Texas: New Bill Amends Trade Secrets Statute, Aligning with the Defend Trade Secrets Act

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September 1, 2017

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House Bill 1995 amends the Texas Uniform Trade Secrets Act (“TUTSA”), bringing it into closer alignment with the federal Defend Trade Secrets Act (“DTSA”).  The bill eliminates discrepancies between the TUTSA and DTSA’s definition of “trade secrets,” adds definitions for an “owner” of a trade secret, defines “willful and malicious appropriation” and “clear and convincing evidence” for the purpose of establishing willful and malicious appropriation, and further emphasizes what measures an organization must make in order to qualify information as a trade secret.

Further, the amended TUTSA codifies the “balancing test” used to determine whether or not a party involved in a trade secrets lawsuit can be limited or denied access to documents or testimony regarding a competitor’s trade secrets.  The following factors must be considered:

  1. Value of the owner’s alleged trade secret;
  2. Degree of competitive harm the owner would suffer from the trade secret information being revealed;
  3. Whether the owner is alleging that the other party is already in possession of the trade secret;
  4. Whether a party’s representative acts as a competitive decision maker;
  5. Degree to which a party’s defense is impaired by limiting or denying access to the trade secret information;
  6. Whether a party or its representative possesses specialized expertise not available to a party’s outside experts; and
  7. The stage of the action.

The amended TUTSA also expressly incorporates the common-law rule that court orders cannot prevent a person using “general knowledge, skill, and experience” acquired during employment.

Action Items

  1. Review precautions to protect trade secret information with labor counsel, if applicable.
  2. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

© 2017 ManagEase, Incorporated.

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