Digging a Little Deeper into the Texas Uniform Trade Secrets Act

We have previously posted on the nuts and bolts of the newly enacted Texas Uniform Trade Secrets Act (the “Texas UTSA”). (See link to original post below.) Although the Texas UTSA becomes effective September 1, 2013, it does not apply to any misappropriation, including continuing misappropriation, occurring prior to that time. In this post, we would like to expand on a few items as we inch closer to its effective date. While the Texas UTSA primarily codifies Texas’s current trade secret law, it also strengthens trade secret protections and provides greater certainty to misappropriation claims. Under current Texas law, there has been some question regarding whether information must be in “continuous use” in the operation of a business in order to gain trade secret protection. It is thought that the omission of “continuous use” language in the Texas UTSA’s definition of a “trade secret” means that there is no longer any such requirement for a trade secret to be protectable. If this bears out in the coming post-Texas UTSA case law, it will make it far easier for trade secret owners to seek protection for information related to a single event, such as for information about a business idea or product that is not currently in development, even if it is not in continuous use by the business.

Also, as briefly mentioned in our last post, the Texas UTSA modifies the model act’s definition of “trade secret” to specifically add “financial data” and a “list of actual or potential customers or supplies” to the types of trade secret information covered. Even though this type of information has been protected under common law in Texas, the specific inclusion in the Texas UTSA solidifies and clarifies that this type of information is protectable as a trade secret and ends the need for courts to evaluate this type of information on a case-by-case basis to decide if it is protectable.

In delving deeper into how the Texas UTSA broadens the availability of injunctive relief, it is now an option to enjoin actual and threatened misappropriation. The inclusion of the “threatened misappropriation” language in the Texas UTSA should be useful for a company seeking to enjoin the activities of a wayward ex-employee who joins up with a competitor or becomes a competing business owner because the injunction can be obtained now before any damage has been done to the trade secret. This idea has been previously linked to the “inevitable disclosure doctrine” even though Texas courts have not previously expressly recognized the idea of a threatened misappropriation.

In a turn that may end up increasing litigation for trade secret misappropriation, the Texas UTSA adds the ability to recover attorneys’ fees as a new form of relief. Texas courts will have discretion to award the prevailing party its attorneys’ fees where willful and malicious misappropriation is shown. Conversely, attorneys’ fees may be awarded for misappropriation claims made in bad faith.

Source: http://www.capitol.state.tx.us/tlodocs/83R/billtext/pdf/SB00953E.pdf

Klemchuk LLP is an Intellectual Property (IP), Technology, Internet, and Business law firm located in Dallas, TX.  The firm offers comprehensive legal services including litigation and enforcement of all forms of IP as well as registration and licensing of patents, trademarks, trade dress, and copyrights.  The firm also provides a wide range of technology, Internet, e-commerce, and business services including business planning, formation, and financing, mergers and acquisitions, business litigation, data privacy, and domain name dispute resolution.  Additional information about the IP law firm and its IP law attorneys may be found at www.klemchuk.com.

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