PJC Business 2024

PJC 111.1

M ISAPPROPRIATION OF T RADE S ECRETS

When the gravamen of a common law claim duplicates a TUTSA claim, the common law claim is preempted. This occurs if the factual basis of the com mon law claim, as pleaded, would not exist “without the use of alleged trade secrets.” However, because TUTSA’s preemption provision applies only to conflicting common law remedies, a common law claim is not preempted by TUTSA if it addresses harm separate from the trade secret misappropriation. Title Source, Inc. v. HouseCanary, Inc. , 612 S.W.3d 517, 533 (Tex. App.—San Anto nio 2020, pet. denied) (internal citations omitted). To the extent prior Texas common law regarding ownership of trade secrets has not been displaced, Texas courts held before the Act that a plaintiff must establish owner ship of the trade secret as an element of its misappropriation claim. Rusty’s Weigh Scales & Service, Inc. v. North Texas Scales, Inc. , 314 S.W.3d 105, 109 (Tex. App.— El Paso 2010, no pet.); Mabrey v. SandStream, Inc. , 124 S.W.3d 302, 310 (Tex. App.— Fort Worth 2003, no pet.). The supreme court treated a licensee of a trade secret as an owner who could pursue a claim for misappropriation. K&G Oil Tool & Service Co. v. G&G Fishing Tool Service , 314 S.W.2d 782, 785, 790 (Tex. 1958); see also LBDS Holding Co. v. ISOL Technology Inc. , No. 6:11-CV-428, 2014 WL 892126, at *1 (E.D. Tex. Mar. 2, 2014). Note that while the Act displaces conflicting tort and other laws, contractual remedies are not affected by the Act. Tex. Civ. Prac. & Rem. Code § 134A.007(b). Definition of trade secret. The definition of “trade secret” is derived from the Act. Tex. Civ. Prac. & Rem. Code §134A.002(6). The court should submit only the bracketed portions of the definition that could apply to the particular trade secrets alleged. Trade secrets may be tangible or intangible, no matter how the trade secret is “stored, compiled, or memorialized physically, electronically, graphically, photograph ically, or in writing.” Tex. Civ. Prac. & Rem. Code § 134A.002(6). The definition does not include the six factors noted by the Texas Supreme Court in resolving a discovery dispute in In re Bass , 113 S.W.3d 735, 739–40 (Tex. 2002) (orig. proceeding) (“(1) [T]he extent to which the information is known outside of his busi ness; (2) the extent to which it is known by employees and others involved in his busi ness; (3) the extent of the measures taken by him to guard the secrecy of the information; (4) the value of the information to him and to his competitors; (5) the amount of effort or money expended by him in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others.”). In re Bass identified pre-Act factors that a trial court faced with a discov ery dispute should consider in determining the existence of a trade secret, not factors that should be included in a jury instruction. But see Eagle Oil & Gas Co. v. Shale Exploration, LLC , 549 S.W.3d 256, 270 (Tex. App.—Houston [1st Dist.] 2018, pet. dism’d) (approving submission of Bass factors in pre-Act trade secrets case).

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