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Trade secret litigation: When does your proprietary information and technology qualify as a trade secret?

What trade secret is worth litigating over? The answer to that question will vary from business to business. As a trade secret litigator, I have seen litigation over software code, business methods, software/hardware requirements, SMS/cell phone technology, customer lists, medical devices and chemical formulas. That is a pretty broad list of technology and information, which raises the question: what do courts recognize as a trade secret?

A trade secret may consist of any formula, pattern, device or compilation of information which is used in one's business and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. It may be a formula for a chemical compound, a process of manufacturing, treating or preserving materials, a pattern for a machine or other device, or a list of customers. A trade secret is a process or device for continuous use in the operation of the business. Generally it relates to the production of goods, as, for example, a machine or formula for the production of an article. It may, however, relate to the sale of goods or to other operations in the business such as a code for determining discounts, rebates or other concessions in a price list or catalogue, or a list of specialized customers, or a method of bookkeeping or other office management.

Restatement of Torts § 757, Comment b (1939). The Texas Supreme Court adopted this definition of a trade secret in 1958 in the case Hyde Corp. v. Huffines, 314 S.W.2d 763, 776 (Tex. 1958), cert. denied, 358 U.S. 898 (1958). A trade secret has also been defined under Texas law as:

A trade secret is any formula, pattern, device or compilation of information which is used in one's business and presents an opportunity to obtain an advantage over competitors who do not know or use it.

Computer Assocs. Int'l v. Altai, Inc., 918 S.W.2d 453, 455 (Tex. 1996). While most people might suspect that the formula for Coke would qualify as a trade secret, many do not realize that a list of customers or a compilation of information can be a trade secret. Trade secret issues often come up when someone is either joining or leaving a company. What can they take with them? What can they bring with them into the new company from their old one? Trade secret litigation ususally involves detailed discovery of how the trade secret was misappropriated and the value of the trade secret to the business. As a trade secret litigator, I reguarly learn about a company's trade secrets, how the trade secrets are used in its business and what competitive advantage the trade secrets confer.

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