The Texas Uniform Trade Secrets Act, Explained

What the Act is and what it replaced

The Texas Uniform Trade Secrets Act, usually shortened to TUTSA, is chapter 134A of the Texas Civil Practice and Remedies Code. The Legislature adopted it in 2013, making Texas one of the last states to take up the Uniform Trade Secrets Act, and amended it in 2017 to bring its definitions in line with the federal Defend Trade Secrets Act passed the year before.

Before 2013, Texas trade secret claims were common law torts shaped case by case. Section 134A.007 says the Act displaces conflicting tort, restitutionary and other Texas law that provides civil remedies for misappropriation of a trade secret. Two things survive untouched: contractual remedies, so a breach of a confidentiality agreement is still a separate claim, and criminal remedies under the Penal Code.

The practical effect is that a Texas trade secret case is now a statutory case. The elements, the remedies and the procedural protections all come from the text of chapter 134A, and a claim pleaded as common law misappropriation or unjust enrichment for the same taking is likely to be dismissed as displaced.

What counts as misappropriation

Section 134A.002(3) defines misappropriation in two branches. The first is acquisition: obtaining a trade secret while knowing, or having reason to know, that it was acquired by improper means. The second is use or disclosure without consent by a person who either used improper means to get the secret, or knew at the time that it came from someone who used improper means, who owed a duty to keep it secret, or who got it by accident or mistake.

Improper means, under section 134A.002(2), includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy or limit use, and espionage through electronic or other means. Proper means, under section 134A.002(4), includes independent development, reverse engineering unless prohibited, and any other means that is not improper.

Two consequences follow. A competitor who reverse engineers a product has done nothing actionable. A company that receives a file from a new hire and keeps using it after learning where it came from has, by that point, misappropriated. What qualifies as a trade secret in the first place has its own article: what counts as a trade secret in Texas.

Injunctions under section 134A.003

The Act lets a court enjoin actual or threatened misappropriation. Threatened is the important word: the owner does not have to wait until the secret has been used. The 2017 amendment added a limit that governs almost every departing-employee case. The order may not prohibit a person from using general knowledge, skill and experience acquired during employment.

Three further features matter in practice:

• Duration. On application, the injunction ends when the trade secret has ceased to exist, but the court may extend it for a reasonable time to eliminate any commercial advantage the misappropriation produced.
• Royalty injunctions. In exceptional circumstances, where barring use would be unreasonable, the court may instead condition future use on payment of a reasonable royalty for the period use could have been prohibited.
• Affirmative acts. The court may order the defendant to take steps to protect the secret, such as returning files, certifying deletion or submitting devices for inspection.

The standard a Texas court applies at the temporary injunction stage, and how the first weeks of an emergency case unfold, are covered in getting an emergency injunction to stop trade secret misuse.

Damages under section 134A.004

Damages are available in addition to or in place of an injunction. The Act offers two measures. The first is the actual loss caused by the misappropriation plus the unjust enrichment of the defendant that the loss figure does not already capture. The second, available when neither of those can be proved by other methods, is a reasonable royalty for the unauthorized disclosure or use.

Exemplary damages are capped by the statute. If the owner proves willful and malicious misappropriation by clear and convincing evidence, the fact finder may award exemplary damages of up to twice the actual damages award. Section 134A.002(7) defines willful and malicious as intentional misappropriation resulting from the conscious disregard of the owner's rights. How each measure is calculated and proved is treated in damages in trade secret cases.

Attorney's fees under section 134A.005

Texas follows the general rule that each side pays its own lawyer unless a statute or contract says otherwise. TUTSA says otherwise in three situations, and in each the award is discretionary with the court:

1. a claim of misappropriation was made in bad faith;
2. a motion to terminate an injunction was made or resisted in bad faith; or
3. willful and malicious misappropriation exists.

The first category is the one defendants rely on. A company that sues a former employee over information that was plainly public, or that cannot identify any secret at all, risks paying the other side's fees. The third category rewards the owner who proves intentional, conscious-disregard conduct. An ordinary case, where the taking is proved but malice is not, usually produces no fee award under the Act, which is one reason a confidentiality agreement with its own fee clause is worth having.

Keeping the secret secret in court: section 134A.006

A trade secret lawsuit asks the owner to describe, in a public forum, the very information it wants to keep private. Section 134A.006 addresses this directly. The court shall preserve the secrecy of an alleged trade secret by reasonable means, and there is a presumption in favor of granting protective orders. The tools the section names include provisions limiting access to confidential information to the attorneys and their experts, in camera hearings, sealing the records of the action, and ordering anyone involved in the litigation not to disclose the alleged secret without court approval.

The 2017 amendment added a procedure for the hardest version of the problem: whether a party itself, not just the public, can be kept out of part of a hearing where the other side's secret is discussed. The court weighs listed factors, including the value of the owner's secret, the degree of competitive harm, whether the party is a competitor, and the party's need to participate in its own case.

Owners should expect to obtain a protective order early and to produce the detailed description of the secret under it. Defendants should expect to be asked to identify their own counsel and experts who will see it. The wider rules on sealing and confidentiality in Texas business cases apply alongside these.

The deadline: three years

The limitations period is not in chapter 134A but in section 16.010 of the same code. A misappropriation claim must be brought within three years after the misappropriation is discovered or, by the exercise of reasonable diligence, should have been discovered. A misappropriation that continues over time is a single cause of action, so each new use does not start a new period.

Example

Suppose a Dallas software company learns in January that a former developer took its source code to a start-up. It sends one letter, gets no answer, and does nothing further. In March of the third year it sees the start-up's product and realizes the code is inside. The three-year period runs from the January discovery, not from the product launch, because the misappropriation was discovered then and the later use is part of the same continuing claim. The damages claim is still timely if filed before that January passes. The injunction, however, would face a hard question about why the company waited.

How TUTSA compares with the federal Act

Since the 2017 amendment the two statutes define trade secret, misappropriation and improper means in nearly the same words, and both cap exemplary damages at twice actual damages, both allow fees for bad faith or willful and malicious conduct, and both carry a three-year limitations period. The differences are about court and procedure: the federal Act requires a connection to interstate commerce and opens the federal courthouse, offers a rarely used ex parte seizure order, and ties exemplary damages and fees against employees to a whistleblower notice in their agreements. When those differences point toward federal court is the subject of when to sue under the federal Defend Trade Secrets Act.

What the Act means for owners and for defendants

For the owner, TUTSA is a complete toolkit: a fast injunction, two measures of damages, a path to exemplary damages and fees in the worst cases, and a court obliged to protect the secret while the case proceeds. Its demands are on proof. The owner must identify the secret with particularity and show reasonable measures, which means the case is partly won or lost on how the company behaved before anyone left.

For the defendant, the Act supplies the defenses: the information was not secret, was not guarded, was readily ascertainable, was reverse engineered or independently developed, or is general skill and experience the injunction cannot reach. It also supplies a sword in the bad-faith fee provision. Tina Wysk represents Dallas companies and individuals on both sides of these cases in state and federal court; the practice is described at trade secret litigation.