Discovery is the crucial stage in the litigation process where parties seek to obtain the evidence they need to support their positions. Since parties may generally obtain “discovery regarding any matter that is not privileged and is relevant to the subject matter of the pending action,” broad swaths of documents and information are often requested.
But what happens if information that must remain confidential, such as trade secrets, is asked for in discovery? Today we discuss how trade secrets can be kept out of discovery.
Do we have to disclose our trade secrets?
Businesses walk a fine line during litigation. While relevant information must generally be disclosed if requested, the disclosure of trade secrets can be detrimental to a business. Luckily, there are ways to protect certain proprietary information.
Texas Rule of Evidence 507, known as the trade secrets privilege, gives parties facing the prospect of having to disclose trade secret information some relief. According to the rule, “[a] person has a privilege to refuse to disclose and to prevent other persons from disclosing a trade secret owned by the person….” Despite the trade secrets privilege, courts may still compel discovery of trade secrets if nondisclosure would “conceal fraud or otherwise work injustice.”
The key challenge for the party asserting the trade secret privilege is proving that the information sought qualifies as a trade secret. If the party asserting the trade secret privilege meets its burden, “the burden shifts to the party seeking the trade secret discovery to establish that the information is necessary for a fair adjudication of its claim.”
Determining whether information is a trade secret
A trade secret can be “any formula, pattern, device or compilation of information which is used in one’s business and presents an opportunity to obtain an advantage over competitors who do not know or use it.” Courts weigh six factors when evaluating whether information is a trade secret:
- The extent to which the information is known outside of the business;
- The extent to which it is known by employees and others involved in the business;
- The extent of measures taken to guard the secrecy of the information;
- The value of the information to the business and its competitors;
- The amount of effort or money expended in developing the information; and
- The ease or difficulty with which the information could be properly acquired or duplicated by others.
Many people think of trade secrets as a company’s “secret sauce.” This idea leads some to believe their business doesn’t have any trade secrets. But the truth is, most companies have information that would qualify as a trade secret. It could be manufacturing processes, marketing tactics, or even customer information.
Protect your business’s assets during litigation
Today’s economy focuses on information more than ever, and companies in every industry must take steps to protect their trade secrets and other confidential information. If your business is facing a possible lawsuit, trade secret protection is an essential part of building a litigation strategy to preserve what is often a business’s most valuable asset.
Tex. R. Evid. 507.
Tex. R. Evid. 507.
In re Cooper Tire & Rubber Co., 313 S.W.3d 910, 915 (Tex. App.-Houston [14th Dist.] 2010, no pet.).
Computer Associates Intern., Inc. v. Altai, Inc., 918 S.W.2d 453, 455 (Tex. 1996).
In re Valero Ref.-Texas, LP, 01-14-00149-CV, 2014 WL 4115917, at *3 (Tex. App.-Houston [1st Dist.] Aug. 21, 2014, no pet.).