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Texas Adopts Uniform Trade Secrets Act; New York, Massachusetts and North Carolina Remain Lone Holdouts

On May 2, 2013, the Texas Uniform Trade Secrets Act (UTSA) was signed into law by Governor Rick Perry. The new law becomes effective on September 1, 2013. Nearly every state in the United States now has adopted some variation of the model Uniform Trade Secrets Act; only New York, Massachusetts and North Carolina have not.

The UTSA includes statutory definitions for terms such as trade secrets, misappropriation, and wrongful means, and provides several potential remedies for wrongs committed under the act, including injunctive relief, damages and attorneys’ fees.

Until now, claims of misappropriation of trade secrets in Texas were governed by Texas common law, which in large part is similar to the UTSA. Texas’ UTSA even varies from the model UTSA definition of trade secrets by including customer lists in the new statutory definition, as certain kinds of customer lists and other compilations are recognized as trade secrets under Texas common law.

One area in which Texas trade secret law will change come September 1 is in the possibility of recovering attorneys’ fees on a misappropriation claim, an element of relief that did not exist under Texas common law. Also, while Texas courts in the past have not expressly or consistently adopted the inevitable disclosure doctrine, plaintiffs asserting that doctrine in Texas will find some comfort in the UTSA’s prohibitions on “threatened,” as well as “actual” misappropriation.

Once enacted, the UTSA should serve to provide greater predictability for companies or individuals that are considering asserting claims in Texas courts for misappropriation of trade secrets. Texas’ adoption of the UTSA leaves New York as the only state which relies upon purely common law precedent with regard to trade secret claims. (Both Massachusetts and North Carolina have their own “Trade Secret Protection Acts.”)

So which state will be the next to adopt the UTSA? Massachusetts has a head start: on January 2, 2013, Bill H. 27 was introduced in the state legislature to enact the UTSA in Massachusetts, and that bill remains pending in the legislature.