Texas Uniform Trade Secrets Act
Trade Secret Protection, Enforcement & Litigation in Texas
Trade secrets are the confidential information that provide your company with distinct advantages over your competitors. As a business, ensuring your trade secrets are safeguarded requires proactive protection, streamlined processes, and the pursuit of available legal remedies when they are misappropriated, used, or disclosed without authorization.
Hendershot Cowart, P.C. provides the comprehensive counsel and representation businesses need to protect their interests and litigate cases involving theft of trade secrets. Taking the right steps to prevent and address trade secret violations is critical to mitigating disruption and damage and securing relief.
What Are Protected Trade Secrets?
The Texas Uniform Trade Secrets Act defines a trade secret as information that has economic value because it is not generally known, and which a company has made reasonable efforts to keep secret.
Under TUTSA, adopted in 2013, trade secrets include:
Scope of Our Legal Services
Laws governing trade secrets, unfair competition, and related issues are nuanced and complex. To stay on the forefront of this legal area, our team leverages experience and tracks judicial precedents and evolving case law.
Scope of our intellectual property legal services include:
- Proactive protection of trade secrets through reasonable efforts that include the drafting, review, analysis, and negotiation of non-compete agreements, nondisclosure agreements (NDAs), work-for-hire agreements, business transactions and licensing agreements, and other contracts and stipulations.
- Safeguarding trade secrets through processes and policies, including passwords, employee education, security protocol, classification of confidential information, and restricting access to digital or physical files.
- Rigorous evaluation of clients' most important goals and legal avenues for achieving them - such as obtaining an injunction to stop intellectual property infringement or the misappropriation of protected trade secrets.
- Assessment of market activity such as client "poaching," which may constitute a non-compete agreement violation or tortious interference of contract.
- Help for clients in weighing the value of what may be achievable and recoverable through a lawsuit against the risks and potential costs of litigation and, when deemed necessary, aggressively litigating trade secret violation disputes.
Protecting Your Texas Business from Trade Secret Violations
Protecting trade secrets, ensuring enforceability, and benefiting from available remedies in the event of violation begins with pro-active safeguards and policies. Your trade secrets are yours – and they can be kept safe from misappropriation with the following tools:
- Confidentiality / nondisclosure agreements
- Non-solicitation agreements
- Non-compete agreements
- Work for hire agreements
These tools are crucial to addressing concerns involving trade secrets and competitive restrictions and are essential to providing the grounds for a trade secret lawsuit, which typically arise from breach of contract claims and non-compete violations. While focusing on ways to protect and police trade secrets is vital, businesses must also focus on doing so in a way that enables future enforcement, litigation, and advantageous remedy provided by statutory law.
The Texas Uniform Trade Secrets Act Explained
Who Can File Misappropriation Claims Under TUTSA?
Under TUTSA (CIV. PRAC. & REM. CODE § 134A), any individual or entity seeking a recovery of damages over alleged trade secret violations (including actual or threatened misappropriation) can bring claims. Misappropriation may include:
- Disclosure of trade secrets without consent, or
- Obtaining trade secrets through improper means;
TUTSA permits “owners” of trade secrets (defined as those with legal title or the right to enforce) to bring claims, as well as licensees. Regardless of who the claimant is, TUTSA only applies to misappropriation claims that commence on or after its original enactment (9/1/2013).
Claimants are also subject to a statute of limitations, which is 3 years from the date the alleged misappropriation was discovered, or should have been discovered by reasonable diligence.
Elements of a TUTSA Misappropriation Claim
To prevail in a misappropriation claim, Plaintiffs must prove their trade secrets provide a distinct competitive advantage, and that they took “reasonable” measures to protect them. Though there is no bright line test for what constitutes “reasonable,” companies and Courts typically consider factors such as the:
- Value of the information;
- Cost and effort associated with acquiring the trade secret;
- Competitive harm owners would suffer upon violations / disclosure of the information;
- Level of competition in the specific industry / marketplace;
- Perceived ease of reverse engineering.
Generally, TUTSA requires Plaintiffs to satisfy a few key elements:
- The existence of a legally enforceable trade secret;
- The acquiring of the legally enforceable trade secret by a breach of confidential relationship or discovery through improper means; and
- The use of the trade secret without authorization.
When determining whether Plaintiffs satisfy these elements, Courts will look to the statutory definitions of:
- Trade secret: Under TUTSA, trade secret was defined in a manner to allow for flexibility in its interpretation. While such flexibility was intended to ensure TUTSA could stand up to changing technologies and modes of commerce, it also provides opportunity for employers to argue that certain company information falls within the protected definition of a trade secret.
- Misappropriation: TUTSA defines misappropriation as the (1) acquisition of trade secrets through “improper means” or (2) the “disclosure” or “use” of a trade secret without consent (implied or express). The definition is intended to impose liability only in situations where Defendants had actual or constructive knowledge (i.e. they knew or should have known) of improperly obtained protected information.
- Clear and convincing evidence: TUTSA adopted a higher standard of proof, clear and convincing evidence, for Plaintiffs seeking exemplary damages.
Injunctive Relief Under TUTSA
Claims brought under TUTSA focus on securing injunctive relief to stop the use of confidential information (in addition to establishing civil liability for damages and unjust enrichment). Per statute, this may include “actual or threatened misappropriation,” but not the use of general knowledge and skills a person acquires prior to their employment.
Still, TUTSA provides considerable protections for employers who seek injunctions, particularly because an injunction may be issued before trade secrets have actually been used to a company’s detriment.
Additionally, because TUTSA requires Courts to take reasonable steps to preserve the secrecy of alleged trade secrets in misappropriation claims, Courts can compel affirmative acts to protect confidential information, such as issuing a temporary restraining order / protective order, sealing court records, limiting access to information only to attorneys / experts, or imposing requirements that parties in a case not disclosed information without Court approval.
Generally, misappropriation claims brought under TUTSA will proceed as follows:
- Lawsuit and temporary restraining order
- Preliminary injunction
- Litigation, or arbitration, for a recovery of damages
- Permanent injunction
Recoverable Damages Under TUTSA
In addition to injunctive relief, TUTSA allows Plaintiffs to recover:
- Monetary damages (actual losses and unjust enrichment);
- Exemplary damages no greater than twice the actual damages (in cases involving “willful and malicious” conduct);
- Attorneys’ fees (for claims brought in bad faith, or claims involving “willful and malicious” conduct.
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