Electronic Data Systems v. Powell

Citation: ''Electronic Data Sys. Corp. v. Powell,'' 524 S.W.2d 303 (Tex. Civ. App. 1975).

In a trade secret case brought against a former employee who had gone to work for a competitor, the court said:


 * Appellant's [EDS's] business of employing systems engineers to write computer programs for its customers is unique and highly specialized. Its training of Powell included specialized information

pertaining to its business as distinguished from general skills and knowledge of the trade. Restraining him from using this information is intrinsically unenforceable so long as he is employed by a competing employer in the health-care field. It would indeed be difficult to determine if Powell were imparting his specialized knowledge to SRI [the subsequent employer] until SRI markets a product resembling closely EDS's system.


 * The evidence on the merits reveals that Powell, by participating in the servicing of SRI medicare contracts, preparing SRI proposals to process health care claims for potential EDS customers, including a proposal to incorporate utilization review into the system operated by SRI for Kansas City Blue Shield, and participating in the development and marketing of an SRI computer system for processing regular business healthcare claims, has violated his covenant not to compete with EDS. All of these activities were admitted by Powell.


 * It was clearly established that the methods and techniques developed by EDS have resulted from a significant investment of time and money. Even in the best of good faith, a former technical or

“creative" employee such as Powell working for a competitor such as SRI can hardly prevent his knowledge or his former employer's confidential methods from showing up in his work. If Powell is permitted to work for SRI in the same area as that in which he was trained by EDS, injunctive relief limited to restraint of imparting such special knowledge as prepayment utilization review, is likely to prove insufficient. The mere rendition of service in the same area would almost necessarily impart such

knowledge to some degree in his subsequent employment. Powell cannot be loyal both to his promise to his former employer, EDS, and to his new obligation to his present employer, SRI. In these circumstances, the most effective protective device is to restrain Powell from working in the same computer field in which he was associated while employed by EDS.