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Trade Secret Protection

Shellmar Rule

Texas follows the Shellmar rule which holds that the party liable for misappropriating a trade secret can be permanently enjoined from ever using the trade secret. [1]  An injunction may be granted even if the trade secret, due to being made public such as the later issuance of a patent, has become part of the unprotectable public domain and consequently is free for anyone to use.  A permanent injunction ensures that the party misappropriated the trade secret does not benefit from his wrongful conduct.  The party misappropriating the trade secret cannot use the trade secret even though everyone else can freely use it.

Conmar Rule

Some states like New York follow the Conmar rule which holds that injunctive relief will be allowed only until the trade secret enters the public domain.[2]  Once the trade secret is made public and enters the public domain, the only remedy is an award of damages.  

Head Start Rule

Some states like California follow the Head Start rule which holds that injunctive relief will be allowed until the trade secret becomes public and enters the public domain, plus an additional length of time equal to the time it would take a competitor to be able to discover the secret, using lawful means such as reverse engineering, following becoming publicly known.[3]  This rule is designed to prevent the trade secret misappropriator from gaining any competitive advantage in the marketplace.  It puts the misappropriator at the same position with third parties who are free to use the trade secret once it is disclosed and known to the public.  The language of the Uniform Trade Secrets Act seems consistent with the underlying theory of the Head Start rule.[4]

[1] Shellmar Prods. Co. v. Allen-Qualley Co., 87 F.2d 104 (7th Cir. 1936).

[2] Conmar Prods. Corp. v. Universal Slide Fastener Co., 172 F.2d 150 (2d Cir. 1949).

[3] See Winston Research Corp. v. Minnesota Mining & Mfg. Co., 350 F.2d 134 (9th Cir. 1965).

[4] Uniform Trade Secrets Act § 2(a), 14 U.L.A. at 449.