In my December 11, 2016 post, I explained how the Southern District of Texas rejected the argument that the receipt of trade secrets pursuant to a non-disclosure agreement (NDA) is not a defense to a Texas Uniform Trade Secrets Act claim. The Western District of Texas, however, takes the opposite position in Education Management Services v. Cadero, No. SA-14-CA-587, 2014 WL 12586781, (W.D. Tex. Nov. 18, 2014), reconsideration denied, No. SA-14-CA-587, 2014 WL 12586782 (W.D. Tex. Dec. 23, 2014). In Education Management Services, the Plaintiff alleged that it disclosed confidential compliance training information to the Defendant, and that the Defendant disclosed that information to a competitor to improve the competitor’s business. While this allegation was sufficient to support a claim for breach of the Defendant’s NDA, it was insufficient—in the Court’s view—to support a claim for violation of the Texas Uniform Trade Secrets Act (TUTSA). According to the Court, an essential element of TUTSA is that the Defendant acquired the trade secret through improper means. Here, the Defendant received information as part of its employment with Plaintiff. Therefore, the Defendant did not receive acquire the trade secret through improper means. The Court subsequently denied the motion for rehearing on this point.
The problem with the Court’s reasoning, however, is that is misreads the TUTSA statute. The Court is correct that TUTSA defines misappropriation as “disclosure or use of a trade secret of another without express or implied consent by a person who . . . used imporper means to acquire knowledge of the trade secret.” Under that definition, a defendant that lawsfully acquires the trade secrets as part of his or her employment could not be liable for misappropriation. But that is only one definition of misappropriation. TUTSA also defines misappropriation as “disclosure or use of a trade secret of another without express or implied consent by a person who . . . at the time of disclosure or use, knew or had reason to know that the person’s knowledge of the trade secret was . . . acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use.” Any correctly drafted NDA is going to give rise to a duty to maintain the trade secrets’ secrecy or limit their use. Therefore, the Court should have ruled that the Plaintiff sufficiently plead a TUTSA claim.