Your trade secrets – customer lists, pricing strategies, proprietary processes, and more – can be among your most valuable business assets. But Texas law only protects what you actively protect.
If you haven't taken reasonable steps to keep that information secret, courts may refuse to treat it as a trade secret at all.
What Is a Trade Secret Under Texas Law?
Under §134A of the Texas Civil Practice and Remedies Code, also known as the Texas Uniform Trade Secrets Act or TUTSA, a trade secret is:
“Information [that] derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.”
Additionally, the owner of the trade secret must have taken “reasonable measures under the circumstances to keep the information secret.”
What Are Some Examples of Trade Secrets?
Common trade secrets include:
- Client lists and customer data
- Financial data and pricing strategies
- Patents, prototypes, and technical designs
- Formulas, codes, methods, and techniques
- Scientific, technical, or engineering information
- Software source code and proprietary algorithms
- Supplier relationships and contract terms
What Are “Reasonable Measures” to Maintain a Trade Secret?
Business owners have a duty to protect their trade secrets. If an owner doesn’t take reasonable steps to protect the information, it’s not a trade secret.
Here's what reasonable trade secret protection looks like in practice:
Contractual Safeguards
- Require employees, customers, independent contractors, and vendors to sign confidentiality or non-disclosure agreements (NDAs).
- Consider work-for-hire agreements to clearly establish ownership of intellectual property created by employees or contractors.
- Include confidentiality provisions in sales and licensing agreements if access to trade secrets is included in the transaction (such as specs or technical information contained within equipment manuals).
Internal Policies and Training
- Prohibit employees from using personal devices for work purposes.
- Train employees – especially your sales team – on how to handle trade secrets.
- Address confidentiality requirements in your employee handbook and recurring trainings.
- Limit access to sensitive information on a "need-to-know basis" and track which employees have access.
- Label sensitive documents as "proprietary and confidential." Courts look more favorably on businesses that consistently mark what they intend to protect.
- Conduct closing interviews to remind departing employees of their confidentiality obligations and the handling of trade secrets, so no one can later claim they didn't know the rules.
Digital and Physical Security
- Store digital information on password-protected servers with role-based access controls.
- Store physical information securely – use security badges for file rooms and restricted areas.
- Require passwords for Zoom calls and other web conferencing tools when discussing proprietary matters.
- Promptly revoke IT access when an employee is terminated.
- Implement data loss prevention (DLP) software. These tools can flag suspicious downloads and alert you to exfiltration as it happens – before an employee walks out the door with your data.
What Can Invalidate Trade Secret Protection?
Courts won't protect what you haven't bothered to secure. Something as simple as revealing confidential information in the wrong place at the wrong time could invalidate its consideration as a trade secret.
Consider these examples, drawn from actual court cases, that cost the trade secret owners their legal protection:
- Posting proprietary information online without encryption or password protection, even in incomplete form or on a non-indexed URL, can undermine your trade secret claim in court.
- Sharing confidential information with employees without restrictions or notice that the information is proprietary.
- Disposing of trade secret documents in a trash can rather than shredding them.
- Failing to act after an accidental disclosure – for example, not notifying recipients of the error or recalling a misdirected email.
- Disclosing trade secrets in a patent application, which permanently strips them of trade secret protection.
Can You Sue Over a Trade Secret?
Yes. If someone misappropriates your trade secret – by improperly acquiring it, using it without consent, or disclosing it – you can ask a court to issue an injunction to stop the misuse and sue for damages.
In cases of willful misappropriation, you may also be entitled to exemplary damages and attorneys' fees under TUTSA.
To succeed, you'll need to prove two things:
- The information was a legally protected trade secret, and
- It was misappropriated through improper means.
This is why your protection measures – and your records of those measures – matter so much before any dispute ever arises. A trade secret cannot be “misappropriated” if it was attained through proper means or with your consent.
How Texas Courts Evaluate Trade Secret Claims
In Texas, courts usually consider the following questions when determining whether information constitutes a trade secret:
- How extensively is the information known outside of the business?
- How extensively is the information known within the business (among employees and others involved in the business)?
- What measures did the business take to guard the secrecy of the information?
- How valuable is the information to the business and its competitors?
- How difficult or expensive was developing the information?
- How easy was it for others to acquire or duplicate the information?
Frequently Asked Questions
How do I know if my information qualifies as a trade secret in Texas?
If the information gives your business a competitive advantage that depends on it remaining confidential, and you have taken reasonable steps to keep it secret, it may qualify. Common examples include client lists, proprietary formulas, pricing strategies, and software code.
What happens if an employee takes trade secrets when they leave?
You may be able to obtain an emergency injunction to stop them from using or disclosing the information, and you can sue for damages. Courts will look at whether you had reasonable protections in place and whether you can demonstrate that the departure involved improper means.
Does Texas have its own trade secret law?
Yes. Texas follows the Texas Uniform Trade Secrets Act (TUTSA), codified at Section 134A of the Texas Civil Practice and Remedies Code. Federal protection is also available under the federal Defend Trade Secrets Act (DTSA).
Is trade secret theft a state or federal court matter?
Both. Where you file your lawsuit over trade secret theft depends on the scope of the dispute and your strategic goals.
If the theft involves interstate or international business, you can file a claim in federal court under the Defend Trade Secrets Act (DTSA). If the matter is limited to Texas, a claim under the Texas Uniform Trade Secrets Act (TUTSA) in state court may be the right path.
As of September 1, 2025, high-stakes trade secret cases in Texas may also be heard in the Texas Business Courts – a specialized court designed for faster resolution of business disputes exceeding $5 million in controversy.
The right venue depends on the facts of your case. An experienced trade secret attorney can help you evaluate your options before you file.
Hendershot Cowart P.C. Can Help
Protecting trade secrets requires proactive planning – not just a response after something goes wrong. At Hendershot Cowart P.C., we help Texas business owners, executives, and compliance officers build the systems that protect what they've built, and fight back when those protections are violated.
If you have questions about protecting trade secrets or believe your confidential information has been misappropriated, contact Hendershot Cowart P.C. at (713) 783-3110 or contact us online to schedule a consultation today.