• In Texas, a trade secret can include formulas, patterns, compilations, programs, devices, methods, techniques, processes, financial data, and lists of actual or potential customers or suppliers.
• A holder of a trade secret must make reasonable efforts to keep the information a secret.
• An alleged trade secret must also have an economic value to third parties and it must not be generally known or readily ascertainable.
Trade Secrets Can Be a Variety of Things
Individuals and entities all over the United States claim to own or have trade secret rights and protections. However, there is a lot of confusion as to what really is a trade secret. A trade secret is an intellectual property right that gives the owner of the trade secret a right to prevent people from disclosing without permission, copying, using, and/or benefiting from its trade secrets. In Texas, a trade secret can include formulas, patterns, compilations, programs, devices, methods, techniques, processes, financial data, and lists of actual or potential customers or suppliers.[1] One of the most well-known trade secrets that exist today is the unique method, combination, and process that Coca-Cola uses to make its caffeinated soda. Although all the ingredients used to make Coca-Cola are in the public domain, the exact method and combination of those ingredients are not. Therefore, Coca-Cola retains trade secret protections over its secret recipe.
Keep Your Trade Secret Confidential
In order for a trade secret to remain a trade secret, the owner of the trade secret must take reasonable precautions to keep the information confidential.[2] The reasonableness of the efforts made by the owner to keep the information confidential will be determined on a case-by-case basis and is a question of fact. Therefore, a motion for summary judgment on this issue alone should not be warranted. Some typical methods that have been found reasonable include advising employees of and limiting access to trade secrets. One may also enter into confidentiality or non-disclosure agreements with employees and third parties. In any event, if an owner fails to take reasonable precautions to keep his/her trade secret confidential, he/she may lose any trade secret protections.
Value to Third Parties
Not only must one take reasonable precautions to maintain the trade secret in a confidential manner, but the trade secret itself must also have value to third parties. A trade secret’s economic value can be determined by its market value or the reasonable amount of damage that would result if the owner of the trade secret would lose the advantage of knowing or using the trade secret. An argument that a specific process took a lot of time and money may not be enough to show an economic value. One must show clear evidence of the time, money, and effort in the production of confidential information. A hypothetical scenario would be where one spends time, money, and effort to develop or research a valuable trade secret. A second party then comes and takes the first party’s trade secret without having to spend any money or time on the research behind the trade secret. Therefore, the latter party would have saved a substantial amount of money without having to conduct any of the legwork. If this scenario exists, one may be able to prove economic value.
In summary, a trade secret can include formulas, patterns, compilations, programs, devices, methods, techniques, processes, financial data, and lists of actual or potential customers or suppliers. Such trade secrets must have an economic value to third parties and must be maintained in a reasonably confidential manner.
Written by*:
Jorge Mares
WATTS GUERRA, LLP
4 Dominion Drive, Bldg 3, Suite 100
San Antonio, Texas 78257
Office: (210) 447-0500
Email: jmares@guerrallp.com
[1] Tex. Civ. Prac. & Rem. Code §134A.002(6)
[2] Tex. Civ. Prac. & Rem. Code §134A.002(6)(B)
*This information is provided to supply relevant information concerning trade secrets, and should not be received as legal advice. Legal advice is only given to persons or entities with whom Watts Guerra LLP has established an attorney-client relationship. Available remedies vary from case to case and depend on the underlying facts of each. If you have another lawyer, you should consult with your own attorney, and rely upon his or her advice, rather than the information contained herein.
© Watts Guerra LLP 2015
