Texas Adopts the Texas Uniform Trade Secret Act: Here’s what it means

Chris Hanslik

May 16, 2013

On May 2, Texas Governor Rick Perry signed into law the Texas Uniform Trade Secrets Act (TUTSA). The new law helps clarify what are protectable trade secrets and the remedies available to businesses whose trade secrets are misappropriated. The TUTSA replaces existing, and often confusing, case law regarding misappropriation of trade secrets.

TUTSA prohibits the unauthorized acquisition, disclosure, and use of a trade secret. The Act also defines trade secrets to include the following: a process, financial data, or list of actual or potential customers, a formula, pattern, compilation, program, device, method, technique, process, financial data, or list of actual or potential customers or suppliers, that:

  • 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.
  • Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

The law also makes claims of misappropriation easier to prove by providing that there is a presumption in favor of granting protective orders to preserve the secrecy of trade secret information. Courts may enter injunctions against individuals or other companies for actual or threatened misappropriation. Under the law, courts are also authorized to use reasonable means to protect a trade secret in litigation, and protective orders may:

  • Limit access to confidential information to only the attorneys and their experts.
  • Allow for in camera hearings.
  • Seal the records of the action.
  • Order any person involved in the litigation not to disclose an alleged trade secret without prior court approval.

Under the new law, claimants may also seek monetary damages for the actual loss caused by the misappropriation, as well as for unjust enrichment. In addition, a court may impose a reasonable royalty for an unauthorized disclosure or use of a trade secret. Exemplary damages and attorneys’ fees are recoverable upon a showing that the misappropriation was willful and malicious. Attorneys’ fees may also be awarded upon a showing that the misappropriation was in bad faith or if a motion to terminate an injunction is made or resisted in bad faith.

The TUTSA becomes effective September 1, 2013 and only applies to allegations of misappropriation that take place after that date. This new law is a big step forward for Texas businesses trying to keep their trade secrets protected.