Protecting Competitive Advantages
Trade secrets provide competitive advantages but must be treated correctly to be protected. To get a sense of what the law may protect as a trade secret, there is no better place to start than a definition.
Trade Secret Defined
Although Texas has long protected trade secrets under common law, in 2013 Texas adopted the Uniform Trade Secrets Act (“UTSA” known in Texas as “TUTSA”). TUTSA’s definition of “trade secret” can be summarized as any secret information that does, or might, provide economic value and reasonable steps are taken to maintain the secret.
A more expanded definition of “trade secret” is:
information, including business, scientific, technical, economic, or engineering information, and any [a] formula, design, prototype, pattern, plan, compilation, program device, program, code, device, method, technique, process, procedure, financial data, or list of actual or potential customers or suppliers, whether tangible or intangible and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if:
1) it is the subject of efforts that are reasonable under the circumstances to maintain its secrecy; and
2) it derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.
It’s common for business owners to think “I don’t have any ‘trade secrets’ because I’m just a [fill in the blank] business.” But on closer look at the the trade secret definition it’s more likely that most businesses do have information that is not known by their competition that provides them with a competitive advantage (whether the information is a list of actual or potential customers or suppliers, procedures, or financial data).
Reasonable steps must be taken to protect this information in order for it to fit the definition of trade secret and, consequently, be enforceable under TUTSA.
(background photo by Anna Shvets from Pexels)