Texas trade secret law is governed by the Texas Uniform Trade Secrets Act (TUTSA). The Act gives injured parties substantial rights and remedies in the event of a potential or actual misappropriation of trade secrets.
TUTSA was first enacted in Texas in 2013 to provide more clarity to Texas trade secret law. Yet Texas trade secret law is highly complex. Many businesses that have valuable intellectual property are unsure how to protect that property and enforce their rights.
In this article, we will discuss what a trade secret is to help you determine whether your business has legally protectable interests. We will then explore Texas trade secret law in more detail and highlight some ways to protect your business from misappropriation.
What Is a Trade Secret?
A trade secret is company information that is not known or fully understood outside of the organization. Trade secrets generally grant businesses a competitive advantage. They can take many forms, ranging from a business process to a unique design or formula.
To cite a few real-world examples of trade secrets, Google’s search algorithm is known by few people outside of the company. And Coca-Cola’s formula for its legendary cola has remained a tightly guarded secret for well over 100 years.
Trade secret law exists to protect the legal rights that organizations have in their intellectual property. While trade secret law varies by state, most states define trade secrets as having several characteristics in common:
· The information is not public.
· The holder of the information proactively guards its secrecy.
· The secrecy grants the holder an economic benefit.
The Economic Espionage Act of 1996 defines and protects trade secrets in the U.S. In addition, each state can adopt its own trade secret laws. Almost every state — including Texas — has adopted the Uniform Trade Secrets Act (UTSA). The UTSA is a piece of legislation that was created by a non-profit organization – the Uniform Law Commission (ULC).
Texas Trade Secret Law: Uniform Trade Secrets Act
Texas trade secret law is governed by the Texas Uniform Trade Secrets Act (TUTSA). TUTSA is intended to give businesses a better understanding of what a trade secret is, as well as grant them rights to protect their intellectual property.
Texas originally adopted the UTSA in 2013. Four years later, the Texas Legislature amended TUTSA to integrate the Defend Trade Secrets Act (DTSA). The DTSA is a federal law that gives employers legal remedies when employees misappropriate or steal company trade secrets.
Under Tex. Civ. Prac. & Rem. Code Ann. § 134A.002(6), a trade secret includes information that has been kept secret by “reasonable measures,” and (2) “derives independent economic value” due to its secrecy. Claims under TUTSA must be filed within 3 years of the discovery of the alleged misappropriation or the date that the misappropriation should have been discovered through “reasonable diligence.”
Under TUTSA, courts can grant an injunction for “actual or threatened misappropriation.” This means that the party against whom the claim is brought is legally prevented from the use of the trade secret. Notice that the statute also includes “threatened misappropriation.” This means that the court can prevent the misappropriation of a trade secret before it occurs (for example, an employee that is in possession of confidential information and leaves a company cannot work for a competitor).
In addition to granting an injunction, Texas trade secret law allows the court to grant actual monetary damages, exemplary damages, and attorneys’ fees.
Trade Secret vs. Confidential Information
There is often confusion when it comes to trade secret vs. confidential information. The two terms are typically used interchangeably when talking about trade secret law. But there are some important differences. The biggest difference is one of scope. Confidential information is a much broader category under which trade secrets fall.
Confidential information is not defined by statute. Rather, confidential information is commonly set forth within the scope of an employment or business relationship. For example, when employees are hired, they are often required to sign several documents, such as an employment agreement and a non-disclosure agreement. These agreements will define what constitutes confidential information and the consequences of misusing that information.
In contrast, Texas trade secret law expressly defines what a trade secret is. Moreover, it gives injured parties rights to seek injunctive and monetary relief.
Who Can Bring a Trade Secret Claim?
Under TUTSA, trade secret claims are not limited strictly to the owners of trade secrets. Rather, other individuals or organizations that have “rightful, legal, or equitable title to, or the right to enforce rights,” to a given trade secret can also file a claim. For example, a licensee of a trade secret can also file a misappropriation claim.
Elements of a Trade Secret Claim
To bring a successful claim for misappropriation of trade secrets under TUTSA, the plaintiff must prove by clear and convincing evidence that:
· There was a legally protectable trade secret;
· This secret was acquired through a breach of confidentiality or discovered through improper means; and
· The trade secret was subsequently used without authorization.
When considering whether there was a legally protectable trade secret, Texas courts will look to both statutory provisions and legal precedent interpreting Texas trade secret law.
Protecting Your Texas Business from Trade Secret Violations
Protecting your business from trade secret violations starts with maintaining strict process controls and ironclad legal agreements. This means clearly defining information that you consider to be confidential, other parties’ obligations to not misappropriate that information, and your remedies in the event of a breach. These provisions are incorporated into a broad range of contractual agreements, such as confidentiality and nondisclosure agreements, non-compete clauses or agreements, and non-solicitation agreements.
Misappropriation claims typically arise from breach of contract claims. Ensuring that you have valid legal agreements will help you to enforce your rights under Texas trade secret law.
Texas trade secret law provides a clear definition of what constitutes a trade secret and grants injured parties remedies in the event of trade secret misappropriation. To protect your trade secrets and business interests, it is crucial to maintain strict process controls and enter into legally enforceable agreements to protect your rights should a misappropriation occur.
The Padua Law Firm has many years of experience helping parties protect and enforce their rights under Texas trade secret law. If you are concerned about the security of your trade secrets or are concerned about a potential or actual misappropriation, contact our experienced team today to discuss your rights and options.