News

Texas joins majority of country by passing Uniform Trade Secrets Act

by Mike Maslanka

On May 2, Governor Rick Perry signed the newly enacted Texas Uniform Trade Secrets Act, which takes effect September 1. Texas is the 48th state to pass the law, proving that while Texas may not always be first, it is never last!

The law, put simply, is a big deal. It wipes away, with a stroke of the governor’s signature, all existing case law regarding misappropriation of trade secrets. So what will be a trade secret under the new law? “Information, including a formula, pattern, compilation, program, device, method, technique, process, financial data, or list of potential customers or suppliers.”

The inclusion of financial data and customer lists was a decision of the Texas Legislature, as those items are not included in other states’ Uniform Trade Secrets Act.

The law has a real bite to it for those who abscond with a company’s trade secrets, including extension of an injunction to eliminate “commercial advantage” gained by the swiper, an award of unjust enrichment damages for any damages caused by the misappropriation, and, in some cases, imposition of liability for reasonable royalties. If the misappropriation is shown to be willful and malicious, punitive damages may be assessed in an amount not to exceed twice the actual damages.

Further, a court may award attorneys’ fees if a claim of misappropriation is made in bad faith or if a motion to terminate an injunction is made or resisted in bad faith. The law also instructs courts to take steps during litigation to preserve the secrecy of trade secrets.

In application of the new law, Texas courts will look to the law of other states for assistance interpreting the language of the Uniform Trade Secrets Act. Gasp! You heard it here first—we’ve gone from talk of secession to joining the rest of the union!

Mike Maslanka is a partner at Constangy, Brooks & Smith, LLP, and the editor of Texas Employment Law Letter. You can reach him at mmaslanka@constangy.com.