Trade Secrets

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On February 16, 2017, Texas State Representative Gary Elkins filed H.B. 1995 to amend the Texas Uniform Trade Secrets Act (TUTSA). The bill is the product of months of study completed by a Working Group consisting of members of the Trade Secrets Committee of the Intellectual Property Section of the State Bar of Texas and the Business Law Section of the State Bar of Texas. As a result of that study, the Working Group (of which I was a member) determined that there were four key concerns with TUTSA that needed to be addressed:
Continue Reading Texas Representative Files Bill to Amend Texas Uniform Trade Secrets Act

A non-disclosure agreement is a contract that allows a trade secret owner to impose contractual liability for any disclosure or misappropriation of its trade secrets.  Non-disclosure agreements allow companies to disclose their trade secrets to new employees or to third-parties (like potential customers or investors) with less danger of destroying the secrecy of the trade secret.   A typical non-disclosure agreement requires the other party to keep trade secrets in the strictest confidence, prohibits the other party from disclosing the information without prior written consent, and warns the other party that it cannot make use of the trade secret for his or her personal benefit.  Here are five reasons why using non-disclosure agreements can benefit your company:
Continue Reading Five Reasons Your Company Should Use Non-Disclosure Agreements

In May 2016, the federal government enacted the Defend Trade Secrets Act (DTSA), which provides federal civil cause of action for trade secrets misappropriation.  It is similar to the state-based Uniform Trade Secret Act.  One important difference, though, is the DTSA’s notice provision for non-disclosure agreements (NDAs).  With the enactment of DTSA, all NDAs entered into or amended after May 11, 2016 are expected to provide notice of certain trade secret disclosure immunities to employees, contractors, or consultants. 
Continue Reading Time to Update Your Employee Non-Disclosure Agreements

In my December 11, 2016 post, I explained how the Southern District of Texas rejected the argument that the receipt of trade secrets pursuant to a non-disclosure agreement (NDA) is not a defense to a Texas Uniform Trade Secrets Act claim.  The Western District of Texas, however, takes the opposite position in Education Management Services v. Cadero, No. SA-14-CA-587, 2014 WL 12586781, (W.D. Tex. Nov. 18, 2014), reconsideration denied, No. SA-14-CA-587, 2014 WL 12586782 (W.D. Tex. Dec. 23, 2014). 
Continue Reading The Opposite View: Receipt of a Trade Secret Pursuant to a Non-Disclosure Agreement is a Defense to a Trade Secrets Claim

In my December 17, 2016 post, I discussed the In re M-I, LLC balancing test that courts must employ in making the decision to exclude a party’s representive from participating at trial.  Recently, I had a conversation with an in-house counsel about this case, and he brought up an interesting point about excluding a party’s representative: If the allegation is that the defendant already has knowledge of the plaintiff’s trade secret, how can the plaintiff be harmed by the defendant’s participation at trial or hearing?  (For purposes of this blog, I’ll assume that the excluded representative is the defendant.)  Under that scenario, there is little harm to plaintiff if defendant participates at hearing/trial since the defendant already knows the trade secret.  Conversely, there’s more harm from defendant participating at trial if defendant has not yet received the trade secret—e.g., defendant is hiring an employee that has the trade secrets.
Continue Reading The Problem with In re M-I, LLC

In a misappropriation of trade secrets case under the Texas Uniform Trade Secrets Act (TUTSA), the trial court must “preserve the secrecy of an alleged trade secret by reasonable means.”  TEX. CIV. PRAC. & REM. CODE § 134A.006 (Westlaw 2016).  TUTSA, however, provides only scant guidance for the courts on how to preserve that secrecy.  Under TUTSA,  “[t]here is a presumption in favor of granting protective orders to preserve the secrecy of trade secrets.”  Futher, TUTSA states that these protective orders may include, among other things, “limiting access to confidential information to only the attorneys and their experts, holding in camera hearings, sealing the records of the action, and ordering any person involved in the litigation not to disclose an alleged trade secret without prior court approval.”  Beyond these two sentences, TUTSA is not specific as to what the trial court must do in order to preserve the secrecy of the alleged trade secret.

In re M-I, LLC is the first Texas Supreme Court case to attempt to provide trial courts with more guidance. 
Continue Reading The First Texas Supreme Court Case Interpreting the Texas Uniform Trade Secrets Act

In Graduate Medical Education Development, LLC v. St. George’s Univ., Ltd., No. CV H-15-2641, 2016 WL 5844707 (S.D. Tex. Oct. 6, 2016), the Southern District of Texas rejected a defendants’ argument that the receipt of trade secrets pursuant to a non-disclosure agreement (“NDA”) bars the plaintiff’s trade secrets claim.  In Graduate Medical Eduation Development, plaintiff GMED disclosed various trade secrets to defendants pursuant to the terms of the parties’ NDA.  Plaintiff alleged that Defendants then used that information to place a bid to purchase a hospital and to secure additional investors, all in violation of the NDA.

Defendants countered with a Rule 12(b)(6) motion, arguing, among other things, that Plaintiff had not properly pled that the trade secrets were misappropriated because Plaintiff admitted that Defendants received the secrets pursuant to the NDA.
Continue Reading Receipt of Trade Secrets Pursuant to a Non-Disclosure Agreement is Not a Defense to a Trade Secrets Claim

The Northern District of Texas recently published a 2015 opinion interpreting the Texas Uniform Trade Secrets Act (TUTSA). In ZeniMax Media, Inc. v. Oculus VR, LLC, 166 F. Supp. 3d 697 (N.D. Tex. 2015), Judge Solis held that plaintiff’s common law misappropriation claims were not preempted by TUTSA.  Defendant Facebook did not acquire the…