New York Law Journal: Trade Secrets Ruling Rejects Irreparable Injury Presumption
New York partner John Siegal and associate Francesca Ambrosio co-authored an article, "Trade Secrets Ruling Rejects Irreparable Injury Presumption," which was published in the April 15, 2009, edition of the New York Law Journal. Click here to read the full article (PDF).
According to Siegal and Ambrosio, "Some legal doctrines seem so entrenched that lawyers and trial courts stop thinking about them. For at least 25 years, when seeking preliminary injunctions in New York trade secrets cases, lawyers have simply asserted that irreparable injury is presumed when trade secrets are at stake, opposing counsel largely stopped contesting the notion and, reciting this rule, trial judges in the federal and state courts have not bothered to make findings of whether there is proof of actual, imminent irreparable injury in the absence of injunctive relief. Until now. On March 9, in Faiveley Transport Malamo AB v. Wabtec Corp., a case concerning brake technology used for New York City subway cars, the U.S. Court of Appeals for the Second Circuit brought the practice of granting trade secrets injunctions without proof of irreparable injury to a screeching halt."
The authors continue: "Following Faiveley, the presumption of irreparable injury does not apply in cases where the trade secrets are simply being used for commercial purposes; instead, the presumption will apply only if, absent an injunction 'a misappropriator of trade secrets will disseminate those secrets to a wider audience or otherwise irreparably impair the value of those secrets.' Competitive use of the protected information by itself will not be enough to warrant an injunction, and without more will be remediable only through damages. This decision will fundamentally change preliminary injunction litigations in trade secrets cases, requiring the moving party to develop and demonstrate actual evidence of imminent, irreparable injury and, often, making it significantly more difficult to obtain injunctions."
Siegal and Ambrosio's article goes on to detail why "Faiveley is a significant re-routing of the common law that will reshape the practice of trade secrets litigation not only in the federal courts within the Second Circuit but in all likelihood in New York's state courts as well," noting that "Faiveley is a clear and definite decision that leaves no doubt that there is no longer any generalized presumption of irreparable injury in Second Circuit trade secrets preliminary injunction cases," and that "while the New York state courts are not required to follow a federal court's interpretation of New York state law as binding precedent, the reality is that when a federal appellate court decisively interprets state law, state courts often follow suit. That is likely to be the case here."
The authors conclude: "Given the clarity of the Second Circuit's decision in Faiveley, the long-standing but shallow roots of the presumption of irreparable injury, and the tradition of New York's federal and state courts following parallel tracks with regard to the evolution of trade secrets law, in short order we can expect to see New York's state courts refusing to apply the presumption of irreparable injury on motions for preliminary injunctions in misappropriation of trade secret cases where there is no proof or actual threat of the trade secrets being further disseminated into the marketplace and therefore being 'lost forever.' While there will no doubt be extensive litigation over the meaning and scope of Faiveley—including issues such as what constitutes further dissemination of trade secrets and what quantum of proof of it is needed to show irreparable injury—Faiveley will in all likelihood swiftly and certainly rule the day, the decade and beyond in New York trade secrets injunction litigation."