06 / 23 / 2014

Texas’s New Law on Trade Secrets

Prior to the enactment of the Texas Uniform Trade Secrets Act (“TUTSA”), misappropriation of trade secrets was a common-law cause of action, often brought by trade secret owners against individuals who had taken trade secrets and were using or disclosing the trade secrets to the detriment of the owner. Trade secret litigation can be expensive, and under the common law, there was no way for a plaintiff to recover attorney’s fees. However, there was a way around that shortcoming.

Enter Texas’ civil theft statute, known as the Texas Theft Liability Act. The civil theft statute allows an individual to file a civil lawsuit for several different types of theft, such as theft of property or theft of services. Prior to September 1, 2013, it also allowed an individual or business to file a lawsuit for theft of trade secrets.

A key feature of the civil theft statute is that it allows a court to award attorney’s fees to the prevailing party. There are no special requirements, other than that the party prevail. Thus, attorneys representing plaintiffs claiming misappropriation of trade secrets would bring two claims in one lawsuit:  a claim for misappropriation of trade secrets, and a second claim for civil theft.  By filing the civil theft claim, a plaintiff stood a chance of recovering their attorney’s fees if they won the lawsuit.

TUTSA amended the Texas Theft Liability Act, and eliminated theft of trade secrets as a basis for bringing a civil theft lawsuit. Thus, after September 1, 2013, it is no longer possible to bring a civil theft lawsuit in conjunction with a misappropriation of trade secrets case; TUTSA is now the sole remedy in Texas for misappropriation of a trade secret.

TUTSA does allow for attorney’s fees to be recovered, but only in limited circumstances. TUTSA provides that a court may award attorney’s fees to a prevailing party in situations where a lawsuit is brought in “bad faith,” or where a plaintiff proves “willful and malicious misappropriation” by a defendant. While not as broad as the relief provided for by the civil theft statute, TUTSA does appear to recognize that in some circumstances it is unjust to deny a prevailing party the possibility of recouping its attorney’s fees.
As the TUTSA is still in its infancy and has yet to be litigated in many cases, it is important for both Plaintiffs and Defendants in trade secret litigation to be on the cutting edge of legal developments.  Hiring a lawyer who specializes in this area of law is critical for either early success (in the form of prosecuting or defending both Temporary Restraining Orders and Temporary Injunctions) and for success at trial.

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