IP Law Daily Oilfield services company obtains TRO barring former employees from using trade secrets
Monday, August 6, 2018

Oilfield services company obtains TRO barring former employees from using trade secrets

By Cheryl Beise, J.D.

Oilfield services testing company Loenbro Inspection was entitled to a temporary restraining order to prevent three former employees from possessing, using, or disclosing proprietary setup files for a phased array ultrasonic test device used for non-destructive testing, the federal district court in Denver has decided. Loenbro Inspection established a likelihood of success on its claims that the employees had violated the Defend Trade Secret Act by showing that one of the employees had retained a memory card for an OmniScan MX2 phased array ultrasonic test device and accessed files on the card after leaving the company to form a competing company (Loenbro Inspection LLC v. Sommerfield, August 2, 2018, Brimmer, P.).

Loenbro Inspection, LLC is an oilfield services company that provides non-destructive testing ("NDT") using phased array ultrasonic test ("PAUT") instruments and visual inspection services. In late 2017 or early 2018, Loenbro employees Scott Sommerfield, Jason Mahoney, and Brandon Campos, while still employed by Loenbro, started making plans to form a competing company, Trispec LLC. Their plans included attempts to recruit current Loenbro employees to the new company and the preparation of a business plan that identified three current Loenbro clients as potential customers. Two weeks after the employees announced they were leaving, Loenbro discovered that the SDHC memory card from a PAUT device used by Campos, specifically an OmniScan MX2 device, was missing. Campos returned the device, but Loenbro discovered that the card had been accessed after Campos left the company. The memory card included proprietary MX2 setup files. Campos was contractually prohibited from using Loenbro’s proprietary information, including "trade secrets," "source and object codes," "data, programs," and "improvements," for purposes beyond his employment responsibilities.

On July 31, 2018, Loenbro filed a complaint against the former employees and Trispec, asserting alleging eight claims, including violation of the Defend Trade Secrets Act ("DTSA"). Loenbro alleged that defendants retained its trade secret information after leaving its employment, including "confidential and proprietary setup files for the OmniScan MX2 PAUT device, which provided Loenbro a competitive advantage by enabling it to provide more consistent and reliable PAUT results. Loenbro moved a temporary restraining order ("TRO") and preliminary injunction. The court held a hearing and decided to grant a 14-day TRO pending another hearing on the preliminary injunction.

At the TRO hearing, the court found that plaintiff demonstrated a likelihood of success on the merits of its DTSA claim concerning Campos’s retention and apparent accessing of the SDHC memory card after he left Loenbro. The court noted that the DTSA defines "trade secret" broadly to include "all forms and types of financial, business, scientific, technical, economic, or engineering information" so long as "the owner thereof has taken reasonable measures to keep such information secret" and "the information derives independent economic value, actual or potential, from not being generally known to," or ascertainable by, another person. 18 U.S.C. § 1839(3).

The court also found that: (1) Loenbro demonstrated that, in the absence of injunctive relief, it would suffer irreparable harm because the custom setup files provided a competitive advantage; (2) balance of equities tipped in Loenbro’s favor because the defendants indicated that they used different equipment to perform inspections that required different setup files; and (3) the public interest favored an injunction because the public has a substantial interest in enforcing private property rights, including rights in trade secrets.

The defendants were enjoined from "possessing, using, copying, or disclosing Loenbro Inspection, LLC’s and its affiliates’ proprietary setup files for the OmniScan MX2 PAUT device."

The case is No. 1:18-cv-01943-PAB.

Attorneys: Ben D. Kappelman (Dorsey & Whitney LLP) for Loenbro Inspection LLC. Asa Cash Garber (McCarthy Garber Law, LLC) for Scott Sommerfield.

Companies: Loenbro Inspection LLC

MainStory: TopStory TradeSecrets ColoradoNews

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