Canterbury, Gooch, Surratt, Shapiro, Stein, Gaswirth & Jones

The Texas Uniform Trade Secrets Act is Now in Force

Texas courts have been inconsistent in their protection of trade secrets. There has been no uniformly recognized definition of a trade secret, nor has enforcement of a trade secret been uniform throughout the state. The Texas Legislature had been silent on the issue until May 2, 2013, when the Texas Uniform Trade Secrets Act (“TUTSA”) was enacted. The TUTSA is modeled after the Uniform Trade Secrets Act (“UTSA”), a form of which has been enacted by virtually every other state prior to Texas coming on board. In fact, only New York and Massachusetts have failed to adopt some version of the UTSA. The TUTSA will go into effect on September 1, 2013. The law is an attempt to give a clear definition of what constitutes a “trade secret.” The TUTSA’s definition is in fact broader than the version of the TUTSA because it includes financial data and customer lists. The definition is as follows:

“Trade secret” means information, including a formula, pattern, compilation, program, device, method, technique, process, financial data, or list of actual or potential customers or suppliers, that:

(a) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

(b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Another feature of the TUTSA is that it allows for injunctive relief from threatened, as well as actual, misappropriations of trade secrets. Also, an injunction possibly can be extended for a longer period of time in order to eliminate any advantages that might be obtained from the misappropriation.

The new law also expands the damages available to a successful party in trade secret litigation. In addition to injunctive relief, the law allows for the recovery of economic damages for misappropriation of a trade secret, which includes the actual economic loss and any unjust enrichment. Furthermore, a court has the power to impose a royalty for the unauthorized use of a misappropriated trade secret. Exemplary damages of up to twice the actual or unjust enrichment damages is also allowed. Finally, in a limited number of cases, the court has discretion to award attorneys’ fees to the prevailing party.

There is no question that the TUTSA will have broad application to protect trade secrets than otherwise existed. There is a clear definition of what constitutes a trade secret (which specifically includes client or customer lists), and the type of injunctive relief and damages available to a party who has suffered a misappropriation of a trade has been expanded. The law will certainly provide much greater protection for those companies who do not have specific agreements with their employees covering trade secrets and their misappropriation.