Not All Documents Labeled Confidential Actually Are: Texas Jury Finds $23M Trade Secret Case Was Brought In Bad Faith

• Published date: 13 July 2023
• Subject Matter: Intellectual Property, Trade Secrets
• Law Firm: Seyfarth Shaw LLP
• Author: Mr Jesse Coleman and Kevin M. Green

On May 31, 2023, a Harris County Texas District Court jury found a telecom company acted in bad faith by filing a $23 million trade secret misappropriation lawsuit against a rival where the underlying technology was found to not actually be a trade secret.

Background & Analysis

In February 2019, Telecom firm Teligistics, Inc. ("Teligistics") sued its rival Advanced Personal Computing, Inc. d/b/a Liquid Networx ("Liquid Networx") and company executives Travis Wood and Robert Short, alleging they misappropriated trade secrets concerning its online platform for handling contracts named Telibid. Specifically, Teligistics alleged a former Liquid Networx employee obtained a copy of Teligistic's internal Request for Proposal ("RFP") in order to "tweak" Liquid Networx's internal RFP, rather than spending time and resources developing their own RFP.

Teligistic's RFP contained a confidentiality notice and information that permitted bidders to submit responses for Teligistic's telecom products and services. Teligistics alleged the Liquid Networx "sanitized" its RFP by changing the names of parties to secure contracts for financial gain.

Liquid Networx challenged the existence of Teligistic's alleged trade secrets, claiming the latter did not clearly define its trade secrets. Liquid Networx argued, for example, that while the source code of Teligistic's Telibid platform could qualify as a trade secret, the output it generated'such as an RFP'was not entitled to trade secret protection merely because a confidentiality label was affixed to it. As Texas courts have noted, and Liquid Networx cited in its motion for directed verdict, affixing a confidentiality label to a document does not necessarily make the information within a trade secret. See Providence Title Co. v....