I made an ambitious goal for myself: write a memo that talks, right down to earth, in language everyone can easily understand, about the basics of trade secrets law. After careful consideration, I have decided to de-classify and release my memo: Trade Secrets 101: What Texas Businesses and Their Lawyers Need to Know.
[Editor’s note: The memo has been updated with Paul Freeman’s help since the original post.]
Please let me know what you think of it. Did I leave out something important? If so, what would you delete to make room for what I left out? Is it too technical for non-lawyers? Too superficial for practicing lawyers? I want to know.
And here is a little background on trade secrets law, to give you some context.
Is trade secrets law hard to understand?
Let’s back up and look at trade secrets law in general. Is it hard to understand?
Not especially. The good news is that trade secrets law is fairly intuitive, at least compared to other areas of intellectual property law.
For example, take the question “can a plaintiff claim trade secret protection for information that it did not keep secret?” If a company publicizes information, you wouldn’t think it can claim the information is a trade secret. On the other hand, you wouldn’t think the mere fact that confidential information escaped from the company would be sufficient to destroy the information’s trade secret status.
Your intuitions on this issue would be correct. The company is required to show that it took “reasonable measures”—not perfect measures—to maintain the confidentiality of the alleged trade secrets. That’s just common sense.
The “bad” news—at least for business people who want certainty—is that trade secrets issues tend to be fact-intensive, making it difficult to give categorical answers to client questions.
Where do the statutes define “hard” and “soft” trade secrets?
They don’t. This is terminology I made up (I’m sure I wasn’t the first) to help make sense of a basic factual distinction in trade secret cases.
“Hard” trade secrets are the kinds of things you traditionally think of as trade secrets. The paradigm of hard trade secrets is the “secret sauce,” e.g. the formula for Coke, the Colonel’s secret herbs and spices, the recipe for the creamy jalapeño dip at Chuy’s, etc.
Secret technology is another obvious type of hard trade secret. If you come up with a new secret technology that allows you to drill an oil well sideways, for example, that’s obviously a trade secret. If competitors can’t readily figure out your technology, it gives you a competitive advantage.
Secret business plans—when truly valuable to know—are the third thing I think of as a “hard” trade secret. Let’s say you’re buying up land in the middle of nowhere in Florida because you’re secretly planning to build a massive theme park. That would obviously be an extremely valuable thing for a real estate speculator to know.
“Soft” trade secrets, on the other hand, are the kind of confidential information that almost every business has: things like customer lists, vendor lists, pricing information, and financial information about the company.
I don’t mean to suggest that soft trade secrets aren’t really trade secrets. If the information meets the statutory definition (discussed in the memo), it’s a trade secret, regardless of whether it is hard or soft.
But from both a practitioner’s and a public policy perspective, we should be a little more skeptical about soft trade secrets. The company is almost always going to claim that its customer lists and prices are trade secrets. Whether you’re the plaintiff’s lawyer, the defense lawyer, or the judge, you should always ask “why?”
Zach Wolfe (firstname.lastname@example.org) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. Follow @zachwolfelaw on Instagram to keep up with his latest shenanigans.
These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.