Third Time's the Charm: Key Differences Between the Texas Uniform Trade Secrets Act and Federal Defend Trade Secrets Act

Posted By Godwin Bowman & Martinez || Apr 26, 2016

In last week's installment of "Third Time's the Charm," we examined the new Federal Defend Trade Secrets Act ("FDTSA") that's making its way through Congress right now and how it may affect businesses in 2016. This week, the Series looks at the major differences between the Texas Uniform Trade Secrets Act ("UTSA"), and the 2015 FDTSA.

The FDTSA was largely constructed from the uniform trade secrets act, a version of which has been adopted by every state except New York and Massachusetts. Texas was one of the last states to adopt the UTSA in 2013. Although the Texas trade secrets statute and the FDTSA are both based on the uniform trade secrets act, there are several major differences between them, which will become important if the FDTSA becomes the law in 2016. Since the FDTSA does not preempt state trade secrets statutes, plaintiffs bringing trade secrets claims in Texas will get to choose whether to bring the suit in a state court or in federal court taking into consideration the following differences:

  • Texas's UTSA has more expansive definitions for "trade secrets" and "misappropriation" than FDTSA.
  • Texas's UTSA only provides for exemplary damages in the amount of double the actual damages; the FDTSA provides for triple actual damages.
  • Texas's UTSA has a three-year statute of limitations; the FDTSA has a five-year statute of limitations.
  • The FDTSA narrowly tailors the ability of a court to issue an ex parte seizure or injunction order for trade secret infringers. This authorization was allegedly responsible for the failures of the previous FDTSAs in 2013 and 2014. In response, Congress alleviated these fears in the 2015 FDTSA by requiring the most narrow order necessary to achieve the purposes of the order. Texas's UTSA does not have an ex parte seizure provision.
  • The FDTSA seems to narrowly tailor the circumstances in which threatened misappropriation may be curbed, while the Texas's UTSA appears to allow an order prohibiting potential disclosure to a competitor before any trade secret information has actually been used to the company's detriment.
  • Texas's UTSA allows the injunction to continue indefinitely in order to deprive any commercial advantage derived from the misappropriation.

Therefore, while Texas's UTSA is more favorable for businesses, the FDTSA is more favorable for employees. Stay tuned to learn more about the FDTSA, and how it will protect whistleblowers in Part III.

Leiza Dolghih is a Senior Attorney in Godwin Bowman & Martinez's Unfair Competition, Trade Secrets and Copyright Section. She has over a decade of experience in commercial litigation and has handled multiple temporary restraining order and temporary injunction hearings in trade secrets lawsuits. LDolghih@GodwinLaw.com.

Michael A. Holmes is an Associate in Godwin Bowman & Martinez's Commercial Litigation section. He has a broad range of experience in Business, Employment, Securities, Financial Institutions, Energy, and Environmental disputes in state and federal court. MHolmes@GodwinLaw.com.

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