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Excluding Competitors from The Courtroom in Trade Secret Cases

November 2016 Newsletter Article In a recent decision, the Texas Supreme Court provided new guidance for courtroom procedures under the Texas Uniform Trade Secrets Act (TUTSA). In re M-I L.L.C. d/b/a M-I Swaco, Relator, No. 14-1045 (Tex. May 20, 2016). The Texas Supreme Court recently addressed the issue of when a competitor may be excluded from the courtroom in a trade secrets case. Until the M-I LLC decision, companies bringing actions under TUTSA for the theft of trade secrets risked their disclosure to competitors in open court. The usual contention of these companies is that they shouldn't have to disclose their trade secrets in open court in order to prove their claim and protect their legal rights. Defendants countered with the argument that they need to have notice of what they are accused of stealing to defend a claim for trade secret theft. The Texas Supreme Court held that due process requires a trial court to balance the competing interests of the parties when determining whether or not to exclude a party's representative from the courtroom during the part of the trial when trade secrets are openly discussed. This is a question of fact based on a fully developed record. The balancing test weighs the potential competitive harm to the disclosing party against the opposing party's ability to defend the claims. On one side of this balancing test, a court must consider the "degree of competitive harm" which will affect the holder of the trade secret holder if trade secrets are disclosed. This includes considering the relative value of the trade secrets, and whether the defendant's representative "acts as a competitive decision-maker." On the other side of the test, courts must determine the degree to which the other party's defense would be impaired by the exclusion of its representative. This determination is dependent upon the role of the representative within his company, and whether the corporate representative possesses unique expertise that a party may not find in outside experts assisting in the defense. Texas finally adopted a version of the Uniform Trade Secrets Act (the "Act"), which became effective a little more than three years ago, in September of 2013. Under TUTSA, trial courts are required to take "reasonable measures" to protect trade secrets during litigation. Such measures include "in camera hearings" that are closed to the public because of their discussion of trade secrets. However, TUTSA does not specifically define "in camera hearings" or provide which parties may be present during such hearings. In the M-I LLC decision, the Texas Supreme Court clarified that a company wishing to pursue a claim for the theft of its trade secrets may do so without having to disclose them to a competitor in open court. If disclosure of information related to trade secrets in open court will harm the company, it may petition the court to remove the opposing party's representatives from the courtroom during the discussion of any valuable proprietary information. It is important to enlist the assistance of an experienced business attorney, especially with the passing of fairly recently enacted legislation such as the Texas Trade Secrets Act in 2013 and the Defend Trade Secrets Act in 2016. At the Metcalf Adair Law Firm, we can assist any employer in any business situation, including when an employee misappropriates or a competitor steals trade secrets.

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