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Summary: Under current law, Texas trade secret law is based on a compilation of common law rather than statutory law. As a result, the definition of trade secret and the duration of its protection are ambiguous and vary widely across the state. HB 1894 standardizes the definition of trade secret by using statutory law as defined in Section 134.022(6) as follows: "Trade secret' means information, including a formula, pattern, compilation, program, device, method, technique, process, financial data, or list of actual or potential customers or suppliers, that: (A) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (B) is the subject of efforts that are reasonable under the circumstances to maintain secrecy."
This would include information that an entity does not use because it has proven incapable of performing the intended result; therefore, it is also protected since the information may provide a competitive advantage. Second, HB 1894 expands protection from "continuous use" to an entity that will continue using the information but is not doing so presently. Third, a trade secret becomes a secret when a "reasonable" effort is made to protect information. Fourth, this legislation places a cap on the extent of exemplary damages.
Analysis: HB 1894 enhances free-market by enabling businesses to better protect their trade secrets and provides government transparency. By modifying the definition of trade secrets to reflect current technology and methods by which individuals transfer information, this legislation permits stakeholders and courts to have a statewide standard definition on what is considered a trade secret. This provides predictability for the court system and for industry. With common law varying among district courts and the potential for lawsuits to occur under civil or criminal law, HB 1894 provides a uniform process for the courts and removes punishment under the criminal law that is not necessary for non-harmful offenders. HB 1894 provides trade secret protection on a basic level and does not hinder competition; but, rather allows businesses to compete knowing that they have legal recourse if their trade secrets are compromised. Lastly, the legislation specifies restitution and allows for recovery of attorney fees. We encourage the Legislature to support HB 1894.