IP Topics
Trade Secrets.
Formulas, processes, customer data, and know-how can be protected for as long as they remain secret and the business takes reasonable steps to keep them that way.
In Short
A trade secret is information that has economic value because it is not generally known or readily ascertainable, and that its owner takes reasonable measures to keep secret. Texas protects trade secrets under the Texas Uniform Trade Secrets Act and the federal Defend Trade Secrets Act. There is no registration and no fixed term, but protection lasts only while the information is kept confidential.
Common situations.
- The business's edge depends on a process, formula, or dataset competitors cannot reverse-engineer.
- Employees with sensitive knowledge are joining or leaving.
- Confidential information is being shared with partners or vendors.
- A former employee or partner may have taken information.
- The choice between patenting an invention and keeping it secret is still open.
- Confidentiality agreements have to hold up if they are ever tested.
Key concepts.
DTSA and TUTSA
The federal Defend Trade Secrets Act and the Texas Uniform Trade Secrets Act protect the same kinds of information. The DTSA provides access to federal court and, in extraordinary circumstances, ex parte seizure; TUTSA provides exemplary damages for willful and malicious misappropriation. Plaintiffs often assert both.
Reasonable measures
Trade secret law protects only information its owner took reasonable measures to keep secret. Identification, classification, access controls, confidentiality agreements, and consistent enforcement are the kinds of measures courts consider.
When an employee leaves
Departures are a common point of risk. Exit interviews, return of materials and credentials, written reminders of continuing obligations, and preservation of access logs are typical steps.
When a company hires from a competitor
A new employer can face liability if it knew or should have known that a hire brought a former employer's trade secrets. Employers commonly screen candidates, instruct them not to bring prior employers' materials, and document independent work.
Defending a misappropriation claim
Claims often begin with a demand letter or a request for a temporary restraining order. Records of independent development, clean-room procedures, and lawful reverse engineering can be central to a defense.
Independent development and reverse engineering
Trade secret law prohibits acquisition by improper means, not independent development. Information developed independently, or learned by examining a lawfully obtained product, is not misappropriated.
Patent or secret
A patent requires public disclosure and lasts a limited term, generally twenty years from filing; a trade secret can last indefinitely, but only while it stays secret. The choice often turns on whether competitors could learn the invention from the product.
Texas context
Energy, semiconductors, health care, and advanced manufacturing are significant Texas industries in which confidential know-how is valuable. Texas has its own trade secret statute and its own noncompete statute, and both state and federal courts in Texas hear misappropriation cases.
The Program
Parts of a trade secret program.
Trade secret law protects only information its owner took reasonable measures to keep secret. A protection program usually has five parts.
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Identify
List the information that gives the business its advantage, focusing on what a competitor would value.
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Classify
Rank information by value and sensitivity so that protections match the risk, and so the business can show it separated confidential information from routine information.
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Restrict
Limit access to people who need it, using physical, digital, and contractual controls.
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Document
Mark confidential materials, log access, and keep records of the measures taken.
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Enforce
Respond consistently when a policy is breached.
The first decision is often whether to patent an invention or keep it secret. The guides below cover that choice and the Texas law that applies.