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How to Keep Trade Secrets Secret While in Trial

Article by Heath Coffman

How to Keep Trade Secrets Secret While in Trial | The Fort Worth Business & Employment Law Reporter

One of the most difficult things about litigating a trade secrets case is how to handle the introduction of evidence containing the trade secret.  The party obviously does not want this information divulged in open court or filed as a public record.  Thus, to get around this problem, the party must file a motion to seal the records with the trial court.

Many litigators believed that the Texas Uniform Trade Secrets Act’s (TUTSA) provision on sealing court records provided an efficient means to obtain such an order:

“In an action under this chapter, a court shall preserve the secrecy of an alleged trade secret by reasonable means. There is a presumption in favor of granting protective orders to preserve the secrecy of trade secrets. Protective orders may include provisions limiting access to confidential information to only the attorneys and their experts, holding in camera hearings, sealing the records of the action, and ordering any person involved in the litigation not to disclose an alleged trade secret without prior court approval.

Others, however believe that court records may only be sealed according to the standards and procedures of Texas Rule of Civil Procedure 76a.   Rule 76a provides a more difficult process for sealing exhibits, which includes (1) a public notice and hearing, (2) a presumption that courts are open to the general public, and (3) a showing of (a) a specific, serious, and substantial interest that clearly outweighs the presumption of openness and any probable adverse effect that sealing will have upon the general public health or safety and (b) no less restrictive adverse effect that sealing will have upon the general public health or safety.

The San Antonio Court of Appeal’s case Title Source, Inc. v. Housecanary, Inc., No. 04-18-00509-CV, 2019 WL 2996974 (Tex. App.–San Antonio July 10, 2019, no pet. h) refused to wade into this debate.  In Title Source, the trial court sealed several trial exhibits under the Court’s authority in TUTSA and not according to the procedures outlined in Texas Rule of Civil Procedure 76a.  But the debate was not specifically whether Rule 76a overruled or was in conflict with TUTSA.  (The court did hold that Rule 76a’s immediate appeal procedure did not conflict with TUTSA, but it took no position on the other matters.)  Instead, the parties agreed under their Stipulated Protective Order (SPO) that Rule 76a applied.  Therefore, the trial court abused its discretion by not following Rule 76a in sealing the Court’s records.

The lesson here is that if the parties agree in their protective orders that Rule 76a applies, they will have to follow Rule 76a’s requirements.  Because it is more difficult to seal court records under Rule 76a, the parties should consider expressly agreeing that Rule 76a does not apply to any sealing procedure.  Then, they could avoid having to follow Rule 76a–at least until some court specifically addresses whether Rule 76a conflicts with TUTSA.