Texas Passes New Trade Secret Law

On May 2, 2013, Rick Perry signed into law the Texas Uniform Trade Secrets Act (UTSA), modeled after a uniform act in place in nearly every other state. The Texas UTSA creates Chapter 134A of the Texas Civil Practice and Remedies Code and replaces existing Texas law governing the misappropriation of trade secrets. The new law takes effect on September 1, 2013 and is intended to replace all statutory or common law trade secret laws in place at that time.

The Texas UTSA prohibits the unauthorized acquisition, disclosure and use of trade secrets. The Texas UTSA provides a broad definition of a “trade secret,” including 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; and
  • Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

However, the Texas UTSA allows authorized reverse engineering.

The new law provides that there is a presumption in favor of granting protective orders, including orders to protected “threatened” misappropriation, to preserve the secrecy of trade secret information. The law also allows injunctions to survive the life of the trade secret, allowing an additional reasonable period of time to eliminate any commercial advantage that otherwise would result from the misappropriation.

In addition to injunctive relief, claimants under the new law can seek damages for the actual loss caused by the misappropriation, unjust enrichment, and an imposed royalty for unauthorized disclosure or use. Exemplary damages and attorneys’ fees are available for the willful and malicious misappropriation of trade secrets. Attorneys’ fees are also available if a claim of trade secret misappropriation is made in bad faith.

This column is published for informational purposes only. It should not be construed as legal advice and is not intended to create an attorney client relationship. The views expressed are those of the author and do not necessarily reflect the views of the author’s law firm or its individual partners.

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