Texas Trade Secrets Primer

A trade secret is 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.

To determine whether a trade secret exists, Texas courts apply a six-factor test, examining:

  1. The extent to which the information is known outside the business;
  2. The extent to which it is known by employees and others involved in the business;
  3. The extent of the measures taken by the business to guard the secrecy of the information;
  4. The value of the information to a company and its competitors;
  5. The amount of effort or money expended by a company in developing the information; and
  6. The ease or difficulty with which the information may properly be acquired or duplicated by others.

Not all valuable information qualifies as a trade secret.  A trade secret is not simply information as to single or ephemeral event in the conduct of the business. For example, the amount or other terms of a secret bid for a contract are not necessarily trade secrets. Information a company considers confidential does not become a trade secret even if it is information it would not choose to share with its competitors.

While documents such as customer lists, pricing information, and client information have sometimes—but not always—been shown to be trade secrets, this does not mean that trade secret status automatically attaches to any information that a company acquires regarding its customers; if it did, it would amount to a de facto common law non-compete prohibition.

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