law-trade-secret-privilege TRE 507 | discovery mandamus cases | trade secrets caselaw | noncompete agreements
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Trade Secret Privilege
“A trade secret is 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.” Computer Assocs. Int’
l, Inc. v. Altai, Inc., 918 S.W.2d 453, 455 (Tex. 1996). Rule 507 of the Texas Rules of Evidence provides for the
protection of trade secrets:
A person has a privilege, which may be claimed by the person or the person’s agent or employee, to refuse to
disclose and to prevent other persons from disclosing a trade secret owned by the person, if the allowance of the
privilege will not tend to conceal fraud or otherwise work injustice. When disclosure is directed, the judge shall take
such protective measure as the interests of the holder of the privilege and of the parties and the furtherance of
justice may require. Tex. R. Evid. 507.
The trade secret privilege seeks to accommodate two competing interests. In re Continental Gen. Tire., Inc., 979
S.W.2d 609, 612 (Tex. 1998) (orig. proceeding). First, it recognizes that trade secrets are an important property
interest, worthy of protection. Id. Second, it recognizes the importance placed on fair adjudication of lawsuits. Id.
Rule 507 accommodates both interests by requiring a party to disclose a trade secret only if necessary to prevent
“fraud” or “injustice.” Id. Disclosure is required only if necessary for a fair adjudication of the requesting party’s
claims or defenses. Id.
The party asserting the trade secret privilege has the burden of proving that the discovery information sought
qualifies as a trade secret. In re Bass, 113 S.W.3d 735, 737 (Tex. 2003) (orig. proceeding). If the resisting party
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. Id. It is an abuse of discretion for the trial court to order production
once trade secret status is proven if the party seeking production has not shown necessity for the requested
materials. Id. at 738.
To determine whether a trade secret exists, the following six factors are weighed in the context of the surrounding
circumstances: (1) the extent to which the information is known outside of the business; (2) the extent to which it is
known by employees and others involved in the business; (3) the extent of measures taken to guard the secrecy of
the information; (4) the value of the information to the business and to its competitors; (5) the amount of effort or
money expended in developing the information; and (6) the ease or difficulty with which the information could be
properly acquired or duplicated by others. In re Union Pac. R.R. Co., 294 S.W.3d 589, 592 (Tex. 2009) (orig.
proceeding) (per curiam). The party claiming a trade secret is not required to satisfy all six factors because trade
secrets do not fit neatly into each factor every time. In re Bass, 113 S.W.3d at 740.
The Texas Supreme Court has not stated conclusively what would or would not be considered necessary for a fair
adjudication; instead, the application depends on the circumstances presented. In re Bridgestone/Firestone, Inc.,
106 S.W.3d 730, 732 (Tex. 2003) (orig. proceeding). The degree to which information is necessary depends on
the nature of the information and the context of the case. Id. However, “we can say with certainty that the test
cannot be satisfied merely by general assertions of unfairness.” Id. “Just as a party who claims the trade secret
privilege cannot do so generally but must provide detailed information in support of the claim, so a party seeking
such information cannot merely assert unfairness but must demonstrate with specificity exactly how the lack of the
information will impair the presentation of the case on the merits to the point that an unjust result is a real, rather
than a merely possible, threat.” Id. at 732–33. An appellate remedy does not exist if a trial court orders a party to
produce privileged trade secrets absent a showing of necessity. In re Bass, 113 S.W.3d at 745.
In re Cooper Tire & Rubber Co. (Tex.App. - Houston [14th Dist.] Feb. 2, 2010)(Anderson)
(discovery mandamus granted to protect trade secrets in product liability litigation) (trade secret privilege-relevant
factors)
MOTION OR WRIT GRANTED: Opinion by Justice Anderson
Before Chief Justice Hedges, Justices Anderson and Boyce
14-09-00906-CV In Re Cooper Tire & Rubber Company
Appeal from 127th District Court of Harris County
Trial Court Judge: R.K. Sandill
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