Conflicting Texas federal district court opinions have been issued on one aspect of the Texas Uniform Trade Secrets Act (\u201cTUTSA\u201d).\u00a0 The issue in dispute is whether (1) a plaintiff must establish that the defendant originally used improper means to gain access to the trade secret or (2) it is sufficient for the plaintiff to show that the defendant used or disclosed the trade secret in violation of an obligation not to do so.<\/p>\n
This is significant when you consider a common fact pattern in trade secret lawsuits.\u00a0 The plaintiff claims that it voluntarily disclosed its trade secrets to the defendant either because the defendant was the plaintiff\u2019s employee or because the defendant first signed a non-disclosure agreement.\u00a0 If voluntary disclosure of trade secrets under these circumstances is fatal to the plaintiff\u2019s claim, then much of TUTSA\u2019s bite disappears.\u00a0 The statute would be left to cover situations of overt theft \u2013 such as breaking into a company office to steal a trade secret or bribing an employee to disclose the trade secret.<\/p>\n
Although three of the cases discussed below held that the plaintiff must prove that the defendant acquired the trade secret through improper means, those decisions conflict with the text of TUTSA.\u00a0 Recent opinions reaching the opposite conclusion are also discussed below.<\/p>\n
The (Incorrect?) Cases<\/strong><\/p>\n In three different cases, federal district courts in the Western District (San Antonio division) and Southern District of Texas dismissed TUTSA claims because the plaintiff did not allege that the defendant acquired the trade secret through use of \u201cimproper means.\u201d\u00a0 The cases involved defendants who allegedly gained access to the plaintiffs\u2019 trade secrets in return for entering into agreements restricting the defendants\u2019 ability to use or disclose the trade secrets.\u00a0 The plaintiffs alleged that the defendants later used or disclosed the trade secrets in violation of the contract restrictions.\u00a0 In each case, the courts dismissed the plaintiffs\u2019 claims based upon the reasoning that the plaintiff did not assert that the defendant acquired the trade secrets through \u201cimproper means.\u201d<\/p>\n The courts concluded that TUTSA requires a plaintiff to show that the trade secrets were \u201cacquired by improper means\u201d (quotation a portion of the definition of \u201cmissapropriation\u201d in TUTSA; Tex. Civ. Prac. & Rem. Code \u00a7134.002(3)(B)(i)).\u00a0 As a practical matter, the courts held that the plaintiffs effectively disproved their own cases by admitting that the plaintiffs voluntarily disclosed the trade secrets to the defendants.\u00a0 The defendants\u2019 breach of a contract prohibiting use or disclosure of the trade secret was no evidence that the defendants acquired the trade secrets through improper means.\u00a0 Thus, the courts dismissed the plaintiffs\u2019 TUTSA claims.<\/p>\n The cases at issue are: Capstone Assoc. Services, Ltd. V. Organizational Strategies, Inc<\/a>.<\/em>, No. H-15-3233, 2015 WL 9319239 at *2 (SD Tex. December 23, 2015); Education Management Services, LLC v. Tracey<\/em><\/a>, 102 F.Supp. 3d 906, 914 (WD Tex. 2015); Education Management Services v. Mark Cadero<\/em>, No. SA-14-CA-587 (WD Tex. San Antonio Division December 23, 2014) (Order Denying Motion for Reconsideration is unpublished and not on Westlaw, but can be obtained at item 26 at this link<\/a>).<\/p>\n Interestingly, none of those cases discussed the following language from TUTSA, which appears to apply:<\/p>\n \u201c\u2018Misappropriation\u2019 means: . . . disclosure or use of a trade secret of another without express or implied consent by a person who . . . at the time of disclosure or use, knew or had reason to know that the person\u2019s knowledge of the trade secret was . . . acquired under circumstances giving rise to a duty to the person seeking relief to maintain its secrecy or limit its use\u201d<\/p>\n Tex. Civ. Prac. & Rem. Code \u00a7134.002(3)(B).<\/p>\n The plaintiffs alleged the defendants acquired access to the trade secrets while the defendants were under a duty to maintain secrecy or limit use of the trade secrets.\u00a0 The plaintiffs also asserted that the defendants were aware of that fact and still disclosed or used the trade secrets without the plaintiffs\u2019 consent.\u00a0 Facially, this meets the statutory elements quoted above.<\/p>\n Contrary (Correct?) Opinions<\/strong><\/p>\n In March 2016, a federal district court in the Austin Division of the Western District of Texas rejected a similar argument advanced by a defendant.\u00a0 The plaintiff claimed that the defendant signed an employment agreement with the plaintiff prohibiting use or disclosure of the plaintiff\u2019s trade secrets.\u00a0 The plaintiff also claimed that the plaintiff granted the defendant access to the plaintiff\u2019s \u201cBroker List\u201d during the course of the defendant\u2019s employment.\u00a0 Finally, the plaintiff alleged that, while still employed by the plaintiff, the defendant transmitted the Broker List to the defendant\u2019s personal email address then used it in work for the defendant\u2019s new employer.<\/p>\n The defendant sought to dismiss the plaintiff\u2019s TUTSA claim asserting that the defendant did not use improper means to obtain the broker list.\u00a0 The court denied the motion because a factual dispute existed over whether the defendant breached her duty to maintain the secrecy of the plaintiff\u2019s trade secrets by using or disclosing the Broker List.\u00a0 That duty arose under the parties\u2019 contract and common law cited in the opinion.\u00a0 Unfortunately, the opinion does not distinguish itself from or even discuss the other three cases discussed above.<\/p>\n The Austin Division opinion is: 360 Mortgage Group, LLC v. Homebridge Financial Services, Inc<\/a>.<\/em>, No. A-14-CA-00847-SS, 2016 WL 900577 at *5 (WD Tex. March 2, 2016).<\/p>\n Another recent federal opinion holding that a plaintiff may still prevail on a TUTSA claim when the plaintiff disclosed its trade secrets to the defendant under circumstances imposing duties of secrecy or non-use upon the defendant is Emerald City Management, LLC v. Kahn<\/em><\/a>, No. 4:14-cv-358 , 2016 WL 98751 at *19 (ED Tex. January 8, 2016) (employee allegedly gained access to passwords and customer lists during employment).<\/p>\n photo credit: Asphalt Street Arrows Left Straight<\/a> via photopin<\/a> (license)<\/a><\/p>\n