Trade secrets are valuable assets for many companies, and unauthorized use can lead to significant harm. Both the Texas Uniform Trade Secrets Act (TUTSA) and the federal Defense of Trade Secrets Act (DTSA) provide legal remedies for trade secret misappropriation. In this blog post, we’ll explore these remedies, discuss when punitive damages may be awarded, and examine factors that affect the duration of a trade secret injunction.
Available Remedies for Trade Secret Misappropriation
Under TUTSA and DTSA, a plaintiff who successfully proves trade secret misappropriation can obtain several types of remedies, including injunctive relief, monetary damages, and, in certain cases, punitive damages.
1. Injunctive Relief
Injunctive relief is a common remedy for trade secret misappropriation. Under TUTSA (Tex. Civ. Prac. & Rem. Code §134A.003) and DTSA (18 U.S.C. §1839(b)(3)), a court may issue an injunction to prevent actual or threatened misappropriation. The injunction can also require measures to protect the trade secret, such as restricting the use or disclosure of confidential information.
Under DTSA, an injunction must be narrowly tailored and cannot prevent someone from taking a new job unless there is evidence of threatened misappropriation (18 U.S.C. §1839(b)(3)(A)). Courts often consider the “inevitable disclosure doctrine” to determine if a former employee’s new job poses a substantial risk of trade secret misuse.
2. Monetary Damages
Both TUTSA and DTSA allow plaintiffs to recover damages caused by misappropriation. These damages can include:
- Actual Loss and Unjust Enrichment: A plaintiff can recover for the actual loss caused by misappropriation and any unjust enrichment not accounted for in the actual loss (Tex. Civ. Prac. & Rem. Code §134A.004(a); 18 U.S.C. §1839(b)(3)(B)).
- Reasonable Royalty: If proving actual loss is difficult, a plaintiff may be awarded a reasonable royalty for the unauthorized use or disclosure of the trade secret (Tex. Civ. Prac. & Rem. Code §134A.004(b); 18 U.S.C. §1839(b)(3)(B)). A reasonable royalty may require the testimony of an expert witness.
Punitive Damages and Attorney’s Fees
Punitive damages may be awarded if the defendant’s conduct is found to be willful and malicious. Under TUTSA, punitive damages can be up to twice the amount of compensatory damages (Tex. Civ. Prac. & Rem. Code §134A.004(b)). Similarly, DTSA allows for exemplary damages of up to twice the actual damages if the misappropriation was willful and malicious (18 U.S.C. §1839(b)(3)(C)).
Attorney’s fees may also be awarded to the prevailing party if the defendant’s misappropriation was willful and malicious or if a misappropriation claim was made in bad faith (Tex. Civ. Prac. & Rem. Code §134A.005; 18 U.S.C. §1839(b)(3)(D)). To establish that the defendant acted willfully and maliciously, the plaintiff must prove that the defendant intentionally engaged in conduct with knowledge that it was wrongful or with reckless disregard for the plaintiff’s rights. This requires showing that the defendant knowingly acquired, used, or disclosed the trade secret without consent and with the intent to cause harm or with a conscious disregard for the substantial risk of harm to the plaintiff.
Duration of Injunctions and Trade Secret Viability
A key issue in trade secret cases is determining how long an injunction should last. Under TUTSA and DTSA, the duration of an injunction should be tied to how long the trade secret remains commercially viable.
An injunction should not extend beyond the time that the information qualifies as a trade secret. Under TUTSA, an injunction can continue for as long as needed to eliminate any commercial advantage the defendant might gain from misappropriation (Tex. Civ. Prac. & Rem. Code §134A.003(b)). Similarly, DTSA states that an injunction should not prevent the continued use of information that becomes generally known through legitimate means (18 U.S.C. §1839(b)(3)(C)).
When determining the duration of an injunction, courts often consider factors such as:
The nature of the trade secret, including whether the information is a formula, process, or customer list.
The time it would reasonably take for others in the industry to independently develop the information.
The extent to which the trade secret has been disclosed or used by the defendant, which may reduce its value.
Courts aim to prevent unjust enrichment of the defendant while ensuring that the injunction does not last longer than the trade secret’s commercial value.
Conclusion
The Texas Uniform Trade Secrets Act and the federal Defense of Trade Secrets Act provide important protections for businesses whose trade secrets have been misappropriated. By allowing for injunctive relief, monetary damages, and, in cases of willful misappropriation, punitive damages, these statutes help businesses recover their losses and deter future misconduct. However, determining the appropriate remedy—especially the duration of an injunction—requires careful consideration of the facts and the value of the trade secret.
Understanding these remedies is crucial for both plaintiffs and defendants in trade secret cases. It is not just about monetary recovery; it is also about protecting your competitive advantage and ensuring that your innovations remain secure for as long as possible.
If your business faces a potential misappropriate of trade secrets claim, or wishes to protect its trade secrets, contact us. Because at the Vethan Law Firm, PC
Your Problem Is Our Business®
