Defining Trade Secrets: Texas Supreme Court May Soon Decide How Particular Trade Secrets Owners Must Be in Court

In every trade secrets case, the plaintiff faces the same fundamental dilemma:  In order to enforce their rights in court, they must identify (at least to some degree) the trade secrets at issue. Although California has adopted a reasonable particularity requirement by statute, how much detail plaintiffs must provide when identifying their trade secrets in litigation continues to vary state-by-state.  The answer is no clearer under federal law, as the Defend Trade Secrets Act is silent as to this issue.

Notwithstanding, the level of particularity required is an ongoing issue that courts continue to grapple with.  For example, Texas’s highest court may weigh in for the first time on the degree of specificity plaintiffs must provide when identifying trade secrets allegedly misappropriated under the Texas Uniform Trade Secrets Act (TUTSA).

In March 2016, Sanchez Oil & Gas Corp. sued Terra Energy Partners LLC and three of Sanchez’s former employees, who were hired away by Terra, for allegedly misappropriating Sanchez’s trade secret processes “to drill oil and gas wells and to secure cost savings from vendor.” Specifically, Sanchez alleges Terra misappropriated 15 trade secret processes—seven of which are technical like drilling, hydraulic fracturing, and completing wells; five of which are business methods pertaining to cost reduction strategies.

Shortly after the case was filed, the parties set up a protective order and moved along toward discovery. In discovery, Sanchez responded to Terra’s request for a “narrative description” of these trade secrets with (as Terra puts it) a “data dumps” of 7,500 documents for each allegedly misappropriated process, amounting to 170,000 pages of assorted business records.

Terra argues in its recent petition to the Texas Supreme Court that Texas should follow “a growing consensus” among the other 46 states that have adopted versions of the Uniform Trade Secret Act (UTSA) to require plaintiffs to disclose the trade secrets allegedly misappropriated with “reasonable particularity at an early stage in the litigation.”  For support, Terra cites to several Texas district court opinions applying TUTSA and ordering plaintiffs to provide greater particularity, as well as district court opinions from Oregon, Florida, and New York applying their versions of UTSA and enforcing this standard. Whether Texas will accept this petition and weigh in remains to be seen.

We will continue to update you as this issue evolves in courts around the country.