9-3 EXEMPLARY DAMAGES—CPRC § 134A.004(B)

• Jurisdiction: United States

9-3 Exemplary Damages—CPRC § 134A.004(B)

TUTSA allows for recovery of exemplary damages where a "willful and malicious misappropriation is proven by clear and convincing evidence."⁷⁸ The 2017 TUTSA amendment clarified that "willful and malicious misappropriation" means "intentional misappropriation resulting from the conscious disregard of the rights of the owner of the trade secret.⁷⁹ The amendment further defines "clear and convincing evidence" to mean "the measure or degree of proof that will produce in the mind of the trier of fact a firm belief or conviction as to the truth of the allegations sought to be established."⁸⁰ These clarifications stem from a Seventh Circuit decision in which the defendant intentionally misappropriated the plaintiff's trade secret to start a competing business and then created fake evidence in an attempt to argue that the trade secret was a prior independent development.⁸¹ Exemplary damages for trade secret misappropriation, however, are limited to twice the amount of monetary damages the plaintiff recovers under § 134A.004(a).⁸²

In the trade secret context, the Fifth Circuit (applying Texas law) upheld an exemplary damages award where the jury found that the defendant intended to interfere with the plaintiff's business relationships and stated that it could "easily replicate" the trade secret at issue.⁸³ By contrast, where the evidence established that the defendant did not "fully appreciate[] his responsibility," the court refused to award exemplary damages to another trade secret plaintiff.⁸⁴

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Notes:

^[78] Tex. Civ. Prac. & Rem. Code Ann. § 134A.004(b).

^[79] Tex. Civ. Prac. & Rem. Code Ann. § 134A.002(7).

^[80] Tex. Civ. Prac. & Rem. Code Ann. § 134A.002(7).

^[81] Learning Curve Toys, Inc. v. PlayWood Toys, Inc., 342 F.3d 714, 730 (7th Cir. 2003).

^[82] Tex. Civ. Prac. & Rem. Code Ann. § 134A.004(b).

^[83] Wellogix, Inc. v. Accenture, L.L.P., 716 F.3d 867, 884 (5th Cir. 2013).

^[84] In reMandel, No. 10-40219, 2011 Bankr. WL 4599969 (Bankr. E.D. Tex. Sept. 30, 2011).