required WWE and Wittenstein to not destroy or alter and to provide access information to any computers or similar devices which WWE and Wittenstein used in storing, transmitting, or receiving TNA’s confidential information and trade secrets.  The purpose of this requirement is to allow TNA to inspect WWE and Wittenstein’s computers for use of TNA’s confidential information and trade secrets.

As a condition to entering the Restraining Order, TNA was required to post a $30,000 bond.

The May 24, 2012 TRO was later dissolved as to WWE.  After a hearing, the Court determined that WWE posed no threat of immediate or irreparable harm to TNA and had already returned TNA’s property.  WWE also committed to not solicit TNA’s wrestling talent and to preserve its computers and other devices for inspection at a later date.

While the TRO seems to have had little effect on WWE, because WWE had already taken corrective action with respect to TNA’s confidential information and trade secrets, in other cases such a comprehensive TRO and/or temporary injunction could prove to be costly.  A new employer could suffer loss of business, damages for interfering with a competitor’s contracts, significant costs for litigation, and loss of reputation.  As we said earlier, employers should always be aware of and protect themselves against potential liability when hiring an employee who may possess a former employer’s confidential trade secrets. If you have any questions for your business on trade secrets or liabilities when hiring an employee, don’t hesitate to contact one of the Burr & Forman Non-Compete & Trade Secrets team members.

Topics:  Trade Secrets

Published In: Business Torts Updates, Civil Remedies Updates, General Business Updates, Intellectual Property Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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