Does your employer hold a trade secret worth its weight in gold? Trade secrets are governed by the TUTSA (Texas Uniform Trade Secrets Act) in Texas. Read on to learn the essentials of TUTSA.

At Gardner Employment Law, we have extensive experience dealing with matters involving trade secrets. If you have questions about trade secrets and need legal advice on the subject, give us a call.

How Does The TUTSA Define a Trade Secret?

The TUTSA defines a “trade secret” as all forms and types of information, including business, scientific, technical, economic, or engineering information. Formulas, designs, prototypes, patterns, plans, compilations, program devices, programs, code, devices, methods, techniques, processes, procedure, financial data, or lists of actual or potential customers or suppliers are all considered trade secrets.

A trade secret may be tangible or intangible and eligibility is not determined by whether or how it is stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing. Owners must demonstrate two key criteria:

1. 1. They have taken reasonable measures to maintain the information’s secrecy.
   2. The information derives economic value from not being generally known or readily ascertainable through proper means.

In essence, trade secrets must be reasonably protected and have a quantifiable economic value. It is this last element, economic value, that distinguishes from the larger body of “Confidential Information.”

What Does The TUTSA Say About Misappropriation of Trade Secrets?

Under the TUTSA, misappropriation of a trade secret can be defined in two ways:

1. 1. The acquisition of a trade secret of another person by a person who knows or has reason to know that the trade secret was acquired by improper means;
   2. Disclosure or use of a trade secret of another without express or implied consent by someone who:
      • • Used improper means to acquire knowledge of the trade secret;
        • At the time of disclosure or use, knew or had reason to know that the trade secret was:
          1. 1. Derived from or through a person who has used improper means to acquire it;
             2. Acquired it under circumstances that gave rise to a duty to maintain its secrecy or limits its use;
             3. Derived from or through a person who owed a duty to maintain the secrecy of or limit the use of the trade secret; or
                • Before a material change of the person’s position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or by mistake.

Companies are not required to prove that the employee or other person actually used the trade secret. Instead, its misappropriation or mere threatening use of it warrants a court order against the employee.

What Are The Remedies for Misappropriation under the TUTSA?

The TUTSA provides three remedies for misappropriation: injunctive relief, damages, and attorney’s fees. The availability and extent of these remedies will depend on the specific circumstances of the case.

1. 1. Injunctive relief: “Injunctive” comes from the root “enjoin,” meaning to halt or stop an action.  The court will enjoin or stop the employee from wrongfully disclosing or using the trade secret.  The employer can seek an injunction for either actual or threatened misappropriation by showing potential harm to the trade secret.
   2. Damages: “Damages” are  monetary losses.  Damages awarded by a court against an employee can include both the actual loss caused by misappropriation as well as the unjust enrichment caused by misappropriation that is not taken into account in computing actual loss.
   3. Attorney’s fees: The court may award reasonable attorney’s fees to an employee if the employee shows that the company:
      • • made a claim of misappropriation in bad faith;
        • filed a motion to in bad faith;
        • took any action that was willful and malicious.

The same can happen to an employee in reverse, being order to pay the company’s attorney’s fees if the employee acts in bad faith or willfully and malicious misappropriates a trade secret. Willful and malicious misappropriation is intentional misappropriation resulting from the conscious disregard of the rights of the owner of the trade secret. If proven, the owner of the trade secret, the company, may be awarded attorney’s fees as well as exemplary damages in an amount not exceeding two times the amount of damages awarded for actual loss.

What Factors Affect Trade Secret Secrecy During Litigation?

A court considers factors related to the secrecy component because the company has a duty to maintain the secrecy and protect its trade secrets.  The TUTSA outlines measures to determine whether the company preserved the secrecy of alleged trade secrets during legal proceedings.  The statute provides that the court may exclude or limit a party’s access to alleged trade secrets based on a balancing test. The test considers the following factors:

1. The value of the alleged trade secret to the owner.
2. The potential degree of competitive harm the owner would suffer from disclosing the trade secret to the opposing party.
3. Whether the owner alleges that the opposing party is already in possession of the trade secret.
4. Whether a party’s representative acts as a competitive decision-maker.
5. The extent to which limiting a party’s access to the alleged trade secret would impair their defense
6. Whether a party or their representative possesses specialized expertise not available to an outside expert.
7. The stage of legal proceedings.

The court may grant protective orders to safeguard trade secrets, including limiting access of confidential information to attorneys and their experts, conducting in camera hearings, sealing court records, and prohibiting disclosure of trade secrets without prior court approval.  This is important because once the outside world gains knowledge of the company’s trade secret, it can never be “secret” again.  You cannot “put the toothpaste back in the tube.”

Contact an Expert.

Trade secrets are serious.  The TUTSA is a robust framework for safeguarding trade secrets and intellectual property. If someone has claimed that you misappropriated a trade secret, contact us today. We can help.