The Elements of Trade Secret in Texas: What Counts as “Not Readily Ascertainable”?

To be protected by Texas trade secret law under the Texas Uniform Trade Secrets Act (TUTSA), information must be valuable because it is neither “generally known” nor “readily ascertainable” to third parties unless those third parties use improper means to get it. Clearly, this includes information that a third party could not acquire without breaking the law.

However, it also includes some forms of information that can be obtained legally, if a third party chose to use illegal or improper means to get the information instead. Imagine, for example, that Company X develops a machine that allows it to carry out a key industry task in half the time. Even though the machine is relatively simple in design, Company X goes to great lengths to keep the machine’s design a secret. Company Y acquires copies of the schematics for the machine under false pretenses.

Even though the machine could easily be reverse-engineered to determine how it works (thus making its workings “readily ascertainable”), because Company Y decided to use improper means to get the information instead, Company X can still hold Company Y accountable for misappropriating a trade secret.

Information that is not “generally known” or “readily ascertainable” does not have to be known or ascertainable to the public at large. Instead, to lose its trade secret status, information has to be generally known to a particular audience – those who can benefit economically from knowing it.

For instance, in Taco Cabana Int’l, Inc. v. Two Pesos, Inc. (1991), a federal court held that the defendant, who acquired copies of Taco Cabana’s building plans under false pretenses, could be held liable for misappropriating a trade secret, even though copies of the same plans had been filed along with Taco Cabana’s building permit. Although the general public could have acquired the information, that fact was not relevant. What was relevant was the fact that, instead of acquiring a copy of the building permit by legal means, Two Pesos decided to acquire the plans under false pretenses.

Under the common law, Texas courts frowned upon parties that used improper means to procure trade secrets. This approach continues to be used under the TUTSA.

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