Noelle M. Reed, partner, Skadden Arps, Houston ()
For four long years, Noelle Reed has accompanied her client Aspen Technology Inc. as it pursued a trade secrets case through federal trial and appellate courts in an effort to protect the software that the company sells to oil refineries.
She and her client finally accomplished that mission on May 29, when the U.S. Court of Appeals for the Fifth Circuit issued a decision protecting a hard-fought permanent injunction that her client won in the trial court.
“It’s the longest I’ve ever waited for an expedited appeal,” Reed said of the Fifth Circuit’s decision in Aspen Technology v. M3 Technology, which she argued before the Fifth Circuit in July of 2013. “And maybe that’s because it was a fairly lengthy” decision.
The background to Aspen Technology is as follows, according to the decision. Aspen Technology sued a former employee for violating a noncompete clause in his employment contract. Aspen subsequently added the former employee’s new employer, M3 Technology, as a defendant and brought claims for tortious interference with contract, trade secret misappropriation and copyright infringement in a Southern District of Texas trial court.
A jury found in favor of Aspen—specifically that none of its claims were time-barred, that M3 had misappropriated eight of Aspen’s trade secrets, that M3 had infringed all of Aspen’s asserted copyrights and that M3 had interfered with Aspen’s contract with its former employee, awarding more than $11 million in damages, according to the decision.
The trial court also issued a permanent injunction that prohibits M3 from selling any presently existing or future versions of products derived from Aspen’s protected material.
M3 appealed the district court’s denial of its motion for judgment as a matter of law as to Aspen’s misappropriation and infringement claims. M3 also appealed the jury’s damage award totaling more than $11 million, according to the decision.
In a 24-page per curiam opinion, the Fifth Circuit affirmed the trial court rulings denying M3 relief and granted the permanent injunction protecting Aspen’s software.
However, the Fifth Circuit vacated an award of $546,329 in attorney fees and remanded the case to the trial court to make an adjusted damage award.
The Fifth Circuit affirmed most of the trial court’s rulings, including the permanent injunction protecting Aspen’s software. M3 had challenged the injunction by arguing that the trial court “erroneously presumed irreparable harm, ignored adequate alternatives and failed to consider the public interest.”
The Fifth Circuit granted the permanent injunction, writing that “it was in the interest of public policy to prohibit the sale and use of M3 products containing infringing source code and that were derived from the improper misappropriation of trade secrets. Nor was this permanent injunction ‘overbroad and nonspecific.’”
However, the Fifth Circuit took away more than a half-million dollars in attorney fees because the trial court erred in allowing an equitable exception to a general rule prohibiting the recovery of such fees that are not provided by Texas statute or contract.
Reed, a partner in Skadden, Arps, Slate, Meagher & Flom in Houston who represents Aspen, is pleased with the decision.
“I think the point we’re most happy about is the injunction. It was broad and barred M3 from using our software,” Reed said. “That was a huge part of the appeal.”
Reed added that she’s not upset about the attorney fees ruling.
“It’s such a small part of the judgment, I can’t feel too terrible about it,” Reed said. “I think the way the law has developed in the courts in incorrect, but the Fifth Circuit was correct in how they applied the law as it’s been written by Texas courts of appeals.”
Russell Post, a partner in Houston’s Beck Redden who represents M3, did not immediately return a call for comment.