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Sorry—No Finality, No Injunction, No Appellate Jurisdiction

The US Court of Appeals for the Third Circuit dismissed an appeal from the denial of a motion under the Defend Trade Secrets Act (DTSA) for an ex parte seizure order, explaining that such orders are not final, not effectively injunctive and that the DTSA does not independently provide appellate jurisdiction to review such orders. Janssen Prod., L.P. v. eVenus Pharms. Lab’ys Inc., Case No. 22-2426 (3d Cir. Oct. 17, 2023) (Porter, Freeman, Fisher, JJ.)

In 2015, the US Food & Drug Administration (FDA) approved Janssen’s drug Yondelis—a stable, injectable version of the cancer drug trabectedin—for use in certain cancer patients. Janssen asserts that its data, specifications and methods for manufacturing Yondelis are trade secrets. After Janssen received FDA approval for Yondelis, eVenus sought FDA approval for a generic version of Yondelis. Janssen filed a lawsuit against eVenus (under the Hatch-Waxman Act) for patent infringement. During discovery, Janssen obtained documents that allegedly demonstrated that eVenus misappropriated Janssen’s trade secrets. Janssen then filed the current lawsuit against eVenus seeking relief for eVenus’s alleged trade secret misappropriation under the DTSA.

During discovery, Janssen found that eVenus spoliated evidence. In response, Janssen filed a motion for an ex parte seizure under the DTSA, requesting that the district court order the seizure of eVenus’ network servers and stored data, and the laptops and cell phones of certain eVenus employees and ex-employees. The district court denied Janssen’s ex parte seizure motion. Janssen appealed.

The Third Circuit dismissed the appeal, concluding that it lacked jurisdiction over Janssen’s appeal for two reasons.

First, the Third Circuit found that it lacked appellate jurisdiction because the district court’s denial of Janssen’s ex parte seizure motion was not a final judgment and did not meet any of the limited exceptions to the final judgment rule.

One limited exception to appellate jurisdiction under the final judgment rule is review of a lower court’s refusal to order injunctive relief. However, as the Third Circuit explained, an ex parte seizure order under the DTSA is not effectively injunctive and therefore does not fall under the injunction exception. The Court explained that refusal to grant an ex parte seizure order does not satisfy the first two prongs of the Court’s three-part functional injunction test, which require that an order be “directed to a party” and may be enforced by contempt. Regarding the first prong, the Court noted that DTSA seizure orders are not “directed to a party” because the DTSA requires law enforcement officials—and not a party—to execute any ex parte seizure order. Regarding the second prong, no party can be held in contempt for failing to comply with an order that does not direct it to do anything. Therefore, the district court’s order did not effectively deny an injunction.

Second, the Third Circuit analogized DTSA seizure orders with seizure orders under the Lanham Act in terms of statutory construction. As the Court explained, in the Lanham Act, ex parte seizure provisions are part of its “injunctive relief” section. In contradistinction, Congress did not [...]

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Head East: Contract Disputes Act Claims Must Be Filed in DC

The US Court of Appeals for the Ninth Circuit concluded that the Contract Disputes Act (CDA) “impliedly forbids” federal contractors from bringing most trade secret misappropriation claims against federal agencies in district court. Instead, the CDA requires contractors to bring such claims before the US Court of Federal Claims or the agency board of contract appeals, both of which are located in Washington, DC. United Aeronautical Corp. v. United States Air Force, Case No. 21-56377 (9th Cir. Sept. 7, 2023) (Smith, Lee, JJ.) (Collins, JJ., dissenting).

United Aeronautical Corporation (Aero) develops firefighting products, including the Mobile Airborne Fire Fighting System for use in aerial firefighting. The US Forest Service contracted with Aero to develop an updated aerial system to assist the agency in fighting fires. The ensuing prototype necessarily incorporated significant amounts of Aero’s intellectual property. To protect that information, Aero and the Forest Service executed a Data Rights Agreement (DRA) providing that “the technical data produced . . . or used or related” to developing the prototype “shall remain the property of [Aero],” but specifying that the Forest Service “shall have unlimited rights to view and use the data required for the continued use and operation of the” prototype. The Forest Service proceeded to share Aero’s data with the Air Force, which developed an upgraded aerial firefighting system it marketed internationally.

Aero sued the Air Force for misappropriating its trade secret information. Procedurally, Aero brought its claims under the Administrative Procedure Act (APA), seeking a declaration that the Air Force’s actions violated the Trade Secrets Act and federal procurement law, and an injunction prohibiting any further use of that data to develop competing products. Although the Air Force believed it was permitted to use Aero’s trade secrets pursuant to the DRA, it also argued that Aero’s complaint must be dismissed for lack of subject matter jurisdiction. The district court agreed, concluding that the CDA vests exclusive jurisdiction over federal-contractor disputes with the Court of Federal Claims where, as here, the dispute is related to a procurement contract. Aero appealed.

The Ninth Circuit affirmed the dismissal. Aero argued that the APA permits any “person suffering legal wrong[s] because of agency action” to seek redress in a federal district court and that the Air Force’s misappropriation of Aero’s trade secret information—in violation of the Trade Secrets Act—was exactly that. The Ninth Circuit disagreed, concluding that the nature of Aero’s claims (misappropriation, not breach of contract) and the relief it sought (an injunction, not damages or specific performance) mattered little. What mattered was the existence of a contract between the contractor and an agency that “related to” the intellectual property at issue.

Under the APA, a private party cannot bring suit when its claims are “impliedly forbidden” by a different statute that vests exclusive jurisdiction with another tribunal. The Ninth Circuit concluded that the CDA “impliedly forb[ade]” Aero’s claims since it was enacted to create a dispute resolution system for claims concerning federal procurement contracts, vesting exclusive jurisdiction of these disputes with [...]

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Message Received: US Courts Are Appropriate, More Convenient Venue to Adjudicate US IP Disputes

Addressing personal jurisdiction and forum non conveniens in a software licensing dispute, the US Court of Appeals for the Fourth Circuit upheld a district court’s exercise of personal jurisdiction over a Dutch entity and the court’s decision to not dismiss the case for forum non conveniens. dmarcian, Inc. v. dmarcian Europe BV, Case Nos. 21-1721; -2005 (4th Cir. Feb. 14, 2023) (Wilkinson, Heytens, Hudson, JJ.)

dmarcian is a North Carolina-based software company that developed software to help email users authenticate incoming emails. A Dutch businessman who owned Mailmerk contacted dmarcian to offer to market the software in Europe. While dmarcian was initially unreceptive to the offer, the two parties eventually reached an oral agreement for Mailmerk to rebrand as dmarcian Europe BV (dmarcian BV) and sell the dmarcian software in Europe and Africa.

A dispute arose when dmarcian BV claimed ownership of portions of the dmarcian source code. dmarcian BV filed suit in the Netherlands, eventually filing for and winning injunctive relief in the Netherlands when dmarcian terminated dmarcian BV’s license. dmarcian then filed suit in the Western District of North Carolina asking for a preliminary injunction against dmarcian BV, which dmarcian BV opposed with a motion to dismiss for forum non conveniens. The district court denied the motion to dismiss and entered a preliminary injunction that precluded dmarcian BV from operating outside of Europe and Africa and required dmarcian BV to stop using the registered “dmarcian” trademark without a disclaimer. The district court later found dmarcian BV in contempt for violating the preliminary injunction and ordered dmarcian BV to pay $335,000 in sanctions. dmarcian BV appealed the injunction and the sanctions.

dmarcian BV argued that the district court did not have personal jurisdiction. The Fourth Circuit rejected that argument, finding that the North Carolina long-arm statute authorized jurisdiction over dmarcian BV. The Court found that the application of the long-arm statute to dmarcian BV complied with due process because dmarcian BV worked closely with the dmarcian team in North Carolina (e.g., receiving sales leads, attending virtual meetings, coordinating software development), dmarcian BV sought out dmarcian to initiate business, and there was a strong interest in protecting intellectual property rights in North Carolina.

The Fourth Circuit also upheld the denial of the dismissal for forum non conveniens because the Dutch court was not an adequate alternative forum since Dutch courts cannot effectively adjudicate US trademark claims. The Fourth Circuit found that any judgment by the Dutch court would have little effect in the United States and would deny relief to dmarcian for the infringement of its rights.

The Fourth Circuit upheld the preliminary injunction grant, finding that the district court properly applied US and North Carolina law extraterritorially and that dmarcian was likely to succeed on all claims. The Court found that US laws properly applied and that dmarcian was likely to succeed on the following claims:

  • Copyright infringement, because there was a registered copyright, dmarcian BV reproduced elements of the source code outside of the licensing agreement, and [...]

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Words Matter: Court Sides with Translation Company in Insurance Coverage Dispute

The US Court of Appeals for the First Circuit concluded that a company’s general liability insurer was obligated to provide coverage for legal fees incurred in fending off a trade secret and defamation lawsuit brought by a competitor. Lionbridge Tech., LLC v. Valley Forge Ins. Co., Case No. 21-1698 (1st Cir. Nov. 21, 2022) (Kayatta, Selya, Thompson, JJ.)

Lionbridge and TransPerfect are competitors in the language-translation industry. TransPerfect sued Lionbridge for misappropriation of trade secrets and defamation. TransPerfect alleged that Lionbridge concocted a scheme through its corporate owner to feign interest in acquiring TransPerfect and, through this scheme, improperly gained access to TransPerfect’s trade secrets, which could be used to poach TransPerfect’s customers and otherwise undermine TransPerfect’s business.

Shortly after the lawsuit was filed, Lionbridge informed its liability insurance carrier, Valley Forge, about the litigation. Valley Forge initially indicated that it would provide Lionbridge with coverage for legal costs associated with the litigation. Valley Forge subsequently disputed the requested coverage based on both the reasonableness of the fees incurred and the nature of the suit. Lionbridge filed suit against Valley Forge seeking full coverage from Valley Forge for its defense costs. The dispute centered on whether the fees incurred could be considered injury arising out of “[o]ral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organizations goods, products, or services,” as provided by Lionbridge’s insurance policy. The district court granted summary judgment in favor of Valley Forge, finding that Valley Forge did not owe Lionbridge a duty to defend under the relevant policy provisions and exclusions. Lionbridge appealed.

The First Circuit reversed, explaining that an insurer’s duty to defend depends on whether the allegations in the underlying litigation are reasonably susceptible to an interpretation that the policy provisions apply. The focus of the inquiry is the source of the injury, not any specific theories of liability set forth in the underlying complaint. The Court explained that this inquiry required a comparison of the allegation made in the underlying litigation against the insurance policy provisions.

After analyzing the underlying complaint against the insurance policy, the First Circuit determined that the policy provisions applied because the allegations “roughly sketch[ed]” an injury arising from a defamation claim. TransPerfect’s claims were rooted in alleged reputational harm to its business, which fit within the relevant provision. The Court noted that complete overlap between the policy provisions and the claims was not required.

The First Circuit next considered whether any policy coverage exclusions applied to preclude coverage. The relevant exclusions fell into two buckets:

  • Injuries caused by an insured with direct knowledge that its actions would inflict injury, or injuries arising out of an oral or written publication that the insured knows is false
  • Trade secret misappropriation.

Valley Forge carried the burden of proving that either or both categories of exclusions applied. The Court concluded that the first category did not apply because Valley Forge failed to show that all allegations [...]

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First Amendment Punches Out Alleged Lanham Act Violation

Addressing the balance between trademark rights under the Lanham Act and the First Amendment right to protected expression, the US Court of Appeals for the Ninth Circuit affirmed a district court judgment finding that the defendant’s use of the term “Punchbowl” was not a Lanham Act violation because it was expressive and not misleading as to its source. Punchbowl, Inc. v. AJ Press, LLC, Case No. 21-55881 (9th Cir. Nov. 14, 2022) (Ownes, Bress, Fitzwater, JJ.)

Punchbowl is an online communications company that provides “online events and celebration invitations and greeting cards” as part of its subscription-based service. Punchbowl has used the mark Punchbowl® since 2006 and the mark was registered with the US Patent & Trademark Office in 2013. Punchbowl describes itself as “The Gold Standard in Online Invitations & Greeting Cards,” and uses the logo of a punch bowl ladle:

Punchbowl filed suit claiming that AJ Press infringed on Punchbowl’s mark through its subscription-based online news publication Punchbowl News. Punchbowl News covers “insider” political topics and reports on events in Washington, DC, and derives its name from the use of the term “punchbowl” by the Secret Service to refer to the US Capitol building. As such, the Punchbowl News logo comprises of an overturned image of the US Capitol filled with purple punch and the slogan “Power. People. Politics.”

AJ Press argued that its use of the term “Punchbowl” was protected under the First Amendment and did not violate the Lanham Act. The district court granted summary judgment to AJ Press, concluding that its use of the name “Punchbowl” did not give rise to liability because it constituted protected expression and was not explicitly misleading as to its source. Punchbowl appealed.

Traditionally, the likelihood of confusion test is used for claims brought under the Lanham Act. When artistic expression is at issue, however, that test fails to account for the full weight of the public’s interest in free expression. If the product involved is an expressive work, courts generally apply a gateway test, grounded in background First Amendment concerns, to determine whether the Lanham Act applies. One approach was set forth in the Second Circuit’s 1989 decision in Rogers v. Grimaldi to determine whether First Amendment concerns were strong enough to outweigh the need to protect a mark. The Rogers test requires the defendant to first “make a threshold legal showing that its allegedly infringing use is part of an expressive work protected by the First Amendment.” Once this threshold is satisfied, the Lanham Act will not apply unless the plaintiff can establish that “the defendant’s use of the mark (1) is not artistically relevant to the work or (2) explicitly misleads consumers as to the source or the content of the work.”

The Ninth [...]

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New WDTX Order Shakes Up Initial Judge Assignments

A recent order from Chief Judge Garcia of the US District Court for the Western District of Texas (WDTX) changes how judges are initially assigned to cases filed in its Waco Division. As of July 25, 2022, patent cases filed in the Waco Division shall be randomly assigned to one of 12 judges. The list includes at least one judge from each of the district’s seven divisions. The order states that the new practice is due to “consideration of the volume of new patent cases assigned to the Waco Division, and in an effort to equitably distribute those cases.”

It’s no secret that the Waco Division has been a magnet for patent lawsuits in the last four years. The only judge in Waco—Judge Alan D. Albright—has presided over more than 2,500 patent cases since September 2018. Those 2,500 patent cases account for about 17% of all patent cases filed nationally in district courts in that timeframe. Plaintiffs’ preference to file in Waco is due in part to Judge Albright’s knowledge of patent cases, his interest in patent cases and his promulgation of local patent rules aiming for a predictable and quick path to trial.

Although Waco cases may now initially be assigned to other judges, whether they choose to keep the assignments remains to be seen. The recent order contains a footnote stating that its previous order for assigning judges “remains in full force and effect.” That previous order allows judges to reassign any case “by mutual consent.” (See Item XVIII(a).) Thus, judges may self-select out of these cases. A large criminal docket is one example of why a judge might self-select out of a patent case.

Even if another judge is assigned and decides to keep a Waco patent case, it remains to be seen whether they will adopt Judge Albright’s local patent rules. Judge Albright has put extensive efforts into the local rules, including procedures related to discovery disputes, pre-Markman discovery, Markman hearings, infringement and invalidity contentions, US Patent & Trademark Office inter partes review effects and more. His cases have averaged about eight months to a Markman hearing and about 24 months to trial. Other judges may decide to make use of that framework to save time and effort or to avoid inconsistencies within the division.

Stay tuned for updates as this new assignment practice unfolds and more patent cases are assigned.




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Breach of Confidentiality Claim Survives Motion to Dismiss under Anti-SLAPP Law

The Court of Appeals of Texas (Fourth District) upheld a trial court’s order denying a motion to dismiss a breach of confidentiality agreement claim pursuant to the Texas Citizens Participation Act (TCPA), which is designed to protect people from strategic lawsuits against public participation (SLAPP). Harper v. Crédito Real Bus. Cap., Case No. 21-0212 (Tex. App. July 20, 2022) (Martinez, Chapa, Watkins, JJ.)

Crédito Real Business Capital (CRBC) leases equipment and provides financing services to companies in the construction industry. CRBC provides its services through two limited liability companies: CR-FED and CR-FED Leasing. Earl Harper previously worked for CRBC as executive vice president and was required to sign a confidentiality agreement with CR-FED stipulating that he would not share its confidential information with third parties.

CRBC advanced money and leased equipment to Ontrack Site Services, a site grading contractor and customer with whom Harper worked. As part of his employment, Harper was provided with confidential information regarding CRBC’s plans and projections for its relationship with Ontrack, including CRBC’s willingness to extend additional financing or leasing services to the contractor. Harper allegedly used this information to help Ontrack negotiate better lease rates and financing terms to CRBC’s detriment. CRBC terminated Harper’s employment. Harper subsequently joined a new company and advised Ontrack to obtain financing from that company instead of CRBC.

CRBC sued Harper for breach of fiduciary duty and breach of contract for misappropriating CRBC’s trade secrets and breaching the confidentiality agreement. Harper filed a motion to dismiss the breach of contract claim pursuant to the TCPA, under which a party can file a motion to dismiss a lawsuit if it “is based on or is in response to a party’s exercise of the right of free speech, right to petition, or right of association.” The trial court denied the motion. Harper appealed, contending the following:

  • CRBC’s breach of contract claim related to Harper’s exercise of free speech.
  • CRBC did not establish a prima facie case of its breach of contract claim.
  • The trial court improperly considered CRBC’s amended petition.

A motion to dismiss pursuant to the TCPA is evaluated under a three-step burden shifting framework:

  • The movant must first demonstrate that the legal action is based on the movant’s exercise of the right to free speech, the right to petition or the right to association.
  • The nonmovant must then establish a prima facie case of its claim.
  • If the nonmovant satisfies its burden, the action must still be dismissed if the movant establishes grounds on which it is entitled to judgment as a matter of law.

The Texas Court of Appeals first addressed whether the trial court was permitted to consider CRBC’s amended petition when it ruled on the motion to dismiss. CRBC’s amended petition merely clarified that “CRBC” was the assumed name for both CR-FED and CR-FED Leasing, rather than just CR-FED. Because the amended petition was filed well before the hearing date and did not include any element of surprise, the Court concluded that [...]

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Stormy Weather Ahead: Lack of Causation Evidence Rains Out Appeal

The US Court of Appeals for the Tenth Circuit found that a trade secret owner lacked “non-speculative and sufficiently probative evidence of a causal nexus between Defendants’ alleged bad acts and [the trade secret owner’s] asserted damages,” and upheld a lower court’s summary judgment ruling for defendants. GeoMetWatch Corp. v. Hall, et. al, Case No. 19-4130 (10th Cir. June 29, 2022) (Holmes, Kelly, Lucero, JJ.)

GeoMetWatch (GMW) alleged misappropriation of trade secrets and multiple other complaints against several different groups of defendants, including the Hall defendants, Utah University Advanced Weather Systems Foundation (AWSF) defendants, and Utah State University Research Foundation (USURF) defendants. The lower court granted summary judgment to all defendants based on lack of non-speculative causation relating to lost profits, to the USURF and AWSF defendants based on governmental immunity under Utah law, and to AWSF on its contractual counterclaim. GMW appealed.

Background

GMW launched a venture for a new satellite-based weather-detecting senor system developed by USURF. GMW entered into a cooperation agreement with AsiaSat, a foreign commercial satellite operator on which GMW relied to secure funding from Export-Import Bank. There were two conditions precedent before AsiaSat would seek the loan: a guarantee for the loan and a convertible note. The Hall defendants were brought in to possibly provide the guarantee, and with the understanding that Hall would maintain confidentiality of GMW’s information. After reviewing the confidential information, Hall entered into a nondisclosure agreement (NDA) with GMW. Despite the NDA, Hall launched a competing company and sent a series of inflammatory emails regarding the state of GMW to AsiaSat. These actions became the basis for GMW’s complaint of trade secret appropriation. After failing to make payments to AWSF for the construction of the senor, and despite finding a replacement manufacturer, GMW never satisfied either of the conditions precedent and AsiaSat never applied for the loan. GMW eventually ran out of money and filed the underlying suit.

GMW argued that its lost profits stemmed from its failure to secure a loan with AsiaSat and Export-Import Bank because of the defendants’ trade secrets misappropriation and other bad acts. GMW relied on evidence such as a series of inflammatory emails from Hall stating that “GMW is in Trouble,” along with an invitation to do business with a new company that the Hall defendants launched reviewing GMW’s confidential information. The lower court found that GMW had failed to provide more than speculative evidence that the defendants’ actions, with or without GMW’s confidential information, caused GMW’s lost profits.

The Tenth Circuit’s Ruling

At the Tenth Circuit, GMW argued that the lower court ignored “non-speculative” evidence from which it could be inferred that the defendants’ actions were the cause of lost profits. The Court noted that the district court found that none of GMW’s experts actually opined that any of the defendants’ actions caused the lost profits. Although one expert put forth a theory based on GMW losing its “first-mover advantage,” the Court found that no specific facts were offered to support this theory. The [...]

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No Breach of Contract Where Company Disclosed Its Own Non-Public Information

The US Court of Appeals for the Eighth Circuit affirmed a district court’s dismissal of a trade secret lawsuit against a consultant that allegedly failed to prevent its client from disclosing its own proprietary information during a call with a potential buyer. Protégé Biomedical, LLC v. Duff & Phelps Securities, LLC, and Philip I. Smith, Case No. 21-1368 (8th Cir. Apr. 4, 2022) (per curiam) (Erickson, J., dissenting).

Protégé entered into an agreement with Duff & Phelps to help Protégé find a buyer for its business. Under the agreement, Duff & Phelps received immunity from certain types of claims, its employees were shielded from individual liability and it owed no fiduciary duties to Protégé.

One of Protégé’s competitors, Z-Medica, was identified as a potential buyer. One of Duff & Phelps’s employees, Philip Smith, facilitated execution of the non-disclosure agreement (NDA) by a member of Z-Medica’s board of directors. Protégé assumed that the NDA would also bind Z-Medica and thus participated in conference calls with Z-Medica in which Protégé revealed non-public information. In Z-Medica’s view, however, the board member signed the NDA in his personal capacity and not as Z-Medica’s representative. As a result, Z-Medica used the information it received from Protégé to create its own competing product.

Protégé sued Z-Medica. After settling with Z-Medica, Protégé sued Duff & Phelps and Smith in state court for breach of contract, unlawful practice of law, negligence, breach of professional services and breach of fiduciary and principal-agent duties. Duff & Phelps removed the case to federal court on the ground that Smith, the only non-diverse defendant, had been fraudulently joined. The district court dismissed the case for failure to state a claim. Protégé appealed.

The Eighth Circuit first analyzed whether the case belonged in federal court. The Court upheld the district court’s determination that Smith was fraudulently joined. The Court stated that fraudulent joinder occurs when there is no reasonable basis in fact and law for the claims brought against the non-diverse defendant. Here, the Court found that there was no reasonable basis for Protégé to allege breach of contract against Smith since he was never a party to the contract between Protégé and Duff & Phelps. The Court found that Protégé’s unlawful practice of law claim against Smith also constituted fraudulent joinder because Smith never gave legal advice to Protégé. The Court noted that the contract immunized Smith from Protégé’s other claims and thus, without any viable claims against Smith, the case was properly in federal court under 28 U.S.C. § 1332.

Turning to the merits of the claims against Duff & Phelps, the Eighth Circuit affirmed the dismissal for failure to state a claim. The Court reasoned that Protégé’s breach of contract claim was predicated on an alleged failure by Duff & Phelps to prevent Protégé from disclosing its proprietary information. However, the agreement only made Duff & Phelps responsible for its own conduct, not for Protégé’s conduct. The Court explained that Protégé’s other claims failed for the same reason.

Judge Erickson [...]

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No Service, No Notice

Addressing the notice requirements of Fed. R. of Civ. Pro. 65(a)(1), the US Court of Appeals for the Fifth Circuit vacated a preliminary injunction, finding that the aggrieved party did not have sufficient notice of the possibility of a preliminary injunction. Document Operations, L.L.C., v. AOS Legal Tech., Inc., Case No. 20-20388 (5th Cir. Aug. 23, 2021) (Per Curiam) (unpublished).

In 2017, Doc. Ops. entered into a licensing agreement by which AOS Japan would serve as the company’s exclusive representative and marketing provider in Japan for its virtual data room technology. Later, Doc. Ops. learned that a competing product known as AOS VDR had been developed by AOS Korea and would soon be marketed in the two Asian countries. Despite protests from AOS Japan that AOS Korea developed AOS VDR independently, Doc. Ops. filed suit alleging violation of the Texas Uniform Trade Secrets Act and for common law breach of contract, fraudulent inducement, conversion, civil conspiracy and breach of fiduciary duty.

The licensing agreement mandated that AOS Japan protect Doc. Ops.’ confidential information and also prohibited AOS Japan from acting to “represent, promote, develop, or otherwise try to sell within [Japan] any lines of product that. . . compete with [the technology].” Doc. Ops. sought a temporary restraining order (TRO) as well as preliminary injunction and filed and emailed copies of the complaint and TRO motion to AOS representatives. Once a Zoom hearing was scheduled, Doc. Ops. again contacted AOS to inform it of the hearing date. When AOS failed to appear at the hearing, the district court chose to reschedule the hearing three weeks later in order to ensure that AOS was aware of the hearing.

During this three-week interval, Doc. Ops. continued to communicate relevant dates and filings with AOS, which had appointed Texas-based counsel. One of these communications included a letter from Doc. Ops. to the district court stating that if the district court granted its TRO motion, Doc. Ops. would seek to conduct limited expedited discovery to prepare for a subsequent preliminary injunction. AOS failed to appear at the second hearing, stating that it would not appear until served with process. Subsequently, the district court not only granted the TRO motion and the related request for expedited discovery but also issued a preliminary injunction against AOS. AOS appealed both the preliminary injunction and the order granting expedited discovery.

The Fifth Circuit first explained that Rule 65 requires sufficient notice for a preliminary injunction, which the Supreme Court of the United States has interpreted as implying a hearing where the defendant is given a fair opportunity to oppose the preliminary injunction. The Court contrasted the notice requirement for preliminary injunctions from the more informal notice requirement for TROs. While TRO hearings are sometimes converted into preliminary injunction hearings, this conversion has two requirements: Sufficient notice and an opportunity to meaningfully prepare and respond.

The Fifth Circuit found that while AOS certainly had notice that a preliminary injunction was looming, it lacked sufficient notice that this relief would [...]

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