4-7 STATUTE OF LIMITATIONS

• Jurisdiction: United States

4-7 Statute of Limitations

One of the first considerations a potential trade secret plaintiff must undertake when deciding to bring a lawsuit is whether the statute of limitations has expired. Under Texas law, trade secret claims must be brought "not later than three years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered."⁵⁸ TUTSA does not adopt a separate statute of limitations, so this three-year period applies whether the claim arises under TUTSA or the common law.

The date on which a cause of action for misappropriation accrues is a question of law decided by the court.⁵⁹ As a general matter in Texas, "[c]auses of action accrue and statutes of limitations begin to run when facts come into existence that authorize a claimant to seek a judicial remedy."⁶⁰ In the trade secret context, the claim accrues once the trade secret is actually "used."⁶¹ "Use of the trade secret means commercial use by which the offending party seeks to profit from the use of the secret."⁶² Though the Texas Supreme Court primarily discussed the standard in terms of "use" in Southwestern Energy Production Co. v. Berry-Helfand (citing case law prior to TUTSA's enactment), the same standard should apply in the event of a "disclosure" covered by TUTSA. In fact, in its discussion of reasonable diligence, the Supreme Court refers to the jury finding from the trial court, which did include language regarding "use or disclosure."⁶³ In either case, section 16.010(b) of the Texas Civil Practice and Remedies Code provides that "a misappropriation of trade secrets that continues over time is a single cause of action" and the limitations period begins to run no matter whether the misappropriation is a one-time occurrence or a continuing act.⁶⁴

Even if the use or disclosure triggers the statute of limitations, the discovery rule tolls the statute of limitations until "the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered."⁶⁵ The Texas Supreme Court recently confirmed that section 16.010 expressly "adopted the discovery rule for determining the accrual of a misappropriation-of-trade-secrets claim."⁶⁶ Though accrual is typically a question of law, whether "reasonable diligence" was exercised is a question of fact.⁶⁷ If the party knows (or reasonably should know) of the misappropriation, "the statute of limitations begins to run even if the claimant does not yet know 'the specific...