Texas Public Information Act: Uniform Trade Secret Act Broadens the Scope of Protection

The 83rd Texas Legislature recently enacted Senate Bill 953 and created the Texas Uniform Trade Secrets Act ("TUTSA") in Chapter 134A of the Texas Civil Practice and Remedies Code. For companies wishing to defend their corporate information from disclosure under the Texas Public Information Act ("TPIA"), this new Act should provide some additional help in protecting valuable corporate information in the hands of government entities.

The TPIA was created in 1973 to permit the public to seek access to information held by government entities. The preamble of the TPIA reveals that the goal of the TPIA is to create an informed public with complete information about the affairs of government, subject to certain enumerated exceptions. In light of this policy, the TPIA permits public access to government records and requires every governmental body to make public information available on request. Companies who submit trade secret or proprietary information to state or local governmental bodies should remain vigilant to avoid unintended public disclosure of their data to business competitors.

The Legislature has provided a number of exceptions to the Act's requirement for disclosure of government records. One of those exceptions, found in Texas Government Code 552.110, provides protection for two types of information: (1) trade secret; and (2) confidential commercial or financial information which would cause substantial competitive harm upon release. In light of the law codified by the TUTSA, companies should enjoy a larger scope of protection for their information when a competitor seeks disclosure under TPIA.

First, the definition of trade secret has been codified and expanded. In the past, the Texas Supreme Court had adopted the definition of trade secret from the Restatement of Torts, which described a trade secret as "any formula, pattern, device or compilation of information which is used in one's business and presents an opportunity to obtain an advantage over competitors who do not know or use it."¹ In practice, Texas courts had further recognized that "[i]tems such as customer lists, pricing information, client information, customer preferences, buyer contacts, market strategies, blueprints, and drawings" can be shown to be trade secrets.²

The new law codified in the TUTSA explicitly includes several categories of information that are considered trade secret, 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 its secrecy.

Tex. Civ. Prac. & Rem. Code § 134A.002(6). This more descriptive definition will help companies objecting to the disclosure of their information to competitors under TPIA requests because it expressly includes protection for methodologies and techniques, financial data, and customer/supplier lists. This express clarification should simplify future arguments for protection of this information from other companies seeking a competitive advantage through the TPIA.

Second, TUTSA arguably expands the definition of trade secret by eliminating a requirement that the trade secret be in continuous use. Prior decisions of Texas courts have created a common law requirement that a trade secret be in continuous use in order to receive trade secret protection.³ This requirement came from the definition in the Restatement, which included a requirement that the secret be "used in one's business." However, by not including any similar language in the new statutory definition of trade secret, the Legislature has arguably done away with the requirement of continuous use. Therefore, even those trade secrets not in continuous use ought to be protected under the umbrella of trade secret should another business seek such data under TPIA.

The removal of the continuous use requirement opens the door for trade secret protection of another large body of competitively sensitive and valuable information. In competitive business, learning what works usually involves a significant amount of trial and error relating to the methods and processes that do not work. This type of "negative know-how" is a valuable resource for a company, and keeping it from competitors can have significant value.⁴ Previously, when courts imposed a continuous use requirement on trade secrets, this "negative know-how" was not always protected as trade secret because it was not continuously "used" by the holder of the information. In light of the TUTSA, this information should now receive trade secret protection.

Removal of the "continuous use" requirement should also provide additional protection for trade secret information that was created for a single use, such as information contained in a bid submitted in response to a Request for Proposal. Past Texas Attorney General opinions have frequently refused to provide trade secret protection for this kind of information. For example, opinion letter OR2013-07208 states that "pricing information pertaining to a particular contract is generally not a trade secret because it is 'simply information as to single or ephemeral events in the conduct of business' rather than 'a process or device for continuous use in the operation of the business.'" OR2013-07208, pp.3-4.⁵ Without the continuous use requirement, this reasoning will arguably be obsolete and your company should be able to protect even those trade secrets created for a single use.