Texas Supreme Court Insists on Due Process

Texas courts must take seriously any claim that testimony or documents may contain trade secrets. In some cases, courts may even exclude parties from evidentiary hearings, if necessary to protect trade secrets.

On May 20, 2016, the Texas Supreme Court issued In Re M-I LLC, regarding a trade secret dispute between M-I, a Schlumberger affiliate, and National Oilwell Varco (“NOV”).

At an evidentiary hearing on M-I’s request for temporary injunction, M-I requested that the NOV corporate representative be excluded from the courtroom during certain testimony. M-I claimed that this representative, involved in the same business area as M-I, would inevitably use any of M-I’s trade secrets presented in the testimony.  The trial court, without any detailed analysis, ordered that the NOV representative could remain in court, but also ordered the representative not to use any information heard in the testimony for any reason other than participating in the case.   M-I claimed that this was woefully inadequate protection of its trade secrets, refused to go forward in the hearing, and sought appellate review of the trial court’s decision.

While the appeal proceeded, M-I filed an affidavit under seal with an appellate court. NOV requested a copy of that affidavit.  The trial judge, without even reading the affidavit, ordered M-I to produce it to NOV, over M-I’s objection that the affidavit also contained trade secrets.

The Texas Supreme Court determined that a claim of trade secrets was entitled to due process, and the trial court’s minimal analysis did not provide due process to M-I. The Court ordered the trial court to analyze the purported trade secrets in both the testimony that would be offered at the evidentiary hearing and in the affidavit.  The trial court then must balance the interest of protecting any trade secrets with the interest of NOV to have access to the information in order to defend itself.   Specifically, the Texas Supreme Court indicated that, if necessary, the trial has the discretion to exclude a corporate representative from an evidentiary hearing, in order to protect trade secrets.

Due Process for Claimed Trade Secrets

Texas trial courts must analyze any claim of trade secrets and balance the interest of protecting trade secrets with the interest of the parties to full and fair litigation of the dispute. Trial courts that conduct minimal or no analysis of the claimed trade secrets and the measures for protecting them will not be affording due process.