Texas Uniform Trade Secrets Act

We are blogging on “Non-competes, 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 here.

On May 2, 2013, Texas Governor Rick Perry signed into law the Texas Uniform Trade Secrets Act. The new law adopts a version of the Uniform Trade Secrets Act (“UTSA”). The law took effect September 1, 2013 and applies to a misappropriation of trade secrets that takes place on or after that date. The common law of Texas is very similar to the UTSA in many ways. Of note, the law includes a definition of “trade secret” is “[i]nformation, including a formula, pattern, compilation, program, device, method, technique, process, financial data, or list of potential customers or suppliers.” Other aspects of the new law are express statutory authority for courts to enjoin actual or threatened misappropriation, a court’s ability to order the payment of a reasonable royalty in “exceptional circumstances,” and a mandate that a court hearing any claim for misappropriation of trade secrets issue protective orders and take other “reasonable means” to preserve the secrecy of the alleged trade secret. The new law also provides for monetary damages, which can include both the actual damages and unjust enrichment resulting from the misappropriation. Upon a finding of willful and malicious misappropriation, a court would also be empowered to award exemplary damages in an amount not exceeding twice the award of damages, and attorneys’ fees in certain circumstances. However, the law also expressly provides for the payment of attorneys’ fees to a defendant where a claim for misappropriation is made in bad faith.

With a stated general purpose “to make uniform the law” with respect to the misappropriation of trade secrets, the law displaces existing common law on the subject, to include any law of the state providing for civil remedies for misappropriation of a trade secret, but would not affect contractual remedies, other civil remedies not based upon a misappropriation of trade secrets, or any criminal remedies aimed at addressing misappropriation of trade secrets. The law’s impact on related theories of legal relief in Texas (like the inevitable disclosure doctrine) and on burdens of proof (such as the level of specificity required in pleadings that describe the trade secret) is not clear. Texas is the forty-eighth state to adopt the UTSA, so cases from other states interpreting the law may be a rich source of guidance as such cases proceed in Texas.

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