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Business Litigation Alert: "Texas Adopts the Uniform Trade Secrets Act"

On May 2, 2013, Texas became the forty-eighth state to adopt a version of the Uniform Trade Secrets Act (UTSA). The UTSA includes statutory definitions for terms such as trade secrets, misappropriation, and wrongful means, and provides several potential remedies for misappropriation of trade secrets, including injunctive relief, damages and attorneys’ fees.

Until now, common law governed misappropriation of trade secrets lawsuits in Texas. Much of the common law of Texas is similar to the UTSA, but the new legislation will result in notable changes. Highlights to newly adopted Texas Uniform Trade Secrets Act (TUTSA) including the following:

  • The statutory definition of “trade secret” includes a requirement that the owner of the information has taken steps that are reasonable under the circumstances to maintain its secrecy. Customer lists are specifically listed as possible trade secrets.
  • Reverse engineering is expressly allowed as a “proper means” of obtaining information, “unless prohibited,” which presumably refers to contractual prohibitions.
  • Courts are authorized to grant both prohibitory and mandatory injunctions (ordering affirmative acts to protect a trade secret).
  • If “willful and malicious” misappropriation is proven by clear and convincing evidence, the fact finder may award punitive damages of up to two times actual damages.
  • Attorneys’ fees may be awarded to the prevailing party if a claim of misappropriation is made in bad faith, a motion to terminate an injunction is made or resisted in bad faith, or there is a finding of willful and malicious misappropriation.
  • As you might expect, the TUTSA “displaces conflicting tort, restitutionary, and other law of this state providing civil remedies for misappropriation of a trade secret.”

TUTSA will become effective on September 1, 2013, and will apply to misappropriations occurring after that date. Misappropriations occurring prior to September 1 and continuing misappropriations that commenced prior to September 1 will be governed by current law.

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