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Don’t Forget about the Texas Theft Liability Act When Analyzing a Trade Secrets Claim

Article by Heath Coffman

When the Texas Uniform Trade Secrets Act (TUTSA) was enacted, it removed trade secret theft as a possible basis for asserting a Texas Theft Liability Act (TTLA) claim. One of the biggest impacts of this change was the recovery of attorneys’ fees for trade secrets cases. Under the TTLA, attorneys’ fees were available to prevailing parties. Under TUTSA, attorney’ fees were only available to a prevailing party if (1) the claim for misappropriation was made in bad faith; (2) a motion to terminate an injunction is made or resisted in bad faith; or (3) willful and malicious misappropriation exists. Thus, with the enactment of TUTSA, attorneys’ fees became much more difficult to recover.

Importantly, though, litigants must remember that the TTLA still applies to misappropriations that took place before TUTSA’s September 1, 2013 enactment date. The Fifth Circuit case of Automation Support, Inc. v. Humble Design, LLC, No. 17-10433, 2018 WL 1474937 (5th Cir. Mar. 26, 2018) provides a good reminder of this. In Automation Support, the Fifth Circuit affirmed the district court’s award of attorneys’ fees under the TTLA because the alleged theft of trade secrets took place prior to the employee’s departure on July 13, 2017, a few months before TUTSA’s enactment. This was true despite the defendant’s claims that the employee did not utilize the trade secrets until after TUTSA’s enactment; under the TTLA, the theft occurred when the employee knowingly stole the trade secret and not when he disclosed or used it.

Given that we are almost to the five-year anniversary of TUTSA, it will be rare that any trade secret TTLA claim is not barred by the statute of limitations. Nevertheless, litigants need to remember the TTLA when analyzing pre-September 1, 2013 trade secrets claims.