June 2, 2020

June 02, 2020

Subscribe to Latest Legal News and Analysis

June 01, 2020

Subscribe to Latest Legal News and Analysis

Amended Statute Harmonizes Texas and Federal Trade Secret Protection and Litigation

Governor Abbott recently signed HB1995, which amends the Texas Uniform Trade Secrets Act (“TUTSA”). The amendments change the four-year old Texas trade secret statute due to two events that have occurred since the September 1, 2013, passage.

First, in 2016 the Defend Trade Secrets Act (“DTSA”) was enacted and created a federal cause of action for misappropriation of trade secrets. DTSA is largely based on the Uniform Trade Secrets Act and thus is similar to the Texas statute. However, there were differences in the definitions of “trade secret” and “owner” that could have led to different results under the two statutes in certain situations. Therefore, the definitions of “trade secret” and “owner” in the Texas statute are being amended to harmonize them with the DTSA. This should promote uniform application of trade secret law and perhaps discourage forum shopping between state and federal courts.

Second, in 2016 the Texas Supreme Court decided the case of In re: M-I, LLC (No. 14-1045, 2016 Tex. LEXIS 389 (Tex. May 20, 2016)). The Supreme Court reversed a trial court’s holding that a corporate representative could be excluded from a hearing wherein the opposing party’s trade secrets were being presented. In doing so the Court held that there is a presumption that a party is allowed to participate and assist counsel in a trade secret case and that this presumption can only be overcome if the court balances several factors. The amendment to the Texas statute will codify this balancing test as follows:

a presumption exists that a party is allowed to participate and assist counsel in the presentation of the party's case. At any stage of the action, the court may exclude a party and the party's representative or limit a party's access to the alleged trade secret of another party if other countervailing interests overcome the presumption. In making this determination, the court must conduct a balancing test that considers:

  1. the value of an owner's alleged trade secret;

  2. the degree of competitive harm an owner would suffer from the dissemination of the owner's alleged trade secret to the other party;

  3. whether the owner is alleging that the other party is already in possession of the alleged trade secret;

  4. whether a party's representative acts as a competitive decision maker;

  5. the degree to which a party's defense would be impaired by limiting that party's access to the alleged trade secret;

  6. whether a party or a party's representative possesses specialized expertise that would not be available to a party's outside expert; and

  7. the stage of the action.

The above amendments to the Texas trade secret statute go into effect on September 1, 2017.

Copyright © 2020, Hunton Andrews Kurth LLP. All Rights Reserved.


About this Author

Gregory L. Porter, Intellectual Property Attorney, Andrews Kurth, Law Firm

Greg Porter has extensive experience representing and advising companies in all aspects of patent and trade secret law, including acting as lead counsel in successful jury trials and preliminary injunction hearings, as well as advising on patent procurement and designing around competitor's patents. Greg also has counseled Fortune 500 clients on the creation and management of their patent portfolios.

Over the years, Greg has successfully litigated cases in a diverse range of technologies from oil field tools to polymers and computer networking. Greg has drafted and...

Jeff C. Dodd, Andrews Kurth Law Firm, Securities Attorney

Corporate, Securities and Corporate Finance: experience in diverse domestic and international corporate transactions, including representing issuers and underwriters (and investment bankers) in connection with public and private securities offerings (including IPOs and secondary offerings); representing venture capital and other investment groups or funds, as well as portfolio companies, in private debt and equity financing transactions; representing various participants (buyers, sellers, financing sources) in merger and acquisition and change of control transactions, public and private; counseling as to Securities Exchange Act of 1934 compliance and disclosure; advising regulated companies (including broker/dealers and investment advisers) as to regulatory and compliance matters; advising clients as to Investment Company Act of 1940 issues; structuring financing arrangements and vehicles (including structuring various hedge, private equity and other investment funds); representing borrowers and lenders in lending transactions (including financing transactions relating to acquisitions); and structuring and documenting joint venture, corporate partnering and similar arrangements.