Skip to main content
GeneralInsight

Texas Lawyer: Trade Secrets in Texas: What Qualifies for Protection?

By April 28th, 2022No Comments

Logo Texas LawyerOriginally published in Texas Lawyer on Feb. 09, 2022.

By Laurel L. Baker

The definition of a “trade secret” under Texas law is seemingly broad, as the governing statute provides a laundry list of examples that may qualify. See Tex. Civ. Prac. & Rem. Code § 134A.002(6).  But despite the seeming breadth of trade secret protection, inclusion on this statutory list does not end the inquiry.

Laurel L. Baker

Laurel L. Baker

For trade secret protection in Texas, information must satisfy two requirements: (1) “the owner of the trade secret must take reasonable measures under the circumstances to keep the information secret”; and (2) “the information [must derive] independent economic value from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.” See id. (emphasis added). To determine trade secret status, Texas courts apply a six-factor test:

(1)   the extent to which the information is known outside of the business;

(2)   the extent to which it is known by employees and others involved in the business;

(3)   the extent of measures taken to guard the secrecy of the information;

(4)   the value of the information to the company and its competitors;

(5)   the amount of effort or money expended in developing the information; and

(6)   the ease or difficulty with which the information could be properly acquired or duplicated by others.

In re Bass, 113 S.W.3d 735, 739 (Tex. 2003).

Applying these factors, Texas courts have consistently found that certain efforts by businesses are sufficient to establish trade secret protection under Texas law:

  • Requiring agreements regarding the use of the confidential and trade secret information, including technology agreements and confidentiality, non-solicitation, and non-disclosure agreements entered into at the outset of an individual’s employment with the business. See Title Source, Inc. v. HouseCanary, Inc., 612 S.W.3d 517, 529 (Tex. App.—San Antonio 2020); AHS Staffing, LLC v. Quest Staffing Group, Inc., 335 F.Supp.3d 856, 864 (E.D. Tex. 2018); Morgan v. Clements Fluids South Texas, LTD., 589 S.W.3d 177, 187-188 (Tex. App.—Tyler 2018); In re Cooper Tire & Rubber Co., 313 S.W.3d 910, 916 (Tex. App.—Houston 2010).
  • Ensuring employees comply with company policies requiring confidentiality. AHS Staffing, 335 F.Supp.3d at 864.
  • Storing confidential and trade secret information on a password-protected server. Morgan, 589 S.W.3d at 187-188.
  • Limiting access to confidential and proprietary information to specific employees on an as-needed basis. See Morgan, 589 S.W.3d at 187-188.
  • Closing work sites to the public, including vendors, business partners, contractors, and all other individuals not employed by the business. In re Cooper Tire & Rubber Co., 313 S.W.3d at 916.

While some may believe that certain information falls within the purview of the statute’s protection, it is prudent to be aware of these tenets to ensure that protective steps are in place, like those discussed above, to minimize risk of costly litigation to protect confidential and proprietary information.

Laurel L. Baker is a litigation attorney at the law firm of Phillips Murrah. Her primary practice focus is on commercial and business litigation matters representing both plaintiffs and defendants in business and commercial disputes involving banking, corporate governance, contract disputes, mergers and acquisitions, employment, and other business litigation issues. Baker received her J.D. from the SMU Dedman School of Law and was a Dean’s Scholarship Recipient. She is also a member of the Junior League of Dallas, through which she also volunteers in the community.


Reprinted with permission from the Feb. 9, 2022 edition of Texas Lawyer© website 2022 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or reprints@alm.com.

Print Friendly, PDF & Email