1400 Gables Ct #103 Plano, TX 75075
5601 Bridge Street, #300, Ft. Worth, TX 76112

Armstrong Discusses TUTSA

The following is the 4th installment in a series of articles  published by  Plano Business Litigation Lawyer Richard (‘Ric’) Armstrong, based on a speech he made to the North Dallas Bar Association.

All right then, what has changed as a result of the new trade secrets statute? I’ll tell you what. The   “continuous use” factor. Under pre-TUTSA Texas case law, a company could use and maintain the secrecy of, e.g., a business process for a number of years, but if they stopped using it for any significant time period, they were vulnerable to the challenge that it was no longer a secret. I say, “vulnerable to the challenge” because this issue was unsettled in Texas jurisprudence, meaning that some cases said continuous use was necessary, and others did not.  For example,  compare Hyde Corp. v. Huffines, 158 Tex. 566, 314 S.W.2d 63, 776 (Tex. 1958), quoting Restatement of Torts §757 [requiring continuous use,] to Bertotti v. C.E. Shepherd Co.,752 S.W.2d 648, 653 (Tex. App.—Houston [14th Dist.] 1988, no writ) [Did not require continuous use]. This ambiguity is now gone, because under TUTSA, a company could elect to create something of a confidential nature and treat it as a trade secret, but leave it in mothballs and never use it.

Additionally, Under the new Texas Uniform Trade Secrets Act, in order to be protected , “confidential information” no longer needs to   “give the owner an opportunity to obtain a competitive advantage over his competitors who do not know or use it,” as was true under the common law of trade secrets that preceded it.  As discussed last week, however, it does have to pass the test of possessing “independent economic value”. This can be a big challenge for the practitioner to prove in court, especially if the alleged trade secret has not been introduced into the marketplace.

So, rather than competitive advantage, the emphasis had now shifted to (1) independent value of the supposed trade secret and (2) its disclosure or non-disclosure to the public.

[Visit us next week for Part 5 in this series.]
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Armstrong The Law Firm, P.C.
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1400 Gables Ct #103
Plano, TX 75075

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