TUTSA

                         

At the beginning of the September, the State of Texas followed the majority of other states becoming the 48th to adopt a version of the uniform trade secrets act. So the question becomes, why does this matter to my business or in the context of the employee/employer relationship?

Though the instances where true “trade secrets” are in play is limited, employers that have trade secrets or think they have trade secrets must protect them and treat them as such. The Texas Uniform Trade Secret Act defines a trade secret as:

A formula, pattern, compilation, program, device, method, technique, process, financial data, or list of actual or potential customers or suppliers, that: (1) 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 (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

So, if the information is not readily available and the employer protects it, they may have an argument that there is a trade secret. The interesting thing about the statute is it covers customer or supplier lists which could potentially impact a wide range of sales and other positions.

The statute provides for some other items including a presumption in favor of granting protective orders, allowing injunctions that protect the secrecy of trade secret information to last the life of the trade secret, and allowing plaintiffs to seek damages for the actual loss caused by misappropriation.  Exemplary damages and attorney’s fees are available where there is willful and malicious misappropriation of trade secrets. If a claim of trade secret misappropriation is made in bad faith, attorney’s fees are available for the defendant meaning there is a loser pays provision.

So what happens now? Plaintiffs will now begin to use the statute as a new cause of action with another grounds for attorneys’ fees. The use of the statute will also be a basis for injunctive relief as plaintiffs attempt to demonstrate that are likely to prevail on their lawsuit because of violations of the trade secret act. It will take several years for these types of cases to make their way through the courts and for appellate decisions to interpret the statute. In the meantime, it is likely that practitioners will use cases from other jurisdictions to support their arguments in court.  The statute  only applies to misappropriation that takes place from September 1 forward.