Employers have a new statute to help protect their trade secrets.

Employers have a new statute to help protect their trade secrets.

Effective September 1, 2013, Texas has a new Uniform Trade Secrets Act.  The Act applies to misappropriation of trade secrets on or after September 1. Prior law governs misappropriation of trade secrets before, and continuing misappropriation beginning before, September 1.

Trade secrets are defined in the Act to specifically include financial data, as well as lists of actual or potential customers or suppliers, so long as the information is maintained with reasonable secrecy and derives independent economic value from not being generally known. Proof of the amount of time, effort and money expended in developing the information, often identified in prior caselaw as one of several factors to be considered in determining whether information qualified as a trade secret, is not mentioned. Nor is there a requirement that the information be for “continuous use” in the business operation to qualify as a trade secret.

The Act permits injunctive relief against threatened, as against just actual, misappropriation. This appears to be a legislative endorsement of the inevitable disclosure doctrine (a doctrine never expressly adopted by Texas courts), which applies when a defendant who has had access to trade secrets moves to a competitor to perform duties so similar that it is unlikely those duties can be performed without making use of his former employer’s trade secrets. This means that under specified circumstances an employer can seek an injunction against not only a former employee but also against the former employee’s new employer when disclosure or use is threatened. The Act also permits a court “in appropriate circumstances” to require affirmative acts to protect a trade secret, which would presumably include requiring the return or destruction of trade secrets wrongfully taken.

Damages can include the actual loss caused by the misappropriation, unjust enrichment caused by the misappropriation, or a reasonable royalty. Misappropriation which is found to be willful and malicious (generally defined in caselaw to be intentional unexcused wrongdoing) can result in an award of exemplary damages up to two times actual damages.

Attorneys’ fees may also be recovered by a prevailing party if willful and malicious misappropriation is found. Employers should beware, however, that attorneys’ fees may be awarded against an employer who is found to have made a misappropriation claim in bad faith.

This new Act provides an employer with additional safeguards for its trade secrets.

 

For more information about the Uniform Trade Secrets Act, or any other employment law related questions, please contact the head of GDHM’s Employment Law group, Susan Burton, at sburton@gdhm.com or 512.480.5738.

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