Daniels Health Sciences, LLC v. Vascular Health Sciences, LLC

In 2007, a company called Endomatrix declared bankruptcy. One of its researchers, Dr. Daniels, purchased intellectual property out of the bankruptcy estate, including materials concerning a dietary supplement called Provasca that contained a seaweed extract. In 2010, Daniels approached his brother, David, and a marketing executive, Robert Long, to secure funding for further research and marketing of Provasca. In 2011, they formed two entities: (1) Daniels Health Sciences, LLC (DHS) (plaintiff) for research, and (2) Vascular Health Services (VHS) (defendant) for marketing. Daniels compiled the research underlying Provasca into a PowerPoint presentation, which he showed to David and Long to help them communicate the information to potential investors. Daniels required David and Long to secure Daniels’s approval prior to any such disclosure, and to have each potential investor sign a confidentiality and nondisclosure agreement (CNDA) prior to receiving the presentation. In 2012, Daniels also had VHS sign a CNDA. However, DHS and VHS could not agree on licensing-agreement terms, and VHS abandoned the deal. VHS then developed its own supplement, which contained the same seaweed extract present in Provasca. DHS then sued VHS for breach of contract and trade-secret misappropriation and moved for a preliminary injunction. The district court concluded that DHS showed a likelihood of success of establishing trade-secret misappropriation under Texas law, separately assessing the elements outlined in Taco Cabana International, Inc. v. Two Pesos, Inc. The district court observed that possible public knowledge of discrete portions of Daniels’s compiled information did not by itself negate trade secret status as to Daniels’s research compilation, which remained confidential. The district court also made findings supporting a conclusion that VHS had used the entirety of Daniels’s research. The district court therefore granted DHS’s motion, and VHS appealed.