Texas Amends its Uniform Trade Secrets Act

Last month, Texas’s legislature amended the Texas Uniform Trade Secrets Act (TUTSA). These amendments expand and clarify TUTSA’s definitions, add a clarification to enjoining trade secrets misappropriation, and codify a balancing test to determine whether to exclude people from a courtroom when trade secrets are discussed. The amended TUTSA:

• is effective September 1, 2017.
• expands the definition of "trade secret" by adding: “business, scientific, technical, economic, or engineering information,” design, prototype, plan, program device, code, and procedure. Those terms are copied from the federal Defend Trade Secrets Act (DTSA), thus aligning TUTSA’s trade secret definition more closely with the DTSA. As a reminder, TUTSA, unlike DTSA, (a) includes “list of actual or potential customers or suppliers” as a trade secret and (b) doesn’t require trade secrets to be “related to a product or service used in, or intended for use in, interstate or foreign commerce.” As a very nuanced point, TUTSA trade secrets can be “all forms and types of information” whereas DTSA trade secrets must arguably be “financial, business, scientific, technical, economic, or engineering information.”
• adds a clarification on the proper scope and limits for injunctive relief. TUTSA generally allows for actual or threatened misappropriation to be enjoined and this remains the case but the amended TUTSA now also indicates that an injunction order should “not prohibit a person from using general knowledge, skill, and experience that person acquired during employment.”
• defines (a) “willful and malicious misappropriation” to obtain exemplary damages and (b) level of proof to establish “clear and convincing” evidence to show willful and malicious misappropriation.
• defines a trade secret “owner.” The owner can be either someone holding legal or equitable title or someone holding rights of enforcement. There is no change to the “claimant” definition, which reflects an important difference between TUTSA and DTSA.
• explains trade secret information can be tangible or intangible “whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing.”
• codifies a seven-factor balancing test that courts must consider before excluding a party from the courtroom while discussing trade secrets, a test adopted by the Texas Supreme Court in In re M-I L.L.C., 505 S.W.3d 569 (Tex. 2016). Under TUTSA, there is a presumption that parties are allowed to participate and be present but may be excluded after a court considers:

(1) the value of an owner’s alleged trade secret;

(2) the degree of competitive harm an owner would suffer from the dissemination of the owner’s alleged trade secret to the other party;

(3) whether the owner is alleging that the other party is already in possession of the alleged trade secret;

(4) whether a party’s representative acts as a competitive decision maker;

(5) the degree to which a party’s defense would be impaired by limiting that party’s access to the alleged trade secret;

(6) whether a party or a party's representative possesses specialized expertise that would not be available to a party’s outside expert; and

(7) the stage of the action.

While the TUTSA amendments align it more closely with DTSA, there are still important differences to trade secret definitions, facts that plaintiffs must establish to bring a claim, and available relief. TUTSA is located in Texas Civil Practice & Remedies Code, Chapter 134A; it was amended by House Bill 1995 (signed by Governor Greg Abbott on May 19, 2017).

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.