2-2 TRADE SECRETS UNDER THE COMMON LAW

• Jurisdiction: United States

2-2 Trade Secrets Under the Common Law

Under the pre-TUTSA common law, the Texas Supreme Court in Hyde Corp. v. Huffines opened a wide door to trade secret status, defining protected information as "any formula, pattern, device or compilation of information which is used in one's business, and which gives [the business owner] an opportunity to obtain an advantage over competitors who do not know or use it."² The Huffines court then offered examples of what a trade secret might look like in practice: "[i]t 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."³

Over the next 40 years, Texas courts built on this foundation and granted trade secret status to other categories of information, including (among other categories) "pricing information, client information, customer preferences, buyer contacts, market strategies, blueprints, and drawings."⁴

Following the Huffines roadmap, and with the Restatement principles as their guide, pre-TUTSA courts identified these six factors in deciding what was—and, just as importantly, what was not—a common law trade secret:

(1) the extent to which the information was known outside the business;
(2) the extent to which the business' own employees knew the information;
(3) the measures the business took to guard the secrecy of the information;
(4) the information's value to the business and its competitors;
(5) the effort undertaken or money spent to develop the information; and
(6) how easy (or hard) it was for others outside the business to duplicate the information.⁵

The common law balanced each of these factors in looking to establish a trade secret, but they did not require the plaintiff to offer evidence for each category.⁶ At the same time, the common law provided that reliance on only one of these factors alone would not suffice to establish a trade secret.⁷

Besides these six factors, the common law trade secret plaintiff had to establish that the information at issue remained in "continuous use in the operation of the business."⁸This meant that a company could not claim trade secret status for any information that it used once and never again. Similarly, under the common law, information that related only to a single or "ephemeral" event in a company's operations—such as the amount of a company's secret bid for a contract—did not qualify for trade secret protection.⁹

The common law trade secret...