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Texas Uniform Trade Secrets Act - Chapter 1 - Texas Intellectual Property Law - Third Edition
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Texas Intellectual Property Law - Third Edition - Hardcover
Texas Intellectual Property Law - Third Edition - PDF eBook
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§ 1.01 Definition of Trade Secret
In 1958, the Texas Supreme Court in Hyde Corp. v. Huffines, adopted the definition of a “trade secret” set forth in comment b, Section 757 of the RESTATEMENT OF TORTS (1939):
A trade secret may consist of any formula, pattern, device or compilation of information which is used in one’s business and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. It may be a formula for a chemical compound, a process of manufacturing, treating or preserving materials, a pattern for a machine or other device, or a list of customers. A trade secret is a process or device for continuous use in the operation of the business. Generally it relates to the production of goods, as, for example, a machine or formula for the protection of an article. It may, however, relate to the sale of goods or to other operations within the business such as a code for determining discounts, rebates or other concessions in a price list or catalog, or a list of specialized customers or a method of bookkeeping or other office management.
For more than 50 years, Texas courts followed this definition in trade-secret cases. In 2013, Texas became the forty-eighth state to adopt the Uniform Trade Secrets Act, which is now codified in Chapter 134A of the Texas Civil Practice and Remedies Code. The Texas Uniform Trade Secrets Act (TUTSA) became effective on September 1, 2013, displacing “conflicting tort, restitutionary, and other [Texas] laws providing civil remedies for misappropriation. Its provisions apply to the misappropriation of a trade secret that occurs on or after September 1, 2013, the effective date of the Act. A misappropriation that occurred before September 1, 2013—or one that began before that date and continues beyond the effective date—is governed by the common law. Thus, the common law will continue to be applied in some trade-secret misappropriation cases for the foreseeable future.
Although the Act is to be “applied and construed to effectuate its general purpose to make uniform” with respect to other states, the common law may continue to supply the rule for determining issues falling within the interstices of the statute—what constitutes reasonable efforts to protect a trade secret, the circumstances in which a duty to protect a trade secret arises, and defense to a statutory trade-secret claim. The common law may also be used as an aid in interpreting the statute.
The Texas Uniform Trade Secrets Act defines a trade secret somewhat more broadly than the common law: Under TUTSA, a “trade secret” is “information, including a formula, pattern, compilation, program, device, method, technique, process, financial data, or list of actual or potential customers or suppliers, that
(a) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by, other persons who can obtain economic value from its disclosure or use; and
(b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”
Herbert J. Hammond is a Partner with Thompson & Knight, L.L.P. in Dallas, Texas, where he specializes in patent, trademark, copyright, trade-secret, and computer-law litigation and acts as an arbitrator, mediator, and expert witness in intellectual-property disputes. Mr. Hammond graduated from New York University School of Law in 1976 and is licensed to practice in Texas and before the United States Patent and Trademark Office. He is a member of the American Law Institute where he is in the Member Consulting Group for the Restatement of Copyright.
Mr. Hammond has been recognized by Chambers USA in the area of intellectual property, by the Best Lawyers in America in the areas of Intellectual Property Litigation, Patent Litigation, Trade Secret Law, and Trademark Law, by Thompson Reuters in the Top 100 Overall Texas Super Lawyers in Intellectual Property Litigation, and has been listed multiple times in D Magazine’s Best Lawyers in Dallas. He is a frequent speaker at CLE programs and has written many chapters and articles on intellectual-property topics.
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