What Is A Trade Secret Under Texas Law?

We are blogging on “Noncompetes, Trade Secrets, Fiduciary Duties, and the Inevitable Disclosure Doctrine.” Mark Oberti has prepared a detailed paper on all of these issues, which can be found at here.

A trade secret is “any formula, pattern, device or compilation of information which is used in one’s business and presents an opportunity to obtain an advantage over competitors who do not know or use it.” In re Bass, 113 S.W.3d 735, 739 (Tex. 2003). To determine whether a trade secret exists, a court weighs six fact-intensive factors: (1) the extent to which the information is known outside of the business; (2) the extent to which it is known by employees and others involved in the business; (3) the extent of measures taken to guard the secrecy of the information; (4) the value of the information to the business and to its competitors; (5) the amount of effort or money expended in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. See id. (citing Restatement of Torts § 757 cmt. b. (1939); Restatement (Third) of Unfair Competition § 39 reporter’s note cmt. d. (1995)); In re Cooper Tire & Rubber Co., 313 S.W.3d 910, 915 (Tex. App.–Houston [14th Dist.] 2010, no pet.) (concluding trade secret protection existed). The party claiming a trade secret need not satisfy all six factors because trade secrets do not fit neatly into each factor every time. In re Bass, 113 S.W.3d at 740; In re Cooper Tire & Rubber Co., 313 S.W.3d at 915. The status of the information claimed as a trade secret must be determined through a comparative evaluation of all the relevant factors, including the value, secrecy, and definiteness of the information as well as the nature of the defendant’s misconduct. In re Bass, 113 S.W.3d at 739.

Under the umbrella of protected data are compilations of information which have a substantial element of secrecy and provide the employer with an opportunity for advantage over competitors. See In re Bass, 113 S.W.3d at 739; Rugen, Inc. 864 S.W.2d at 552; Luccous v. J.C. Kinley Co., 376 S.W.2d 336, 338 (Tex. 1964). Examples of such data include pricing information, customer lists, client information, customer preferences, buyer contacts, and market strategies. See Rugen, 864 S.W.2d at 552; Murrco Agency, Inc. v. Ryan, 800 S.W.2d 600, 604-605 & n. 5 & 6 (Tex. App.–Dallas 1990, no writ); Bertotti v. C.E. Shepherd Co., 752 S.W.2d 648, 654-55 (Tex. App.–Houston [14th Dist.] 1988, no writ); see also Rimkus Consulting Group, Inc. v. Cammarata, 688 F. Supp. 2d 598, 668 (S.D. Tex. 2010) (Rosenthal, J.) (surveying Texas law on this issue and concluding that “[b]ased on the evidence presented at the injunction hearing held in 2008, this court concluded that Rimkus’s client database, pricing information, and business plan were the type of information that courts had recognized as entitled to trade secret protection.”).

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