Trade Secret
Information, including formulas, methods, processes, customer lists, financial data, that derives independent economic value from not being generally known and is the subject of reasonable efforts to maintain secrecy. A primary alternative to noncompete agreements for protecting employer competitive interests.
A trade secret is information, including a formula, pattern, compilation, program, device, method, technique, process, financial data, or list of actual or potential customers or suppliers, that derives independent economic value from not being generally known and is the subject of reasonable efforts to maintain its secrecy. Trade secret protection is a primary alternative to noncompete agreements for protecting employer competitive interests.
Elements of a trade secret
Under § 134A.002(6), the information must (1) derive independent economic value, actual or potential, from not being generally known to or readily ascertainable by other persons who can obtain economic value from its disclosure or use; and (2) be the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Reasonable efforts to maintain secrecy
Reasonable measures typically include (1) marking documents confidential; (2) limiting access on a need-to-know basis; (3) requiring employees and contractors to sign confidentiality agreements; (4) using physical and electronic security; (5) training employees on confidentiality obligations; (6) exit interviews emphasizing continuing obligations.
Misappropriation
Misappropriation occurs through (a) acquisition by improper means; or (b) disclosure or use without consent by a person who used improper means or knew the information was a trade secret. § 134A.002(3). Improper means include theft, bribery, breach of confidentiality obligations, and electronic intrusion.
Remedies
Injunctive relief preventing further use or disclosure; damages for actual loss and unjust enrichment (or in lieu, a reasonable royalty); exemplary damages up to twice compensatory damages for willful and malicious misappropriation; attorney's fees in cases of willful misappropriation or bad faith.
Trade secret protection is a powerful complement (or alternative) to noncompete agreements. Where noncompete enforcement is uncertain, for healthcare practitioners under SB 1318, for example, robust trade secret protection through confidentiality agreements, IT controls, and exit procedures preserves competitive position regardless of restrictive-covenant enforceability.
Practice guide: Cease and Desist Letters