top of page

What is a trade secret?

Feb 21, 2013

What type of information does Texas law regard as “trade secrets”?

A trade secret is any "formula, pattern, device or compilation of information" that is "used in one's business and presents an opportunity to obtain an advantage over competitors who do not know or use it." In re Bass, 113 S.W.3d 735, 739 (Tex. 2003). Customer lists, pricing information, client information, customer preferences, buyer contacts, blueprints, market strategies, and drawings have all been recognized as trade secrets. T-N-T Motorsports, Inc. v. Hennessey Motorsports, Inc., 965 S.W.2d 18, 22 (Tex. App.—Houston [1st Dist.] 1998, pet. dism'd). To qualify as a trade secret, the information must be secret and have value to the owner's trade or business. A trade secret cannot be a matter of general knowledge in an industry. Absolute secrecy, though, is not required, the owner must take reasonable precautions to ensure its secrecy. To determine whether information is a trade secret, Texas courts consider the following six-factor test: (1) the extent to which the information is known outside of the business; (2) the extent to which it is known by employees and others involved in the business; (3) the extent of measures taken to guard the secrecy of the information; (4) the value of the information to the business and to its competitors; (5) the amount of effort or money expended in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. See, e.g., In re Union Pac. R.R. Co., 294 S.W.3d 589, 593 (Tex. 2009)(orig. proceeding). However, the party claiming a trade secret is not required to satisfy all six factors "because trade secrets do not fit neatly into each factor every time." In re Bass, 113 S.W.3d 735, 740 (Tex. 2003). Whether a trade secret exists is usually a question of fact to be determined by a factfinder. See General Universal Systems, Inc. v. Lee, 379 F.3d 131, 150 (5th Cir. 2004).

bottom of page