LITIGATION AND PROTECTION OF TRADE SECRETS ...Litigation and Protection of Trade Secrets and Confidential Information Chapter 3 2 each circumstance, the trial court must weigh the

LITIGATION AND PROTECTION OF TRADE SECRETS AND CONFIDENTIAL INFORMATION

JESSE R. PIERCEClements, O’Neill, Pierce,Wilson & Fulkerson, L.L.P.1000 Louisiana, Suite 1800

Houston, Texas 77002

ADVANCED OIL, GAS & ENERGY RESOURCES LAW 2002State Bar of TexasOctober 3-4, 2002

Dallas

CHAPTER 3

JESSE R. PIERCEClements, O’Neill, Pierce, Wilson & Fulkerson, L.L.P.

1000 Louisiana, Suite 1800Houston, Texas 77002-5009

713-654-7602FAX: 713-654-7690

BIOGRAPHICAL INFORMATION

EDUCATION

B.A., Austin CollegeJ.D. with honors, The University of Texas School of Law

PROFESSIONAL ACTIVITIES

Partner, Clements, O’Neill, Pierce, Wilson & Fulkerson, L.L.P.Board Certified - Civil Trial Law, Texas Board of Legal SpecializationMember, State Bar of TexasMember, Houston Bar AssociationMember, American Bar AssociationMember of Council of the Oil, Gas & Mineral Law Section of the State Bar of Texas

LAW RELATED PUBLICATIONS, ACADEMIC APPOINTMENTS AND HONORS

Author of “Current Issues in Controversies Between Royalty Owners and EnergyCompanies”Author of “Common Law Claims in Environmental Contamination Cases”Author of “Standards of Appellate Review”

Litigation and Protection of Trade Secrets and Confidential Information Chapter 3

i

Table of Contents

I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. PROTECTING TRADE SECRETS AND CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . 1A. Trade Secret Privilege . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1B. Confidentiality Agreements, Protective Orders, and Sealing Orders . . . . . . . . . . . . 3

1. Standard for Sealing Court Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42. Court Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44. Hearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45. Temporary Sealing Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46. Order on Motion to Seal Court Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57. Continuing Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58. Appeal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59. Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

III. STATUTE OF FRAUDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

IV. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13A. Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13B. Measure of Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

CONFIDENTIALITY AGREEMENT (Long Form) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

CONFIDENTIALITY AGREEMENT (Short Form) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23


1

LITIGATION AND PROTECTIONOF TRADE SECRETS ANDCONFIDENTIAL INFORMATION

I. INTRODUCTIONThe violation of agreements or legal obligations

regarding the use and disclosure of information isoften the subject matter of a lawsuit. Otherspeakers will deal with the substantive law ofconfidentiality agreements and trade secret law.However, questions regarding the handling ofconfidential information and trade secrets may arisein any type of litigation. This paper is concernedwith the handling of sensitive information in thecontext of litigation. The issues that are encounteredin dealing with the confidentiality of information areones with which the trial lawyer needs to beintimately familiar and with which the transactionallawyer should have at least a general familiarity.

This paper will also briefly outline theapplicability of the statute of frauds to confidentialityagreements and the measure of damages as itrelates to oil and gas leases.

II. PROTECTING TRADE SECRETS ANDCONFIDENTIAL INFORMATIONA trade secret is generally defined as a

formula, pattern, device, or compilation ofinformation that provides one with the opportunity togain an advantage over competitors that do not knowthe information. Computer Assocs., Int’l, Inc. v.Altai, Inc. , 918 S.W.2d 453, 455 (Tex. 1996). Toconstitute a trade secret, the information must not bepublicly available or readily ascertainable byindependent investigation. Allan J. Richardson &Assocs., Inc. v. Andrews, 718 S.W.2d 833, 837(Tex. App.–Houston [14th Dist.] 1986, no writ);SCM Corp. v. Triplett Co., 399 S.W.2d 583, 586(Tex. Civ. App.–San Antonio 1966, no writ). Theremust be “a substantial element of secrecy” for theinformation to constitute a trade secret. Rimes v.Club Corp. of Am., 542 S.W.2d 909, 913 (Tex. Civ.App.–Dallas 1976, writ ref’d n.r.e.) ; Furr’s, Inc. v.United Speciality Advertising Co., 338 S.W.2d762, 765 (Tex. Civ. App.–El Paso 1960, writ ref’dn.r.e.). The owner of the information is required tohave taken efforts to maintain and protect thesecrecy of the information. American PrecisionVibrator Co. v. National Air Vibrator Co., 764

S.W.2d 274, 276 (Tex. App.–Houston [1st Dist.]1988, no writ).

Issues regarding confidentiality arise most oftenin the discovery phase of litigation, but may come upduring or - as we will see - after trial. There arethree rules that are relevant: TEX. R. CIV. P. 192.6,TEX. R. EVID. 507, and TEX. R. CIV. P. 76a.

A. Trade Secret PrivilegeThe first area that is of importance is that of

protection of trade secrets. In the proper case,sensitive information may qualify for the bestprotection of all, an evidentiary privilege, albeit asomewhat limited one, for trade secrets. Theapplicable rule is TEX. R. EVID. 507, which provides:

A person has a privilege, which may beclaimed by the person or the person's agent oremployee, to refuse to disclose and to preventother persons from disclosing a trade secretowned by the person, if the allowance of theprivilege will not tend to conceal fraud orotherwise work injustice. When disclosure isdirected, the judge shall take such protectivemeasure as the interests of the holder of theprivilege and of the parties and the furtheranceof justice may require.

The operation of TEX. R. EVID. 507 was explainedby the Texas Supreme Court in In re ContinentalGeneral Tire, Inc., 979 S.W.2d 609 (Tex. 1998).The supreme court interpreted TEX.R.EVID. 507 toprovide that when a party resisting discoveryestablishes that requested information is a tradesecret, the burden shifts to the requesting party toestablish that the information is necessary for a fairadjudication of its claim or defense. ContinentalGen. Tire, 979 S.W.2d at 610. Balancing thecompeting interests of the important property valueof trade secrets and the importance of adjudicationof lawsuits, the supreme court held:

trial courts should apply Rule 507 as follows:The first party resisting discovery mustestablish that the information is a trade secret.The burden then shifts to the resisting party toestablish that the information is necessary for afair adjudication of its claims. If the requestingparty meets this burden, the trial court shouldordinarily compel disclosure of the information,subject to an appropriate protective order. In

http://www.TexasBarCLE.com/CLE/PMCasemaker.asp?table=TX_caselaw&volume=918&edition=S.W.2d&page=453&id=70750_01









2

each circumstance, the trial court must weighthe degree of the requesting party’s need forthe information with the potential of disclosureto the resisting party.

Id. at 613.

On the merits, the information related to aformula which was conceded to be a trade secret.The party seeking discovery had presented only theopinion of an expert witness that the compound didnot contain the right ingredients and could cause adefect. However, this witness conceded that anexamination of the compound formula would notprovide the final answer to the existence of a defectbecause the physical product would still have to beexamined. The supreme court held that thisevidence was insufficient to meet the burden underRule 507 of demonstrating that the information wasnecessary for a fair trial.

The supreme court also dealt with an interestingpoint in passing. The plaintiff argued that because adefendant originally sought a confidentiality order forthe protection of other documents, it had implicitlyconceded that a protective order would adequatelyprotect the formula that was an issue in thismandamus proceeding. The supreme court held:“However, that Continental was willing to producecertain information under a protective order does notmean that Continental has waived its right to assertRule 507 about other information which it mayregard as more competitively sensitive or lessnecessary for the plaintiff’s case.” Id. at 614.

In re Leviton Manufacturing Co., Inc. , 1S.W.3d 898 (Tex. App.–Waco 1999, orig.proceeding) presents a good summary of the shiftingburdens under Rule 507 for protection of tradesecrets:

Rule 507 of the Texas Rules of Evidence,provides that a party may refuse to disclose atrade secret owned by the person if theallowance of the privilege will not tend toc onceal fraud or otherwise work injustice.TEX.R.EVID. 507. The trade secret privilegeseeks to accommodate two competinginterests. First, it recognizes that trade secretsare an important property interest, worthy ofprotection. Second it recognizes theimportance of the fair adjudication of lawsuits.. . .

When a party resisting discoveryestablishes that the requested information i s atrade secret under Rule 507, the burden shiftsto the requesting party to establish that theinformation is necessary for a fair adjudicationof its claim or defense. . . . The trial judgeapplied In re Continental, and found, byimplication, that Leviton had established thetrade secret privilege of Rule 507. The burdenthen shifted to [plaintiff] to establish that theinformation was necessary for a fairadjudication of its claim. A showing ofrelevance alone is not adequate.

Where a requesting party meets theburden required by In re Continental and Rule507, that the information is necessary for a fairadjudication of its claim, the trial court shouldorder disclosure of the information, subject toan appropriate protective order. In eachcircumstance, the trial court must weigh thedegree of the requesting party’s need for theinformation with the potential harm ofdisclosure to the resisting party.

Id. at 902 (citations and footnote omitted).

On the merits, the court of appeals granted themandamus and ordered the trial court to vacate theorder compelling discovery of the trade secretinformation because the plaintiff’s evidence merelyestablished that the information might be relevant toits claims. The court held: “However, the crucialissue for this hearing was for [plaintiff] to establishthat continued protection of Leviton’s trade secretinformation would ‘. . . tend to conceal fraud orotherwise work injustice.’” Id. at 903 (quoting TEX.R. EVID. 507).

In the recent case of In Re Continental TireNorth America, Inc. 74 S .W.3d 884 (Tex.App.–Eastland 2002, orig. proceeding), the trial courtordered that plaintiff was entitled to have herattorney and an expert enter Continental’s plant tophotograph, videotape, and inspect the premises overContinental’s objection that this motion soughtdisclosure of trade secrets. Plaintiff contended thatgood cause existed for inspection and photographingof the premises “‘in that such information sought isreasonably calculated to lead to relate to (sic) thediscovery of evidence admissible at trial.’” Id. at886. The court of appeals granted the writ of





3

mandamus holding that plaintiff’s argument that theinformation was reasonably calculated to lead toadmissible evidence was not sufficient to meet herburden under TEX. R. EVID. 507: “However,Patterson did not indicate what facts she expects todiscover from touring Continental’s plant in NorthCarolina and how it will assist in her cause ofaction.” Continental Tire, 74 S.W.3d at 886.

In John Paul Mitchell Systems v. RandallsFood Markets, Inc., 17 S.W.3d 721 (Tex.App.–Austin 2000, pet. denied), the court of appealsconsidered the application of the trade secretprivilege under TEX .R.EVID. 507. The court heldthat in order to meet its burden of establishing tradesecret protection in connection with objection todiscovery, a party must satisfy a six-factor test setout in Restatement of Torts §757 cmt.b (1939) andrecognized in Justice Doggett’s concurring opinion inChapa v. Garcia, 848 S.W.2d 667 (Tex. 1992):

“(1) the extent to which the information isknown outside of his business; (2) the extent towhich it is known by employees and othersinvolved in his business; (3) the extent of themeasures taken by him to guard the secrecy ofthe information; (4) the value of the informationto him and his competitors; (5) the amount ofeffort or money expended by him in developingthe information; (6) the ease or difficulty withwhich the information could be properlyacquired or duplicated by others.”

John Paul Mitchell, 17 S.W.3d 738 (quotingChapa, 848 S.W.2d at 670 (Doggett, J.,concurring)).

Because the party resisting discovery satisfiedthe six-factor test, it established trade secretprotection and the burden then shifted to the partyseeking discovery to show that the information wasnecessary for a fair adjudication of its claims. Thecourt of appeals held:

Trade secrets should only be disclosed whenthe information is both “material and necessaryto the litigation and unavailable from any othersource.” Automatic Drilling Machs., Inc. v.Miller, 515 S.W.2d 256, 259 (Tex. 1974). Therequesting party must describe withparticularity how the protected information isrequired to reach conclusions in the case. See

Continental Gen. Tire, 979 S.W.2d 611(citingBridgestone/Firestone, 9 Cal. Rptr.2d at 716).The requested information must be necessary,not merely useful. See Id.

Id. at 738-39. Because the court of appeals foundthat the trial court could have determined that therewere other methods of obtaining the information, itheld that the trial court did not abuse its discretion inrefusing to compel disclosure of the information. Id.at 739.

B. Confidentiality Agreements, ProtectiveOrders, and Sealing OrdersIn the usual case, in addition to asserting the

trade secret privilege where applicable, the triallawyer will also seek protection under TEX. R. CIV.P. 192.6, which states:

To protect the movant from undue burden,unnecessary expense, harassment, annoyance, orinvasion of personal, constitutional, or property rights,the court may make any order in the interest ofjustice and may - among other things - order that:

(1) the requested discovery not be sought inwhole or in part;

(2) the extent or subject matter of thediscovery be limited;

(3) the discovery not be undertaken at thetime or place specified;

(4) the discovery be undertaken only by suchmethod or upon such terms and conditionsor at the time and place directed by thecourt;

(5) the results of the discovery be sealed orotherwise protected, subject to theprovisions of Rule 76a.

The motion for protection is easy andstraightforward. You need to be specific aboutthree things: the information or other interest thatneeds to be protected; the reason that it needs to beprotected; and the specific means by which the courtis asked to provide this protection. The movantbears the burden of persuasion, so make sure thatyou can support the reasons that you give the courtfor the relief that you are seeking.

The area that is not so simple and not generallywell-understood is the last clause of Rule 192.6which provides that orders regarding the sealing or







4

protection of discovery are “subject to the provisionsof Rule 76a.”

TEX. R. CIV. P. 76a provides:

1. Standard for Sealing Court Records.Court records may not be removed from court

files except as permitted by statute or rule. No courtorder or opinion issued in the adjudication of a casemay be sealed. Other court records, as defined inthis rule, are presumed to be open to the generalpublic and may be sealed only upon a showing of allof the following:

(a) a specific, serious and substantial interestwhich clearly outweighs:(1) this presumption of openness;(2) any probable adverse effect that

sealing will have upon the generalpublic health or safety;

(b) no less restrictive means than sealingrecords will adequately and effectivelyprotect the specific interest asserted.

2. Court Records.For purposes of this rule, court records means:

(a) all documents of any nature filed inconnection with any matter before anycivil court, except:(1) documents filed with a court in

camera, solely for the purpose ofobtaining a ruling on thediscoverability of such documents;

(2) documents in court files to whichaccess is otherwise restricted by law;

(3) documents filed in an action originallyarising under the Family Code.

(b) settlement agreements not filed of record,excluding all reference to any monetaryconsideration, that seek to restrictdisclosure of information concerningmatters that have a probable adverseeffect upon the general public health orsafety, or the administration of publicoffice, or the operation of government.

(c) discovery, not filed of record, concerningmatters that have a probable adverseeffect upon the general public health orsafety, or the administration of publicoffice, or the operation of a government,except discovery in cases originally

initiated to preserve bona fide tradesecrets or other intangible property rights.

3. Notice.Court records may be sealed only upon a

party’s written motion, which shall be open to publicinspection. The movant shall post a public notice atthe place where notices for meetings of countygovernmental bodies are required to be posted,stating: that a hearing will be held in open court on amotion to seal court records in the specific case; thatany person may intervene and be heard concerningthe sealing of court records; the specific time andplace of the hearing; the style and number of thecase; a brief but specific description of both thenature of the case and the records which are soughtto be sealed; and the identity of the movant.Immediately after posting such notice, the movantshall file a verified copy of the posted notice with theclerk of the court in which the case is pending andwith the Clerk of the Supreme Court of Texas.

4. Hearing.A hearing, open to the public, on a motion to

seal court records shall be held in open court as soonas practicable, but not less than fourteen days afterthe motion is filed and notice is posted. Any partymay participate in the hearing. Non-parties mayintervene as a matter of right for the limited purposeof participating in the proceedings, upon payment ofthe fee required for filing a plea in intervention. Thecourt may inspect records in camera whennecessary. The court may determine a motionrelating to sealing or unsealing court records inaccordance with the procedures prescribed by Rule120a.

5. Temporary Sealing Order.A temporary sealing order may issue upon

motion and notice to any parties who have answeredin the case pursuant to Rules 21 and 21a upon ashowing of compelling need from specific factsshown by affidavit or by verified petition thatimmediate and irreparable injury will result to aspecific interest of the applicant before notice can beposed and a hearing held as otherwise providedherein. The temporary order shall set the time forthe hearing required by paragraph 4 and shall directthat the movant immediately give the public noticerequired by paragraph 3. The court may modify orwithdraw any temporary order upon motion by any


5

party or intervenor, notice to the parties, and hearingconducted as soon as practicable. Issuance of atemporary order shall not reduce in any way theburden of proof of a party requesting sealing at thehearing required by paragraph 4.

6. Order on Motion to Seal Court Records.A motion relating to sealing or unsealing court

records shall be decided by written order, open tothe public, which shall state: the style and number ofthe case; the specific reasons for finding andconcluding whether the showing required byparagraph 1, has been made; the specific portions ofcourt records which are to be sealed; and the timeperiod for which the sealed portions of the courtrecords are to be sealed. The order shall not beincluded in any judgment or other order but shall bea separate document in the case; however, thefailure to comply with this requirement shall notaffect its appealability.

7. Continuing Jurisdiction.Any person may intervene as a matter of right

at any time before or after judgment to seal orunseal court records. A court that issues a sealingorder retains continuing jurisdiction to enforce, alter,or vacate that order. An order sealing or unsealingcourt records shall not be reconsidered on motion ofany party or intervenor who had actual notice of thehearing preceding issuance of the order, without firstshowing changed circumstances materially affectingthe order. Such circumstances need not be relatedto the case in which the order was issued.However, the burden of making the showingrequired by paragraph 1, shall always be on the partyseeking to seal records.

8. Appeal.Any order (or portion of an order or judgment)

relating to sealing or unsealing court records shall bedeemed to be severed from the case and a finaljudgment which may be appealed by any party orintervenor who participated in the hearing precedingissuance of such order. The appellate court mayabate the appeal and order the trial court to directthat further public notice be given, or to hold furtherhearings, or to make additional findings.

9. Application.Access to documents in court files not defined

as court records by this rule remains governed by

existing law. This rule does not apply to any courtrecords sealed in an action in which a final judgmenthas been entered before its effective date. This ruleapplies to cases already pending on its effective dateonly with regard to:

(a) all court records filed or exchanged afterthe effective date;

(b) any motion to alter or vacate an orderrestricting access to court records, issuedbefore the effective date.

Because Rule 76a is involved in the discoveryprocess by the reference in Rule 192.6, it isimportant to understand the interplay between thetwo rules. Several cases provide instructiveinformation and guidance.

In General Tire, Inc. v. Kepple, 970 S .W.2d520 (Tex. 1998), a product liability action, the trialcourt had issued a protective order that restricted thedissemination of trade secrets and other confidentialinformation designated as such by the defendant.Several months after the protective order wasissued, the court on its own initiative stated that anyorder limiting dissemination of the documents mustcomply with TEX. R. CIV .P. 76a and indicated thatit would vacate the protective order. Defendantfiled a motion for protective order and alternativetemporary sealing order. Before this motion couldbe ruled upon, the lawsuit was settled. Thereafter,plaintiff’s attorney sought relief from the interimprotective order contending that the documentaffected public safety and therefore should be madepublic. At a hearing, the court determined that thedocuments were court records and based onevidence at the hearing in an in-camera review ofthe documents, determined that the defendant hadnot met its burden for sealing the documents andordered that they be made public with certainredactions. The court of appeals affirmed this orderGeneral Tire, Inc. v. Kepple, 917 S.W.2d 444(Tex. App.–Houston [14th Dist.] 1996), rev’d, 970S.W.2d 520 (Tex. 1998).

The Texas Supreme Court held first that underits express language, Rule 166b(5)(c), the precursorto current Rule 192.6, expressly made anyprotective order subject to the requirements of Rule176a, thus leaving “no leeway for interpretation.”General Tire, 970 S.W.2d at 524. The supremecourt found however that the rules did notspecifically set forth a standard by which the trial








6

court should be guided in making the thresholddetermination of whether particular unfiled discoveryis a court record under Rule 76a. The supremecourt held that the trial court erred in using the “fullrange of Rule 76a procedures” in making thisthreshold determination, i.e. requiring the posting ofpublic notice and allowing any party to intervenewith regard to the determination of whether theunfiled discovery constituted a court record. Thesupreme court held the “special procedures of Rule76a” applied only to the sealing of court records, andnot to the threshold determination of whetherparticular unfiled discovery is a court record subjectto the rule. The court held that applying the Rule76a procedures would unduly burden trial courts andlitigants by requiring an elaborate, expensive processfor this determination. The court noted however thatthe interest of the public in obtaining information alsohad to be considered but found that the provisions ofRule 76a(8) which allowed for immediate appeal ofany order relating to the sealing or unsealing of courtrecords did apply to this threshold determination.However, the supreme court held that third partiesshould not be allowed immediate access to therecords until a determination has been made thatthey are court records that cannot be sealed.

The supreme court stated the rule as follows:

In summary, we hold that when a partyseeks a protective order under Rule 166b(5)(c)to restrict the dissemination of unfileddiscovery, and no party or intervenor contendsthat the discovery is a “court record,” a trialcourt need not conduct a hearing or render anyfindings on that issue. If a party or intervenoropposing a protective order claims that thediscovery is a “court record,” the court mustmake a threshold determination on that issue.However public notice and a Rule 76a hearingare mandated only if a court finds that thedocuments are court records. While a trialcourt is not required to determine whetherunfiled discovery constitutes a court record untilrequested to do so by a party or intervenor, thecourt may raise this issue on its own motion.However, as previously discussed, a trial courtmay not apply the special procedures of Rule76a (except for intervention) until it determinesif the documents are court records. The districtcourt in this case erred in applying the full

range of Rule 76a procedures to the threshold“court records” determination.

Id. at 525.

The court then considered the applicablestandard of review for Rule 76a determinations.Noting that an abuse of discretion standard wasapplied to a trial court’s discovery rulings, includingrulings on protective orders, the court held that whilea sealing order under Rule 76a is governed bystricter standards, it is akin to a protective order inthat it requires the court to make a determinationregarding the proper restriction of information andthe abuse of discretion standard is thereforeapplicable to Rule 76a decisions as well. Id. at 526.

On the merits, the court first disposed of aprocedural question holding that the submission ofthe document for in camera review by the trial courtdid not mean that these documents have been “filed”and therefore become “court records.” Id. Thesupreme court considered the documents in questionin two categories in determining whether thesedocuments were “discovery, not filed of record,concerning matters that have a probable adverseeffect upon the general public health or safety, or theadministration of public office, or the operation ofgovernment.” TEX. R . CIV. P. 76a(2)(c). Withregard to the first category of documents whichrelated to design specifications, testing, andmiscellaneous documents, the supreme court heldthat a party

cannot demonstrate that a manufacturer’sproprietary design, researc h, and testingrecords have a probable adverse effect on thepublic health and safety, as Rule 76a requiresbefore documents are “court records,” merelyby producing evidence of a defect in themanufacturer’s products. Rather, the partymust, at a minimum, demonstrate some nexusbetween the alleged defect and the documentsat issue.

General Tire, 970 S.W.2d at 577. The court heldthat because the plaintiff failed to demonstrate thisconnection, the district court abused its discretion infinding these documents to be court records underRule 76a(2)(c). Id. With regard to the secondcategory of documents, which dealt with returnsunder a warranty program, the court also held that



7

plaintiff had failed to meet its burden of showing thatthese data could adversely affect public health andsafety, even though there was some evidence thatthese records had not been provided to the NationalHighway Traffic Safety Administration during a1993 investigation of tire safety. Id. at 528.

The Texas Supreme Court’s opinion in In reThe Dallas Morning News, Inc., 10 S.W.3d 298(Tex. 1999), is interesting because it profiles aproblem that may arise frequently in the future, butdoes not provide any real answers. This situationshould be of particular interest to lawyers that handleenvironmental cases. In the underlying case, theparties had executed and filed with the courtpursuant to Rule 11 a confidentiality agreementunder which the plaintiff agreed not to disclosedocuments designated by defendant as confidential.The case was then settled. Several months later,and after the trial court’s plenary jurisdiction hadexpired, the Dallas Morning News intervened in thecase under Rule 76a and moved for access todocuments produced in the lawsuit, including someof the unfiled discovery that was the subject of theRule 11 agreement. The trial court held a hearingand concluded that despite the fact that it had notentered a sealing order, it had continuing jurisdictionunder Rule 76a(7) to determine whether documentswere “court records.” Defendant filed a petition formandamus in the court of appeals and a notice ofappeal. The court of appeals held that the filing ofa motion seeking access to the documents governedby the Rule 11 agreement did not give the districtcourt jurisdiction under Rule 76a and thereforedirected the district court to vacate its order settinga hearing on the Rule 76a motion and to take nofurther action on the motion.

In a per curiam opinion, the Texas SupremeCourt held that the court of appeals should not havegranted mandamus relief and ordered the court ofappeals to withdraw its order and deny the petitionfor mandamus. However, the supreme court’s percuriam opinion was accompanied by threeconcurring opinions. In the first concurring opinion,Justice Abbott, joined by Justices Enoch, Hankinson,and O’Neill, expressed the view that the courtshould consider whether the trial court hadjurisdiction to set and conduct the hearing, eventhough its order was issued after the final judgmentand after the expiration of its plenary power. JusticeAbbott indicated that he would hold that Rule 76a(7)

provides trial courts with continuing jurisdiction overan intervenor’s attempt to gain or prevent access tocourt records at any time after judgment and that acourt necessarily has jurisdiction to determinewhether unfiled discovery made confidential by Rule11 agreements constituted court records.

Justice Gonzalez, joined by Chief Justice Phillipsand Justices Hecht and Owen, was of the view thatthe real party in interest had an adequate remedy byappeal and mandamus was therefore inappropriate.Justice Gonzalez, however, was also of the opinionthat the appeal was not ripe until the trial courtissued an order granting or denying the relief that theDallas Morning News had requested under Rule76a.

In his concurrence, Justice Baker alsoexpressed the view that mandamus relief wasinappropriate because of the availability of theappeal, but indicated that he would hold that Rule76a(8) was broad enough to permit an immediateappeal from any type of order relating to Rule 76a.

Compaq Computer Corp. v. Lapray, 75S.W.3d 669 (Tex. App.–Beaumont 2002, no pet.),involved the conflict between discovery agreementsand Rule 76a. This was an action against Compaqalleging that a defect in the storage ability of thecomputers caused damage. The case was originallyfiled in federal court, but was dismissed for want ofjurisdiction. Plaintiff filed suit in state court and thetrial court entered a protective order regarding thehandling of protected information during the pre-trialphase of the case and an agreed order incorporatingan agreed discovery control plan. The protectiveorder required that protected information, whichincluded confidential documents, discoveryresponses, or depositions, be filed with a motion fora temporary sealing order under Rule 76a(5). Thediscovery control order provided that discovery inthe federal case would be treated as if it hadoccurred in the state action, subject to the discoverycontrol order, the protective order, and applicableTexas rules.

The plaintiffs moved for class certification andfiled a Rule 76a(5) motion for temporary sealingorder requesting that their motion for classcertification and supporting exhibits be temporarilysealed, because they included information thatCompaq claimed was confidential. Public noticewas posted and the trial court granted a sealingrequest and set a hearing. Compaq responded witha request that in their motion for class certification,





8

plaintiffs be required to cite to specific pages ofdocuments and that they attach only those pages,and file under seal only those confidential documentson which they relied, rather than all confidentialdocuments attached to any document upon whichthey relied. The trial court denied this request andcommenced the Rule 76a hearing.

Compaq appealed, contending that the trialcourt abused its discretion by refusing to adjudicateCompaq’s challenge to the discoverability of thedocuments before it conducted the 76a hearing.Compaq contended that the trial court abused itsdiscretion by failing to conduct discovery inaccordance with the discovery agreement betweenthe parties. The court of appeals affirmed the order,noting that the protective order itself provided thatdocuments were to be filed with the request for atemporary sealing order under Rule 76a(5), and that“all activities thereafter with respect to said motionshall comply with Rule 76a.” The court of appealsnoted that Rule 76 contains no requirement that thetrial court determine the discoverability of courtrecords prior to determining whether to seal orunseal those records, except in the situation providedfor by Rule 76a(2)(a)(1) in which documents filed incamera for the purpose of obtaining a ruling on thediscoverability of such documents, in which case theissue of discoverability must be decided before thedocuments become court records. The court heldthat the documents in question were court recordsand that was, therefore, a conflict betweenprovisions of the discovery plan and a protectiveorder, but noted that the discovery plan itselfprovided that discovery in the state case would begoverned by the protective order. On that basis thecourt held that the trial court did not err in followingthe provisions of the protective order rather thanthose of the discovery plan.

Compaq also contended that the trial courtabused its discretion in not determining whether thedocuments were “court records” under Rule 76abefore conducting the hearing regarding whether thedocuments should be sealed. The court of appealsnoted that Rule 76(2)(c) provides that unfileddiscovery becomes a court record only if thedocuments contain matters having a “‘probableadverse effect upon the general public health orsafety, or the administration of public office, or theoperation of government.’” Id. at 673 (quoting TEX.R. CIV. P. 76a(2)(c)). The rule then requires that thetrial court determine the “probable adverse effect”

issue regarding the questioned documents and thusdetermine whether the documents are court records.However, the rule requires no such determination ina case or filed documents, but provides simply that“documents of any nature” are court records if theyare filed in the matter before a civil court and arenot accepted by another provision of the rule.

The court also held that the trial court did notabuse its discretion in finding that many documentssubmitted by plaintiffs had no connection with theissues on class certification and thus were not courtrecords. The court of appeals held that Rule76a(2)(a) provided support for the trial court’s rulingand thus it did not abuse its discretion. Finally, thecourt of appeals held that Compaq had failed to meetits burden under Rule 76a(1) of showing that itsinterest in protecting its trade secrets clearlyoutweighed any presumption of openness. The courtnoted:

Rule 76a(1), (7) mandates that Compaq,the party seeking to seal records, had theburden to show both that (a) it had a “specific,serious and substantial interest” clearlyoutweighing (1) the presumption of opennessafforded by the rule of court records, as well as(2) any probable adverse effect that sealingwould have on the general public health orsafety and that (b) there was no less restrictedmeans other than sealing the records that wouldadequately and effectively protect its specific,asserted interest.

Id. at 674.

The court of appeals characterized Compaq’sargument as “if it’s a trade secret, it must be sealedas a matter of law.” Relying in part on In reContinental General Tire, Inc. 979 S.W.2d 609(Tex. 1998), the court of appeals held that Compaqwas required to make a showing of “no lessrestricted means” of protecting its interest.

In re Temple-Inland, Inc., 8 S.W.3d 459(Tex.App.–Beaumont 2000, orig. proceeding), isinstructive on the scope of the interests that may besubject to protection under Rule 192.6. In this case,defendant sought a protective order under TEX . R.CIV. P. 192.6 regarding certain documents, which itproduced for in-camera inspection by the trial court.The trial court ordered certain of the documents tobe produced, and ordered that others not be




9

produced because of the attorney-client privilege.The court of appeals held that the documents thatthe trial court ordered to be produced were not tradesecrets and not protected by any privilege.However, the court noted that the documents, whichincluded a list of individuals who were barred fromcertain premises and the reasons for such barpresented an additional issue under Rule 192.6. Thecourt of appeals stated:

While we are in full agreement with thetrial court as to the discoverability of thedocuments ordered produced, we cannot agreethat, at this point in the litigation, saiddocuments . . . may be used by the plaintiffs forany purpose they see fit. Rule 192.6 clearlyprovides the opportunity to “any other personaffected by the discovery request” to requestthat the trial court protect said affected personfrom “harassment” “annoyance” or “invasion”of a variety of rights including, we believe, aright to complete privacy. The trial court’sorder as it currently stands ignores what wefind to be a compelling public interestmanifested in the language contained in Rule192.6 vis a vis unwitting third partie s . Webelieve a discovery order affecting the privacyinterests of persons who do not have notice ofthe litigation, while providing plaintiffs with thedocuments previously ordered, must alsoinclude protective language, e.g.:(1) The documents in question be provided in

sealed envelopes marked confidential.(2) Only the counsel of parties to the instant

lawsuit may have access to the documentsin question.

(3) The information contained in thedocuments in question shall not be sharedwith or disclosed to any other person,either directly or indirectly, unlessotherwise ordered by the trial court.

(4) No party, their agents or representatives,shall directly or indirectly contact anynamed individual nor undertake furtherdiscovery regarding such namedindividuals until permitted to do so byfurther order of the trial court.

(5) The produced documents in question shallbe returned to the producing party afterfinal disposition of the instant lawsuit.

Id. at 463.

Accordingly, the court of appeals held that thetrial court abused its discretion and directed the trialcourt to modify the order in accordance with theopinion.

An unfortunate, but not uncommon, set of factswas presented in In re Marketing Investors Corp.,1998 WL 909 895 (Tex. App.–Dallas Dec. 31,1998,orig. proceeding). There, an officer of relatorexecuted a confidentiality agreement regarding tradesecrets, and proprietary and confidential information.When the individual was terminated, he removedcertain documents that were allegedly covered byhis confidentiality agreement. The corporation filedsuit against the former officer for fraud, breach offiduciary duty, and other torts, and learned duringdiscovery that he had possession of the documentsin question. The parties then entered into an agreedprotective order to maintain the confidentiality ofproperly obtained discovery. The corporation thenrequested that the individual return the documentsand agree not to use them. The individual returnedthe originals, but kept copies. The corporation thenfiled a motion to stay and sealed the documents.The trial court granted a stay pending determinationof the protective order, but denied the motion to seal.The corporation then sought a protective orderrequesting return of the documents, sanctions, anddisqualification of the individual’s counsel. The trialcourt denied the motion for protective order and thecorporation sought a writ of mandamus. The courtof appeals held that the non-disclosure covenant wasvalid and applied to the documents in question. Thecourt of appeals held first that the individual couldnot justify his possession of the document under theagreed protective order, because the fact that he hadabsconded with the documents meant that thecorporation had had no opportunity to assert anyprivilege or lodge any objection to the production ofthe documents due to the manner in which theywere taken. The court held that the protective orderdid not make his possession of the documents properor constitute a waiver of the corporation’s right toconfidentiality or privilege. The court of appealsconcluded that the trial court abused its discretion innot ordering return of the copies of the documents,and not barring the individual from use of thedocuments, and in not disqualifying his counselbecause of his conduct in the case relating todocuments. Id. at 909 895 *5.


10

In Upjohn Corp. v. Freeman, 906 S.W.2d 92(Tex. App.–Dallas 1995, no writ), the court ofappeals confronted the conflic t between the tradesecrets protection provided by the rules and thedisclosure requirements of Rule 76a. There, plaintiffsued Upjohn for injuries resulting from his use of asleeping pill. The defendant asked the trial court tolimit disclosure of documents under Rule 76a andposted the public notices required by Rule 76a(3).The Dallas Morning News, Inc. and Public Citizenintervened. After a hearing, the trial court grantedin part and denied in part Upjohn’s request for asealing order. The court sealed the portion of thediscovery documents containing protocols for testingand analyzing the drug in question based upon afinding that these protocols constituted trade secrets.The trial court did not seal the remaining documents,and Upjohn appealed. The court of appeals’ opinionsets out a good summary of Rule 76a:

Rule 76a (1) provides that “court records. . . are presumed to be open to the generalpublic.” TEX. R. Civ. P. 76a(1). “Courtrecords” include “discovery, not filed of record,concerning matters that have a probableadverse effect upon the general public health orsafety . . . except discovery in cases originallyinitiated to preserve bona fide trade secrets orother intangible property rights.” TEX. R. CIV.P. 76a(2)(c).

The trial court may not presume a document orparticular group of documents are court records if aparty in a Rule 76a motion contests whether thediscovery in question constitutes court records asdefined in the rule. . . . When the issue is raised, thetrial court must determine whether a specificdocument or category of documents are courtrecords. If the character of the discoverydocuments is disputed, it is the burden of the partyclaiming the documents are open to the public toprove by a preponderance of the evidence that thedocuments are court records as defined by Rule 76a.. . .

If the trial court finds that the documents arecourt records, the documents are presumed to beopen to the general public. The party moving for thesealing order then has the burden to rebut thepresumption and order to seal the records. TEX. R.CIV. P. 76a(1). . . . A party may rebut thepresumption of openness by proving the following:

(a) a specific, serious and substantial interestwhich clearly outweighs:(1) this presumption of openness;(2) any probable adverse effect that

sealing will have upon the generalpublic health or safety;

(b) no less restrictive means than sealingrecords will adequately and effectivelyprotect the specific interest asserted.TEX. R. CIV. P. 76a(1) (a), (b). The partyseeking to seal the court records mustprove the elements of Rule 76 by apreponderance of the evidence.

Id. at 95-96 (citation omitted).

The court then noted: “A properly proven tradesecret interest may constitute a specific, serious, andsubstantial interest which would justify restrictingaccess to the documents in question.” Id. It isinteresting to note that although Upjohn offered totend to the documents for in-camera inspection, itappears that neither the trial court nor the court ofappeals inspected all of the documents. The court ofappeals stated however that an in-camerainspection of the documents is not required sinceRule 76 provides that the trial court may inspectrecords in-camera or may base its decision onpleadings, stipulations, affidavits, discovery requests,and oral testimony.

The documents were clinical studies, internalmemoranda, adverse reaction reports, and analysesand miscellaneous documents includingcorrespondence all of which dealt with the drugHalcion. The court of appeals reviewed theevidence regarding whether the documents concernmatters that had a probable adverse effect uponpublic health or safety and found that the trial courtdid not abuse its discretion in determining that thedocuments should be unsealed. The opinion containsa good discussion of the manner in which a trialcourt should weigh the evidence and the factors thatshould be considered in determining whether unfileddiscovery is a court record.

Eli Lilly & Co. v. Biffle, 868 S.W.2d 806 (Tex.App.–Dallas 1993, no writ), was an appeal from atrial court’s order denying a manufacture’s motion toseal certain documents under Rule 76a in a productliability issue relating to the use of Prozac. Indiscovery, the manufacturer objected to productionof documents regarding Prozac and the plaintiff filed




11

a motion to compel. The manufacturer then filed amotion for protec tive order and an order sealingcertain documents pursuant to Rules 166b and 76aalleged to contain trade secrets relating to Prozac.Because of a dispute as to whether Rule 76a appliedto trade secrets, the trial court declined to considerthe request to seal the documents under Rule 76.However, the trial court ordered production of mostof the documents and denied the manufacturer’srequest for a protective order under Rule 166brestricting public dissemination of the documents itwas ordered to produce. After a mandamus inwhich the supreme court ordered the trial court toconduct a hearing, Eli Lilly & Co. v. Marshall, 829S.W.2d 157 (Tex. 1992) (orig. proceeding) (percuriam), the trial court held a hearing and denied themanufacturer’s motion for an order to seal thedocuments under Rule 76a. At the hearing, the trialcourt apparently stated that it presumed thedocuments were “open” to the public and told themanufacturer that the burden was on it to goforward. The court of appeals held that the trialcourt erred in presuming that unfiled discoveryconstituted a court record,

Rule 76a does not contain a presumptionthat discovery documents not filed with the trialcourt are court records. The rule provides onlythat court records are presumed to be open tothe general public. Under rule 76a, discoverynot filed with the trial court is open to the publiconly if it is a court record as defined by therule. A trial court may not presume a particulardocument or group of documents are courtrecords if the party in a rule 76a motion raisesthe issue of whether the discovery in questionconstitutes court records as defined in the rule.When the issue is raised, the trial court mustmake a factual determination of whether aspecific document or category of documentsconstitutes court records.

The burden to prove that all or some of thediscovery documents sought to be sealed are“court records” properly rests on the partyurging that the documents should receive thebenefit of the presumption of opennessdescribed in rule 76a. In effect, the burden ofproof rests with the party opposing the motionto seal because it is that party who contendsthe discovery is open to the general public. If

the character of the discovery documents thatare the subject of the motion to seal is disputed,we hold it the burden of the party asserting thatthe documents are open to the public to proveby a preponderance of the evidence that thedocuments are court records as defined by rule76a. . . .

Because only court records are presumedopen to the general public, we conclude that thetrial court, by presuming the discoverydocuments in question were “open,” necessarilypresumed the documents were court records.As we have already determined, rule 76a doesnot permit the trial court to make such apresumption if the character of the documentsis placed in issue. The trial court mustdetermine whether the documents are courtrecords based upon evidence presented, whichmay inescapably include the documentsthemselves submitted in-camera for the trialcourt’s examination.

By presuming the documents in questionwere court records, the trial court allocated to[the manufacturer] the burden of proving thedocuments were not court records. No suchburden exists. Because the burden of proof onthe issue of whether the documents are courtrecords rests with the party contending thedocuments are court records, [themanufacturer was] entitled to have the trialcourt determine whether [plaintiffs’] evidenceshowed the documents were court records asdefined by rule 76a (2)(c). [The manufacturerwas] not obligated and should not have beenrequired to present evidence on this issue. If[plaintiffs] did not discharge their burden ofproof, the documents in question would not besubject to being sealed and [themanufacturer’s] rule 76a motion would becomemoot.

Id. at 808-09.

III. STATUTE OF FRAUDSIn oil and gas transactions, the issue of

confidentiality often arises in connection with avoluntary disclosure of otherwise confidentialinformation to a competitor, usually as aninducement to a proposed transaction. Several




12

unique issues arise in connection with confidentialityagreements executed under these circumstances.The first problem is the definition or description ofthe area to which the confidentiality agreementapplies. Often these agreements are prepared bylandmen or other operating personnel. They oftenuse a form confidentiality agreement and-at best-merely attach a map, diagram, or generic list ofproperties or leases. The difficulty for the lawyerarises when he or she is asked to enforce such anagreement. If the remedy provided by theagreement is a right of the disclosing party to receivea transfer of any leases or other interests acquiredby the other party in violation of the agreement, aquestion that may arise is whether the agreementcomplies with the statute of frauds.1

The statute of frauds, codified in Texas as TEX.Bus. & COMM. CODE §26.01 (Vernon 2002),provides that certain types of agreements must be inwriting to be enforceable. Among these are “acontract for the sale of real estate.” Id. at§26.01(a)(4). It is well-established that anagreement to assign an interest in an oil and gasleasehold estate “is subject to the statute of fraudsas set out in section 26.01 of the Texas Business &Commerce Code.” Westland Oil Dev. Corp. v.Gulf Oil Corp., 637 S.W.2d 903, 905 (Tex. 1982).A contract regarding the acquisition of oil and gasleases in the future within an area of mutual interest“is in the nature of a contract to convey interests inoil and gas leases.” Id. at 908.

In Westland Oil Development Corp. v. GulfOil Corp., a contract that described the area ofmutual interest as “any of the lands covered by saidfarmout agreement, or any additional interest fromMobil Oil Corporation under lands in the area of thefarmout acreage” was not sufficient. The courtrejected the plaintiff’s argument that ‘the area’meant the area of the production reservoir inquestion, holding that to do so would be animpermissible inference. Id.; see also Swinehart v.Stubbeman, McRae, Sealy, Laughlin & Browder,

Inc., 48 S.W.3d 865, 875 (Tex. App.–Houston [14thDist.] 2001, pet denied) (contract requiring oilcompany to assign to geologist percentage of anyprospect that was subsequently leased lackedspecific property description and was thusunenforceable under statute of frauds).

To comply with the statute of frauds, thewritten agreement “must furnish within itself, or byreference to some other existing writing, the meansor date by which the particular land to be conveyedmay be identified with reasonable certainty.”Morrow v. Shotwell, 477 S.W.2d 538, 539 (Tex.1972). The property description in Morrow v.Shotwell, was held to be insufficient as a matter oflaw because “there are no means or data in thedescription to tell a surveyor on what courses or forwhat distances he will run after intersecting the westboundary of highway no. 277.” Id. at 540.

Similarly in Reagan v. Kmiec, 551 S.W.2d 525,528 (Tex. Civ. App.–Waco), aff’d in part andrev’d in part on other grounds, 556 S.W.2d 567(Tex. 1977), the court of appeals held that a “tract ofapproximately seven (7) acres lying adjacent to saidCounty Road between Steel’s Creek and the westboundary line of Section Number 32 of said Grant”did not comply with the statute of frauds because“we have no beginning point, no courses or distancesby which to fix the location of said tract,” noting that“[d]escriptions without boundary lines, beginningpoints, or other means by which the acreage can belocated have often been held to be insufficient tomeet the Statute of Frauds.” Id. at 529-30 (citationsomitted).

In U.S. Enterprises, Inc. v. Dauley, 535S.W.2d 623 (Tex. 1976), the supreme court held that“[a]n attached map becomes a part of the writtencontract and can aid a defective written descriptionif the map contains enough necessary descriptiveinformation. . . . Whether a map is helpful inremedying descriptive defects of the contractdepends on whether the missing details are shownon the map.” Id. at 628 (citations omitted); see alsoSabine Inv. Co of Tex., Inc. v. Stratton, 549S.W.2d 247, 250 (Tex. Civ. App.–Beaumont 1977,no writ) (contract for conveyance of lot invalidbecause “no valid legal description could be arrivedat by using the contract and plat together. . . . [T]hecourses as well as the distances would [also] beneeded.”).

1 Non-disclosure covenants are generally notconsidered to be restraints on trade, and are therefore notsubject to the same restrictions on enforcement that areencountered with a covenant not to compete. CRC-EvansPipeline Int’l, Inc. v. Myers, 927 S.W.2d 259, 265 (Tex.App.–Houston [1st Dist.] 1996, no writ); see Zep Mfg. Co.v. Harthcock , 824 S.W.2d 654, 663 (Tex. App.–Dallas 1992,no writ).













13

The use of extrinsic evidence to supply thenecessary certainty to a property description isstrictly limited:

“The certainty of the contract may be aided byparol only with certain limitations. Theessential elements may never by supplied byparol. The detail which merely explain orclarify the essential terms appearing in theinstrument may ordinarily be shown by parol.But the parol must not constitute theframework or skeleton of the agreement. Thatmust be contained in the writing. Thus, resortto extrinsic evidence, where proper at all, is notfor the purpose of supplying the location ordescription of the land, but only for the purposeof identifying it with reasonable certainty fromthe data in the memorandum.”

Morrow, 477 S.W.2d at 541(quoting O’Herin v.Neal, 56 S.W.2d 1105 (Tex. Civ. App.–Texarkana1932, writ ref’d)) (emphasis omitted). Thus, the factthat a surveyor might be able, after a search ofabstract records and with direction from the owneror an attorney, to locate and survey the propertydoes not cure the defective description. Texas lawrequires that the surveyor be able to identify the land“with reasonable certainty from the data in thememorandum.” Id. at 541 (emphasis added).However, a surveyor may not resort to extrinsicevidence such as leases or deeds to locate the land.Id. at 540.

Also, the description is not saved by the factthat the parties may have known exactly whatproperty the agreement was intended to cover.“The record leaves little doubt that the parties knewand understood what property was intended to beconveyed. . . . However, the knowledge and intentof the parties will not give validity to the contract, .. . and neither will a plat made from extrinsicevidence.” Id. at 540. In Phillips v. Burns, 252S.W.2d 927, 928 (Tex. 1952), the land wasdescribed as “‘[o]ne certain farm located about 6miles south of [town] . . . and known as the oldWhipple Place, together with several tracts of landadjoining it; amounting in all to about 500 acres, nowowned by the lessor herein.’” The court ruled thatthe inclusion of the phrase “several tracts adjoiningit” made the instrument uncertain, indefinite, andunenforceable under the statute of frauds. The

court reasoned: “How many of the additional tractsare there? What is the acreage of each of them?Where do they adjoin the old Whipple place?” Id.The court further held that it could not hold thedescription valid as to only the old Whipple Place,disregarding the several tracts of land adjoining it, as“[t]hat would be writing a new lease or contract forthe parties.” Id.

When a description of the real property coveredby a confidentiality agreement is inadequate, theagreement is unenforceable, and the disclosing partymay neither enforce it by specific performance norrecover damages for its breach. Wilson v. Fisher,188 S.W.2d 150 (Tex. 1945).

IV. REMEDIES

A. InjunctionInjunctive relief is available and is commonly

sought in cases involving the misuse of confidentialinformation or trade secrets. Luccous v. J.C.Kinley Co., 376 S.W.2d 336 (Tex. 1964); DailyInt’l Sales Corp . v. Eastman Whipstock, Inc., 662S.W.2d 60 (Tex. App.– Houston [1st Dist.] 1983, nowrit). Injunctive relief is proper to prevent a party,which has appropriated another's trade secrets, fromgaining an unfair market advantage. Oftentimes theonly effective relief available is to restrain the use ofalleged trade secrets and confidential informationpending trial, particularly where the loss of good willwould be immeasurable and the potential damage tothe applicant's business cannot be readily calculatedand the legal remedy of damages is thereforeinadequate. T-N-T Motorsports, Inc. v. HennesseyMotorsports, Inc., 965 S.W.2d 18, 24 (Tex. App.–Houston [1st Dist.] 1998, pet. dism’d).

The rules applicable to a temporary injunctionare well-established. At the preliminary hearing, theapplicant is not required to prove it will prevail atfinal trial. Sun Oil Co. v. Whitaker, 424 S.W.2d216, 218 (Tex. 1968). To be entitled to a temporaryinjunction, an applicant must plead a cause of action,show a probable right to recover on that cause ofaction, and show a probable injury in the interim. Id.at 218; Manufacturers’ Hanover Trust Co. v.Kingston Investors Corp., 819 S.W.2d 607, 610(Tex. App.– Houston [1st Dist.] 1991, no writ). Theapplicant also must show that no adequate legalremedy exists. Manufacturers’ Hanover, 819S.W.2d at 610. A probable right of success on themerits is shown by alleging a cause of action and
















14

presenting evidence that tends to sustain it. MillerPaper Co. v. Roberts Paper Co., 901 S.W.2d 593,597 (Tex. App.– Amarillo 1995, no writ). Probableinjury includes elements of imminent harm,irreparable injury, and no adequate remedy at lawfor damages. Surko Enters., Inc. v. Borg-WarnerAcceptance Corp., 782 S.W.2d 223, 225 (Tex.App.–Houston [1st Dist.] 1989, no writ). A legalremedy is inadequate if damages are difficult tocalculate or the award of damages may be untimely.Miller Paper, 901 S.W.2d at 597.

B. Measure of DamagesThe measure of damages in an action for

misuse of confidential information is well-establishedin Texas. In Chandler v. Mastercraft DentalCorp. of Texas, Inc., 739 S.W.2d 460 (Tex.App.–Fort Worth 1987, writ denied), an action forbreach of a covenant not to compete in the sale of abusiness, the jury found that the covenant not tocompete had been violated and the court entered apermanent injunction and awarded damages. Thespecial issues submitted to the jury asked the jury tofind the amount of damages sustained as a result ofthe breach of contract, and instructed the jury toconsider loss of profits, profits made by thebreaching party to the extent not included in lostprofits, and the normal increase in business whichmight have been expected in light of pastdevelopments and existing conditions. The court ofappeals affirmed, holding that this was a propersubmission of lost profits in connection with thebreach of a covenant not to compete pursuant to thesale of the business. Id. at 466. The court ofappeals also affirmed the jury finding as to the fairmarket value of the converted trade secrets, holding:“The proper measure of damages for conversion isthe value of the value of the property at the time andplace of conversion.” Id. at 469 (citing Pruitt v.Branham, 643 S.W.2d 122, 123 (Tex. 1982)).

Sikes v. McGraw-Edison Co., 665 F.2d 731(5th Cir. 1982), was an action by an engineer and“tinkerer” for damages for misappropriation of tradesecrets concerning a device he invented anddemonstrated to McGraw-Edison pursuant to aconfidentiality agreement. McGraw-Edisonultimately decided not to purchase the device, andshortly thereafter began to market its own. The juryawarded Sikes $900,000 in actual damages. Onappeal, the Fifth Circuit held that the district properlyinstructed the jury “to compensate Mr. Sikes in that

amount shown by a preponderance of the evidenceto represent his ‘actual damages, if any, caused bythe Defendant’s infringement and the amount ofmoney by which the Defendant was unjustlyenriched, if any, as a consequence of Defendant’sinfringement.’” Id. at 736. The Fifth Circuitreasoned that the instruction properly caused the juryto award the actual losses suffered by the plaintiffand a reasonable amount as compensation for theunauthorized use of his device. Id. at 737. TheFifth Circuit also held that the district court did noterr in not limiting the damage award to the two-yearconfidentiality period specified in the agreement,because McGraw-Edison had not complied with theagreement and the question of what compensationwould have been provided to Mr. Sikes had anagreement been reached was speculative. Id. Finally, the court found that the amount of the awardwas reasonable in that it was based upon a royaltysimilar to that proposed by Mr. Sikes with whichMcGraw-Edison did not disagree, and was supportedby expert testimony.

Elcor Chemical Corp. v. Agri-Sul, Inc. , 494S.W.2d 204 (Tex. Civ. App.–Dallas 1973, writ ref’d,n.r.e.), was an action by Elcor Chemical againstformer employees for an injunction against use ordisclosure of confidential information and tradesecrets relating to a chemical manufacturing processand for damages. The trial court granted apermanent injunction and awarded damages.Although the court of appeals reversed the award ofdamages because of the absence of evidence, itagreed with Elcor’s assertion that reasonable royaltyon sales of the product resulting from the breach ofconfidence, the cost of research and development tothe owner of the trade secret, the profits lost by theowner from being deprived of the trade secrets, andthe profits obtained by the breaching party at theexpense of the owner were all proper elements ofdamage in a case involving the wrongful use of thetrade secret. Id. at 214.

In the oil and gas field, the confidentialinformation that finds itself the subject of litigationusually relates to the location of what someonethinks is a promising play and the subject of thedamage award is often a lease that someone hastaken by allegedly using confidential information.Given the fluctuation in energy prices and leasecosts, not to mention the possibility of a dry hole, thecase of Whiteside v. Trentman, 141 Tex. 46, 170S.W.2d 195 (1943), illustrates an interesting aspect






http://www.TexasBarCLE.com/CLE/PMCasemaker.asp?table=US_5thcircuit&volume=665&edition=F.2d&page=731&id=70750_01






15

of the problem of defining the proper method ofdamages. In Whiteside v. Trentman, the owner ofa number of oil and gas leases farmed out a few ofthe leases to defendant, who agreed to drill two testwells at specified locations. Defendant drilled thefirst well, which was a dry hole, and refused to drilla second well. Whiteside, the plaintiff, contendedthat his retained leases would have increased invalue during the time the second well was beingdrilled and the jury found that he lost an increasedmarket value of the retained acreage in the amountof approximately $1,400. The jury also found thatthe second well would have been a dry hole. Thetrial court entered a judgment for Whiteside. Thecourt of civil appeals reversed and the case wasappealed to the supreme court, which stated thefollowing description of the question presented forreview:

Does the amount which the retained leaseswould have increased in market value duringthe process of drilling the second well, hadsame been drilled, measure the damage thesame by Whiteside? The Court of CivilAppeals held that it did not and we are of theopinion that this holding is correct. The onlydamage which Whiteside suffered, if any, wasfrom loss of profits.

Id. at 196.

The court then quoted from the court of civilappeals’ opinion: “It is obvious, under the jury findingthat such well would have been a dry hole, that afterthe completion of such well had it been drilled,plaintiff’s retained leases would have had less valuethan before.” Id.

The supreme court stated that the plaintiff’sargument was incorrect because “[t]here were nospecial issues submitted to the jury calling forfindings on the question of whether or not Whitesidewould have sold his leases while the drilling was inprogress and, without such findings, there is no basisfor determining that he suffered any loss at all.” Id.The supreme court relied on its previous decision inRiddle v. Lanier, 136 Tex. 130, 145 S.W.2d 1094(1941):

In the Riddle-Lanier case, as here, the juryfound, in effect, that the well would have beena dry hole, and there, as here, there was no

finding that plaintiff would have sold hisretained leases while the well was being drilled.In short, the two cases are almost identical infact and in the findings by the jury. The rulefor measuring the damages relied upon byWhiteside in this case was expressly rejected inthat case, the basis of the opinion being that theplaintiff would not have been affected by a riseor fall in the market value unless he had sold hisleases, since his damage, if any, was loss ofprofits.

Id.In anticipation of a new trial, the supreme court

added:

We recognize that it will be a somewhatunusual proceeding to try the issue of whatWhiteside would have done had Trentman notbreached its contract, but it cannot be said, asa matter of law, in advance of a hearing that hewill be unable to make a satisfactory showingthat loss of profits resulted from the breach. Ifhe makes such showing, no reason is perceivedwhy he should not be awarded a recoverytherefor. Such profits might reasonably havebeen foreseen as a probable consequence ofthe breach, and that, in the final analysis is theapplicable test.

Id. at 197.

It is therefore important to undertake a carefuleconomic analysis to determine whether the plaintiffhas suffered any economic damage, regardless ofwhat the defendant may have done.



16


17

CONFIDENTIALITY AGREEMENT(Long Form)

IT IS HEREBY STIPULATED AND AGREED BY Plaintiff ___and Defendant ___that thisConfidentiality Agreement shall govern the handling of all Produced Information, as defined herein, and allConfidential Information, as defined herein, that is produced or obtained by either party or any person boundby this agreement.1. Definitions.

The following definitions shall apply to this Confidentiality Agreement:

a. “Action” shall mean the above-styled and numbered cause.b. “Party” or “Parties” shall mean and refer to the named Plaintiff and Defendant in the

Action. A Party which produced information in the Action, either directly (such as by aproduction of its own documents) or indirectly (such as through the testimony of itsemployees, consultants or agents) is the “Producing Party” as to that information andeach of the other Parties receiving that information is a “Receiving Party” with respectto it.

c. “Attorney for a Party” shall mean any partner, member, associate, of-counsel, specialcounsel or other attorney of a law firm, general counsel or in-house counsel, representingany Party in the above-entitled action and paralegals, legal assistants and legal secretariesworking with such persons.

d. “Designating Party” shall mean the Party designating documents or other information as“Confidential” or as “Confidential-Attorney Only” in this action.

e. “Confidential Information” (including Confidential-Attorney Only Information) shall meanand refer to any materials which contain or disclose proprietary (i.e., not publiclyavailable) information of a commercially valuable or otherwise sensitive nature thedisclosure of which to the Designating Party’s competitors or the public would potentiallyhave adverse implications on the Designating Party’s legitimate business interests andexpectations or which otherwise is entitled to confidential status under criteria that havebeen or are hereafter established by the Court or under applicable law. Material whichhas been designated by a Party as Confidential, and the information in that material, shallbe entitled to the protection afforded such material under this Confidentiality Agreementunless and until such designation either has been abandoned or modified by theDesignating Party or has been set aside or modified by the Court.

f. “Confidential-Attorney Only Information” shall mean and refer to any materials whichcontain or disclose Confidential Information which also (i) is of such commerciallysensitive nature that it should not be used, disclosed or disseminated beyond the use,disclosure and dissemination provided for such information in this ConfidentialityAgreement, and (ii) disclosure of which beyond the Attorney for a Party or Expert is notreasonably necessary for establishing any matter in dispute in this Action and is otherwisesuch that the use restrictions provided for in this order do not materially impair theprosecution or defense of any claim in this action. Material which has been designatedby a Party as Confidential-Attorney Only, and the information in that material, shall beentitled to the protection afforded such material under this Confidentiality Agreementunless and until such designation either has been abandoned or modified by theDesignating Party or set aside or modified by the Court.

g. “Expert” shall mean, include and refer to persons in the following positions with respectto each Receiving Party to whom Confidential-Attorney Only Information has beenproduced: an attorney for a Party in the Action, and with respect to each Receiving Partyto whom specific designated Confidential-Attorney Only Information has been produced,an in-house or retained individual with special skill and training (i.e., an expert) whose


18

review of and participation in the evaluation of specific Confidential- Attorney OnlyInformation is reasonably believed by counsel of record to be necessary for a properunderstanding and evaluation of such specific information and of either its potentialsignificance to establishing any matter in dispute in this Action or whether it is otherwiseof such a nature that its restriction as provided herein will materially impair such Party’sprosecution of defense of this Action.

h. “Document” shall refer to the original or copies of any written, printed, typed, recordedor graphic matter whatsoever, however produced or reproduced, including, withoutlimitation, data stored on electronic, magnetic, or mechanical devices, of any kind ordescription, including, but not limited to affidavits, certificates, letters, facsimiles,correspondence, telegrams, memoranda, records, minutes, contracts, conferences,bulletins, circulars, pamphlets, studies, notices, summaries, reports, books, invoices,purchase orders, work sheets, tape recordings, bookkeeping, accounting and tax records,balance sheets, canceled checks, check stubs, photographs, videotapes, and all thingssimilar to the foregoing.

i. “Produced Information” means, refers to and includes all material and informationproduced in this Action by any Party.

j. “Qualified Persons” are limited to the following:(1) Attorneys for the Parties;(2) Deponents and attorneys for any non-party deponents, provided, however, that

before disclosing any Confidential Information to any non-party deponent or his orher attorney, counsel shall advise them of the terms of this ConfidentialityAgreement, and shall endeavor to have each such deponent and his or her attorneyexecute an Acknowledgment to be bound by the terms of this ConfidentialityAgreement in the form attached as Exhibit A (all such Acknowledgments to beretained by the deposition officer and included as exhibits to the depositiontranscript); provided further, that if any non-party deponent or his or her attorneyrefuses to execute an Acknowledgment, or otherwise refuses to be bound by thisConfidentiality Agreement, then in no event shall they or any of them be allowed totake from the deposition room any documents containing Confidential Informationand the deponent will be required to review and execute the transcript of thedeposition in the offices of the deposition officer, and, notwithstanding any otherprovision of law, neither the deponent nor the deponent’s counsel shall be provideda copy of the transcript (or of the videotape or audiotape) of such deposition, anydeposition exhibit, or any other document containing Confidential Information, unlessand until they shall have executed such an Acknowledgment and provided theexecuted original thereof to the deposition officer and a copy of the executed originalthereof to each party (or counsel for each party) who attended the deposition;

(3) Non-technical and clerical staff employed by the Attorneys for the Parties inconnection with the preparation for, and the trial of, this Action;

(4) Independent personnel retained or consulted by counsel to furnish technical litigationsupport services or consulting expert services or advice or to give expert testimony;provided, however, that before disclosing any Confidential Information to any suchpersonnel, counsel shall advise them of the terms of this Confidentiality Agreement,and each such person shall execute an Acknowledgment to be bound by the termsof this Confidentiality Agreement in the form attached as Exhibit A (all suchAcknowledgments to be retained by counsel for the Party obtaining theAcknowledgment and available to opposing counsel by agreement or by order of theCourt in the event of a controversy involving improper use or disclosure);

(5) Officers of and personnel employed by a Party, where needed for the preparationfor, and trial of, this Action.


19

(6) Court reporters and deposition officers who execute an Acknowledgment to bebound by the terms of this Confidentiality Agreement on the form attached asExhibit A (each Acknowledgment shall be retained by the executing court reporteror deposition officer and included as an exhibit or attachment to the transcriptprepared by therm);

(7) The Court in which the Action is then pending court personnel and the trier of fact;and

(8) Experts for each of the Parties.

2. Designation as Confidential.At the time of providing copies of any materials requested by any party, the producing Party shall

designate as Confidential Information any such material by placing the word “Confidential” on each page ofsuch document of other material, and shall designate as Confidential-Attorney Only Information and suchmaterial by placing the words “Confidential-Attorney Only” on each page of such document or other material;provided, however, that if it is not practicable to so label the material, by such other means as will identify thematerial (whether Confidential or Confidential-Attorney Only) with sufficient specificity to permit discoveringcounsel to adhere to the provisions of this Confidentiality Agreement.

3. Dealing with Confidential Information During Depositions.To the extent that a Party utilizes documents designated as containing Confidential Information in any

deposition, said documents shall be so identified on the record in the deposition transcript before theConfidential Information is introduced into the record. Any document containing Confidential Informationwhich is made an exhibit during the deposition shall be marked “Confidential” and maintained in accordancewith the terms of this Confidentiality Agreement.

4. Limits on Use and Photocopying of Material.Produced Information shall be used solely and exclusively for purposes of the prosecution and /or

defense of this Action; provided, however, that with respect to any part or portion of any ProducedInformation that is already within the public domain or subsequently becomes within the public domain throughany means other than a violation of this Confidentiality Agreement by or for a Party receiving that ProducedInformation, then there shall thereafter be no limitation on the further use or public disclosure of that specificpart or portion of the Produced Information. For example, if the specific Produced Information has not beendesignated Confidential Information of Confidential-Attorney Only Information, and is included in a filing withthe Court in compliance with this Confidentiality Agreement, then such information will have become availableto the public and there would subsequently be no limitation with respect to the use or disclosure of thatspecific Produced Information under this Confidentiality Agreement. Material designated as ConfidentialInformation shall not be made public and shall be used solely and exclusively for purposes of the prosecutionand/or defense of this Action, and will be disclosed only to Qualified Persons. Material designated asConfidential-Attorney Only Information shall not be made public and shall be disclosed only to Attorneys forthe Parties and Experts, or to the Court in connection with a motion or application concerning it underparagraph 7, below. Nothing in this Confidentiality Agreement shall limit in any way the use or disseminationof any produced Information (including Confidential Information and Confidential-Attorney Only Information)by the Party who produced the same in this Action.

5. Non-Disclosure.No Confidential Information received by any Party in this Action may be revealed by a Receiving Party

to the public or to any person or entity not described in Paragraphs 1(j) (1 through 8). No Confidential-Attorney Only Information received by any Party in this Action may not be revealed by a Receiving Partyto any person or entity not included in Paragraph 1(j)(1), 1(j)(7), or 1(j)(8).

6. Objection to Designation as Confidential.


20

If a Party disagrees with a designation of Confidential Information or of Confidential-Attorney OnlyInformation by a Designating Party, counsel for the objecting Party shall notify counsel for the DesignatingParty of such objection in writing requesting the withdrawal or a specified modification of such designation.The Designating Party shall provide a written explanation as to why the Designating Party believes each itemof material should be treated as designated by it or a written withdrawal or modification of such designationpromptly upon receipt of the written objection (with the understanding that the time to so respond to such anobjection may depend upon the number, length and variety of materials that are the subject of the objectionand other factors). Both the Designating Party and the objecting Party shall then meet and confer in goodfaith within ten business days after receipt of the written explanation. If either the objecting Party or theDesignating Party concludes that the Parties are unable to resolve the dispute, the objecting Party or theDesignating Party may thereafter seek a determination from the Court as to whether the disputed materialsshould be protected as designated. In any event, the disputed material shall remain Confidential Informationor Confidential-Attorney Only Information until the Court has ruled or the designation has been withdrawnor modified. Upon any such motion or application, and regardless of the moving or applying party, theDesignating Party shall have the burden of establishing the propriety of its designation with respect to theparticular Produced Information in question.

7. Filing Confidential Information.If, in connection with any motion, hearing or other proceeding before the Court, any party intends to file

a brief, memorandum, affidavit or other paper or any documents, exhibits, or other materials that revealConfidential Information or Confidential Attorney Only Information, the materials filed with the Court shallbe submitted in a sealed, opaque envelope bearing the caption of this Action, identifying the motion, hearingor other proceeding before the Court, and the name of the party filing the sealed items. The envelope shallstate: “This envelope is sealed pursuant to a Confidentiality Agreement and is not to be opened except by theCourt.”

8. Exhibits.Any Party designating their exhibits for trial, shall indicate if any exhibit designated by them or any

portion thereof has been identified as Confidential Information, or Confidential Attorney Only Information.Prior to the commencement of trial, the Parties shall attempt to establish agreed upon procedures for the useof Confidential Information, or Confidential Attorney Only Information at trial, subject to the approval of theCourt.

9. Jurisdiction to Enforce This Agreement.All Parties, and all persons who have executed a copy of the Acknowledgment of Confidentiality or who

are otherwise bound by this Confidentiality Agreement, shall be subject to the jurisdiction of the courts of theState of Texas for purposes of enforcing this Confidentiality Agreement, which shall continue to be bindingafter the conclusion of this Action, and the Court shall retain jurisdiction for purposes of enforcing it.

10. Dealing with Confidential Information after the Conclusion of Action.Upon final resolution of this Action, each Party or other person or entity subject to the terms and

provisions of this Confidentiality Agreement shall be obliged (a) to return to the Party providing such materialsall Confidential Information and Confidential-Attorney Only Information, or (b) to destroy all ConfidentialInformation and Confidential-Attorney Only Information, and to certify in writing such destruction. The returnor destruction of Confidential Information and Confidential-Attorney Only Information shall not relieve saidpersons or entities from the obligations imposed upon them under this Confidentiality Agreement.

11. Inadvertent Disclosure of Attorney-Client Privileged or Attorney Work Product Information.The parties agree that they will be bound by applicable Texas law with respect to the handling of any

documents that are claimed to have been inadvertently produced attorney-client privileged or attorney workproduct materials.


21

[Plaintiff]

By:______________________________________

[Defendant]

By:______________________________________

APPROVED AND AGREED:

By:______________________________Attorneys for [Plaintiff]

By:______________________________Attorneys for [Defendant]

ACKNOWLEDGEMENT OFCONFIDENTIALITY

I hereby acknowledge that I have been provided with a copy of the Confidentiality Agreement that isin effect in the above-styled and numbered cause, and that I agree to be bound by the terms thereof.

______________________________________

Dated: ________________________________


22


23

CONFIDENTIALITY AGREEMENT(Short Form)

IT IS HEREBY STIPULATED AND AGREED BY [Plaintiff] and [Defendant] that this ConfidentialityAgreement shall govern the production of confidential documents and information.

1. Counsel for [Plaintiff] or [Defendant] may designate any documents or things produced in thecourse of discovery in this case as “confidential” when such party or counsel for such party in good faithbelieves that such document or material contains proprietary or confidential information.

2. The parties shall so designate a document or thing by marking it “CONFIDENTIAL.”

3. No document shall be designated “confidential” if it can be reasonably determined, from the faceof the document, that the document has been distributed to persons not obligated to maintain the confidentialityof the information contained therein.

4. Confidential documents and materials will be used by the receiving party solely for purposes ofpreparing for and conducting the trial of this case.

5. Documents and things designated CONFIDENTIAL, except with the prior written consent of theother party or prior order of a court or other tribunal with jurisdiction, shall not be disclosed to any person orentity other than the following: (a) counsel for the party to which they are produced, and their representativesinvolved in the case; (b) outside experts and/or consultants who are retained to assist counsel for the partyin connection with the case, and the employees of such persons (“Outside Experts”); (c) outsidephotocopying, data processing, document imaging or graphic production services employed by the parties ortheir counsel to assist in the arbitration; or (d) stenographers, if any, transcribing any testimony whether bydeposition or at the above-referenced arbitration.

6. Any person receiving a document or thing designated as Confidential shall not disclose, disseminate,divulge or discuss such information to or with any other person who is not entitled to receive such informationunder this agreement. Any copies made of Confidential material are also confidential. Any person who isgiven access to the Confidential material as permitted herein shall first be informed of the provisions of thisagreement.

7. If the parties or their counsel receive a subpoena or other request for documents from any personor entity seeking disclosure of the Confidential material, they shall promptly give written notice by overnightdelivery or facsimile to counsel for the other party enclosing a copy of the subpoena, and shall also informthe party issuing the subpoena that the documents sought are subject to this agreement and may not bedisclosed without the consent of the other party or upon the order of a court with jurisdiction.

8. After the conclusion of the above-referenced arbitration and all related proceedings, [Plaintiff] and[Defendant] and their counsel, shall return all copies of material designated “CONFIDENTIAL” to counselfor the other party.

[Plaintiff]By:______________________________

[Defendant]By:______________________________


24

APPROVED AND AGREED:

By:______________________________Attorneys for [Plaintiff]

By:______________________________Attorneys for [Defendant]

ACKNOWLEDGMENT OF CONFIDENTIALITY

I hereby acknowledge that I have been provided with a copy of the Confidentiality Agreement that isin effect in the above-styled and numbered cause, and that I agree to be bound by the terms thereof.

_________________________________________

Dated: ___________________________________