6-3 AFFIRMATIVE DEFENSES TO TRADE SECRET CLAIMS

• Jurisdiction: United States

6-3 Affirmative Defenses to Trade Secret Claims

Absent a successful motion to dismiss at the pleading stage, the trade secret defendant will have to answer the complaint and assert affirmative defenses. These obviously depend on the specific facts of the case, but commonly asserted affirmative defenses in misappropriation cases include, among others, those based the following legal principles:

• statute of limitations;
• preemption;
• independent discovery or development;
• the "shop-right doctrine";
• unclean hands; and
• laches.

Each of these affirmative defenses is summarized, in turn, below.

6-3:1 Statute of Limitations

This affirmative defense is discussed in detail in Chapter 4. As a reminder, TUTSA requires a plaintiff to bring trade secret claims "not later than three years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered."³⁸

6-3:2 Copyright/Patent Preemption

This affirmative defense asserts that federal patent and copyright laws preempt the trade secret claim. Such a defense typically only succeeds in fairly narrow circumstances. Specifically, a state law claim is only preempted by the Copyright Act where (1) "it seeks to vindicate 'legal or equitable rights that are equivalent' to one of the bundle of exclusive rights already protected by federal copyright law"; and (2) "the work to which the state law claim is being applied is among the types of works protected by the Copyright Act."³⁹

As to federal patent law, state law is preempted "to the extent state law is used to protect functional aspects of a product; state misappropriation claims can only go as far as to protect nonfunctional aspects of a product."⁴⁰ As a general matter, however, both the U.S. Supreme Court and Texas courts have held that state law trade secret claims are not preempted by federal copyright or patent claims.⁴¹ Moreover, the Defend Trade Secrets Act specifically states that it does not preempt state law.⁴²

6-3:3 TUTSA Preemption of Non-Trade Secret Claims

TUTSA makes clear that it "displaces conflicting tort, restitutionary, and other law of this state providing civil remedies for misappropriation of a trade secret."⁴³ However, it does not affect criminal or contractual remedies, nor "other civil remedies" not based on trade secret misappropriation.⁴⁴ A trade secret defendant asserting this "defense" might seek to dismiss claims typically associated with trade secret claims such as conversion, tortious interference, breach of fiduciary duty, or unfair competition. In addressing such a defense, however, Texas courts have found that these claims are "not preempted if the plaintiff is able to show the claim is based on facts unrelated to the misappropriation of the trade secret."⁴⁵ However, recent case law has made clear that "TUTSA's preemption provision encompasses all claims based on the alleged improper taking of confidential business information."⁴⁶

6-3:4 Independent Development or Discovery

The defendant can also assert that it independently developed or discovered the trade secret information without...