Court Rules That Injunction Prohibiting Use of Trade Secret Lasts Only as Long as Employment Contract Provides

A New Mexico appellate court reversed a permanent injunction restricting a former employee’s use of his former employer’s trade secret information because his employment contract imposed only a five-year duty of confidentiality.  The New Mexico Supreme Court recently denied certiorari, declining to weigh in on whether remedies under the New Mexico version of the Uniform Trade Secrets Act (UTSA) could be so limited by employment agreements.

The underlying suit was brought by a company which uses laser imaging detection and ranging (LIDAR) technology mounted to helicopters to scan natural gas pipelines for leaks.  According to the appellate court’s opinion, Lasen sued its former research scientist, Boris Tadjikov, for breach of contract and misappropriation of trade secrets when he took the source code he developed for the company’s LIDAR technology upon his termination.  The trial court found Tadjikov had not misappropriated the code because he had not disclosed it to a third party or otherwise made commercial use of the code, but nonetheless entered a permanent injunction preventing him from doing so in the future.

Tadjikov appealed, arguing that, among other things, the permanent injunction was improper given that his employment contracted limited his duty of confidentiality to five years from the date of his termination.  The appellate court agreed, finding that because five years had passed since Tadjikov’s termination from Lasen, Tadjikov was no longer under an obligation to keep Lasen’s trade secret information confidential.  The court reasoned that the New Mexico Uniform Trade Secrets Act contemplated a temporal limit to injunctive relief and found no reason to extend the time period agreed to in the contract.

TIP:  When drafting confidentiality agreements, companies should be mindful of any temporal limitations on obligations to protect confidential information—which is required in some states—if trade secrets are not separately carved out as having indefinite duration.