Which Three Elements Are Required to Have a Trade Secret in Texas?

Any business that wants to protect sensitive information related to its operations must understand which three elements are required to have a trade secret in Texas. Whether you are a startup founder or a corporate executive of a well-established organization, knowing how to protect confidential information is critical to operating successfully in today’s competitive market.

Let’s break down these three elements with some practical examples and insight so that you can better comprehend what is required of your business in 2025.

1: The Information Must Be 

The first requirement is that the information in question must not be known to the public or be easily discoverable. If the information you want to legally protect can easily be figured out through reverse engineering or is available in public records, it likely won’t qualify as an official trade secret.

Some examples of trade secrets that meet this standard include:

• A proprietary recipe known only to some staff members
• Internal software code not shared outside of the organization
• Client pricing strategies that aren’t posted publicly

To maintain secrecy, businesses often take the following measures:

• They avoid publishing critical details online or in their marketing materials.
• They store sensitive documents in secured databases with limited access.
• They limit what certain employees are aware of, keeping them in “need-to-know” roles only.

It’s important to remember that if the information is widely available, even unintentionally, it could lose trade secret protections. Secrecy does not mean complete isolation. You are allowed to share a trade secret with certain employees, partners, or vendors as long as it’s under strict confidentiality.

2: It Must Derive Independent Economic Value From Secrecy

The second element of trade secret protection in Texas focuses on why the information is of value. The value must come from the fact that it is not known by others in the industry.

Some examples of economic value tied to secrecy include:

• A process that reduces manufacturing costs significantly
• A customer database that allows for exclusive targeting
• A business model that offers a market edge until copied

When trying to decide if you have a trade secret on your hands, consider how it helps you do the following things:

• Outperform competitors in pricing, delivery time, or quality
• Lock in exclusive contracts or recurring revenue
• Innovate in a way that others would struggle to easily replicate it

If you feel that releasing the information you have would neutralize your competitive advantage, that is a strong indicator that this second element is met. However, it’s recommended to discuss this with an attorney to ensure your pursuit of legal trade secret protection is not in vain.

3: Reasonable Measures Must Be Taken to Maintain Secrecy

Even if your information is secretive and of value, it won’t be officially protected under Texas law until you proactively take the steps to guard it.

Some of these protective measures include:

• Using NDAs (non-disclosure agreements) with employees and vendors
• Securing files with passwords or restricted physical access
• Training staff regularly on confidentiality policies

Common security practices used by different businesses include the following:

• Locking physical prototypes or documents in secure rooms
• Segmenting access to digital files with user permissions
• Monitoring usage of sensitive data to detect leaks early

After submitting your trade secret information, the courts will assess whether your actions match the level of secrecy needed based on the value and nature of the information. Simply wanting to keep something a secret from the rest of the industry is not enough. Rather, you must act on it.

When you are trying to protect trade secrets, consistency matters. Even one slip-up can jeopardize your rights. It can be as small as leaving a sensitive file unprotected or failing to enforce an NDA. You should focus on building a company-wide culture that treats confidentiality as a shared responsibility rather than just a legal checkbox.

FAQs

Can an Idea Qualify as a Trade Secret?

Generally, an idea alone is not enough to qualify as a trade secret. Rather, it must be developed into something more concrete and specific. For example, an idea for a new type of software wouldn’t be protected, but the code, process, or methodology of that product could be. To have an official trade secret, the information you are looking to protect must be documented, unique on its own merit, and capable of providing value if kept secret.

What Happens if an Employee Leaves With Trade Secret Information?

Anytime an employee leaves a company that was exposed to confidential knowledge during their tenure, it doesn’t mean that what they know becomes fair game. If the company took the necessary steps to protect the trade secret, such as requiring the employee to sign a non-disclosure agreement or restricting their access, they could still retain legal protection. If the former employee violates an NDA, the company could hold them accountable.

Can Trade Secrets Be Protected Forever?

Unlike other protected information, like patents and copyrights, trade secrets don’t have a fixed expiration date. They remain protected indefinitely as long as all three elements discussed continue to be met. If the secret is revealed at any point through a data breach, employee leak, or public disclosure, the protection ends. Businesses must continuously monitor and update their protective measures to prevent this from happening.

What Is the Difference Between a Trade Secret and Confidential Information?

All trade secrets are confidential information, but not all confidential information will end up qualifying as a formal trade secret. Confidential information can include things like internal policies or employee records that are sensitive but not economically valuable to competitors. On the other hand, trade secrets must provide a commercial advantage and meet stricter standards regarding their secrecy and value.

Contact Yocom Rine P.C. Today

If you are sitting on private information and are curious about whether it qualifies to be an official trade secret, contact our firm today. For years, we have been helping businesses just like yours protect what matters most to keep them thriving in today’s competitive market, and we would be honored to help you achieve the same.