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Tilting the Scales Business Issues with a Legal Slant

Protecting Your Piece of the Pie: Texas Adopts the Uniform Trade Secrets Act

Posted in Legal Risk Management, Property Issues

Pizza the Action is a major distributor of pizza dough and toppings and provides these products to many large national pizza chains.  Pizza the Action’s top sales person, Eaton Wright, just announced that he was resigning and that he had accepted a position with The Pie’s the Limit, an upstart competitor in the very same industry.  Wright did not have an employment or non-competition agreement with Pizza the Action.  While Wright has ostensibly done nothing yet, Pizza the Action is concerned about Wright providing his new employer with Pizza the Actions’ customer lists, customer data and financial pricing information.  Is there anything that can be done to stop him?

Yes.  During this past legislative session, Texas became the 48th state to enact (its version of) the Uniform Trade Secrets Act (“TUTSA”). TUTSA, which goes into effect September 1, 2013, will provide companies with greater protection of their trade secret information across Texas.  Previously, Pizza the Action may have found it difficult to obtain a temporary restraining order or injunctive relief against Wright without some proof of actual misappropriation of trade secrets.  TUTSA, however, now authorizes injunctive relief for actual and threatened misappropriation.  Pizza the Action could now arguably seek injunctive relief based on the “inevitable disclosure doctrine” where circumstances suggest that Wright would inevitably make use of their trade secret information as part of his new position.  Other significant changes include: 

  1. an expanded definition of trade secret (includes lists of actual and potential customers or suppliers as well as financial information);
  2. safeguards to protect allegedly trade secret information during the pendency of the litigation (e.g. through protective and sealing orders);
  3. provisions for the award of attorneys’ fees to both the plaintiff and defendant; and
  4. the availability of exemplary damages (act to exceed twice the economic damages) where the plaintiff establishes willful or malicious misappropriation by clear and convincing evidence.

 Tilting the Scales in Your Favor

The TUTSA seeks to put Texas in step with other states and provide increased predictability for those seeking to assert claims in Texas courts for trade secret misappropriation.  Companies will now have a statute in their arsenal as opposed to merely relying upon employment agreements and case precedent.  Given the increased certainty in the law, businesses should consider choosing Texas as the governing law for their agreements as well as modifying their agreements to reflect the recent changes.  As the ultimate determination of whether information constitutes a trade secret will be case specific, businesses should be able to demonstrate measures taken to safeguard trade secret information and should clearly identify such information as “confidential.”