Texas Theft Liability Act – Providing Civil Remedies for Criminal Theft of Trade Secrets

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The Texas Theft Liability Act (TTLA) became enacted in 1989. See Tex. Civ. Prac. & Rem. Code § 134.001. The TTLA became introduced due to the fact, even though robbery turned into criminalized under the Penal Code, there had been no provisions for civil liability of robbery. Committee Report on S.B. 269 p.2.; Cooper v. Sony Music Entertainment, Inc., 2002 U.S. Dist. Lexis 3832, *16 (S.D. Tex. February 22, 2002) (“[T]he Texas Penal Code does not provide a personal right of motion.”); Aguilar v. Chastain, 923 S.W.2d 740, 745 (Tex. App. Tyler 1996) (writ denied) (“[T]he Penal Code does now not create non-public reasons of motion, and a victim “does no longer have status to participate as a celebration in a criminal proceeding.”) This become particularly true for exchange secrets and techniques, even though change secrets and techniques are normally taken into consideration to be rights in the nature of assets rights. The simplest way a party could are looking for to implement the ones rights previous to the passage of the TTLA changed into thru tort or agreement concepts. IBP, Inc. V. Klumpe, 07-00-0221-CV, 2001 WL 1456173, 7 (Tex. App. Amarillo 2001). Thus, the legislature sought to provide statutory civil liability for, among other offenses, illegal appropriation of highbrow property – trade secrets and techniques. In help of passage of the act, State Senator McFarland referred to in committee that, “statutory civil liability [will] allow for economic healing by way of the victim against the culprit, and therefore complement the crook sanctions.” Id.

Under the TTLA, “a person who commits theft is answerable for the damages resulting from the theft.” Tex. Civ. Prac. & Rem. Code § 134.003(a). In addition, “a parent or other individual who has the responsibility of control and affordable area of a baby is liable for theft committed through the child.” Id. At § 134.003(b). Theft under the TTLA is defined because the “unlawfully appropriating assets or unlawfully acquiring offerings as defined… ” in Sections 31.1-7, 11-14 of the Texas Penal Code. Id. At § 134.002(2) consists of Sections 31.03, 31.04, 31.05, 31.06, 31.07, 31.Eleven, 31.12, 31.Thirteen, or 31.14 of the Penal Code as protected styles of robbery. These sections define several exclusive movements that represent theft, including the theft of trade secrets in Section 31.05 Secret.

Under Texas Penal Code § 31.05(a), a change key’s “the entire or any a part of any scientific or technical statistics, layout, process, process, formulation, or improvement that has fee and that the owner has taken measures to save you from turning into to be had to people aside from those decided on by means of the owner to have access for restricted functions.” Id. At § 31.05(a)(four).

A man or woman is responsible of stealing a exchange mystery whilst he “knowingly (1) steals a alternate mystery, (2) makes a duplicate of an editorial representing a change mystery, or (three) communicates or transmits a change mystery.” Id. At § 31.05(b). In order for a defendant to be accountable under § 31.05, he should have taken change secrets “with out the proprietor’s powerful consent.” Id. This is described in § 31.01(3) as:

“Effective consent” includes consent through someone legally legal to behave for the proprietor. Consent isn’t effective if:

(A) precipitated via deception or coercion;

(B) given through a person the actor is aware of isn’t always legally legal to behave for the proprietor;

(C) given by using a person who by cause of adolescents, mental sickness or defect, or intoxication is known by using the actor to be not able to make affordable property inclinations;

(D) given entirely to locate the commission of an offense; or

(E) given by using someone who with the aid of purpose of superior age is known via the actor to have a faded potential to make knowledgeable and rational choices approximately the affordable disposition of belongings.

I. The Advantages of the Texas Theft Liability Act

The capability to pursue a claim beneath the TTLA has several distinct blessings over each conventional commonplace law theories of exchange mystery misappropriation and conventional robbery blanketed in the other sections of the Texas Penal Code.

A. Traditional Theft Statutes

Section 31.03(a), which covers more traditional types of theft, calls for that the wrongdoer (thief) intended to deprive the precept (owner) of the products. Id. At § 31.03(a)(“A character commits an offense if he unlawfully appropriates property with purpose to deprive the owner of belongings.”). See additionally Falcone v. Texas, 682 S.W.2d 418, 420 (Tex. App. 1st Dist. Houston 1984). Texas courts have routinely required the prosecution to prove this detail. In truth, the Court of Appeals for the first District of Houston has long past as a long way as to nation that beneath § 31.03 “[t]he motive to deprive the proprietor of the belongings ought to be proved with the intention to preserve a theft conviction, and failure to show it requires reversal.” Falcone v. Texas, 682 S.W.2d 418, 420 (Tex. App. 1st Dist. Houston 1984). This is a extensive trouble in almost all alternate mystery cases due to the fact the plaintiff typically nonetheless has ownership of his alternate secrets. Therefore, the thief is frequently accused of getting most effective copied the trade mystery or having transmitted know-how of the exchange mystery to every other. Because the plaintiff nevertheless has ownership of the trade secret, the defendant has not really deprived the plaintiff of the name of the game, not to mention meant to deprive the plaintiff of the secret. Id. Thus, acquiring a robbery conviction below § 31.03 or civil damages underneath the TTLA in conjunction with § 31.03 might be almost impossible in exchange mystery cases.

In assessment, § 31.05 gets rid of the “purpose to deprive” requirement. Furthermore, Section 31.05 covers not handiest actual trade mystery theft but additionally communique, transmission, or copying a piece of writing representing a change mystery. Thus, Section 31.05 anticipates and gets rid of ability proof problems with the aid of specifically which include trade mystery robbery offenses that would no longer otherwise be included below the general theft statute. Id. At 421.

B. Traditional Trade Secret Misappropriation

In addition, beneath § 31.05 there’s no requirement that the accused thief absolutely use the trade mystery. This is in particular good sized because one of the three required elements in a conventional misappropriation of trade secrets claim is that “the defendant used the trade mystery.” Dorsaneo, Texas Litigation Guide § 2 hundred.05[1], p. 200-30. There had been several trade secret instances where courts have found no liability clearly because the defendant did now not use or try to profit financially from the usage of the change secret. Under § 31.05, this will now not be a hassle because the defendant is guilty via surely taking the exchange secret.

C. Burden of Proof

Traditionally, crook prices of theft, together with the robbery of alternate secrets and techniques, require that the prosecution prove the offense beyond a reasonable doubt. Shalk v. Texas, 823 S.W.2nd 633, 637 (Tex. Crim. App. 1991); Weightman v. Texas, 975 S.W.2d 621, 624 (Tex. Crim. App. 1998). This isn’t always the standard in civil instances. Rather, a civil declare generally want most effective be proved with the aid of the preponderance of the evidence. While this difficulty has not been closely litigated, the Texas Criminal Practice Guide has said that “[b]ecause [an action under the TTLA] is a civil motive of action for damages, it seems that the weight of proving theft could be by way of a preponderance of the evidence as opposed to beyond a reasonable doubt.” Texas Criminal Practice Guide/Volume 6: Chapters 126-one hundred thirty five SUBSTANTIVE LAW (cont.)/Chapter 127 ROBBERY AND THEFT/I LEGAL BACKGROUND / § 127.03D Civil Liability for Theft (citations omitted).

II. Determining the Applicability of the Texas Theft Liability Act

As mentioned above, the ability for a celebration to deliver a claim under the TTLA, with appreciate to the theft of information, affords severa benefits for such celebration. However, because the TTLA pertains in such respect only to the theft of trade secrets, the threshold inquiry for the courtroom is determining whether or not the relevant records constitutes a alternate secret.

To be a trade mystery, “the information, layout, procedure, system or improvement must no longer handiest be a mystery, however should additionally be usually unavailable to the general public and it have to deliver one who uses it a bonus over competition that don’t know of or use the exchange mystery.” See McGowan v. State, 938 S.W.Second 732,738 (Tex. App.-Houston [14th Dist.] 1996). When figuring out whether or not information constitutes a alternate secret, courts typically take into account elements which include:

(1) the volume to which the information is thought out of doors of the proprietor’s business;

(2) the extent to which it’s miles acknowledged through personnel and others involved inside the proprietor’s business;

(three) the extent of the measures taken to protect the facts’s secrecy;

(four) the records’s price to the owner and his competitors;

(5) the quantity of effort or money the proprietor expended to increase the records;

(6) the benefit or issue with which the facts could be well obtained or duplicated via others. See Downing v. Burns, 348 S.W3d 415, 422 (Tex. App.-Houston [14th Dist.] 2011); see also, In re Bass, 113 S.W.3d 735, 739 (Tex. 2003).

Based on this stringent analysis, commonly the applicable records is held not to be a trade mystery.

III. Recovery of Attorney’s Fees Under the Texas Theft Liability Act

Perhaps the biggest trade that the TTLA brings to plaintiffs is within the area of damages. Under C.P.P.C. § 134.1/2(a), the TTLA gives that “someone who has sustained damages attributable to theft might also recover… From the person that commits theft, the amount of real damages… And… A sum no longer to exceed $1,000.” This statutory availability of actual damages does no longer certainly upload whatever to what might be recovered beneath a traditional alternate secret misappropriation declare. The real change are available in sub-segment (b), which for the primary time authorizes by way of statute the healing of legal professional’s expenses in change secret robbery litigation.

This is substantial due to the fact the general rule inside the United States (along with in Texas) is that a party is to undergo its personal legal professional’s fees until there may be an explicit provision in a settlement or statute indicating in any other case. This is one of these regularly occurring rule that it’s miles typically known as the “American Rule.” And the Texas Supreme Court has regularly held that “lawyer’s fees aren’t recoverable either in an movement in tort or a match upon a agreement until supplied through statute or by means of settlement among the events.”

This has meant that inside the past a plaintiff usually had to look to contractual provisions or the discretion of a choose appearing underneath C.P.R.C. § 38.001 to get attorney’s expenses. Tex. Civ. Prac. & Rem. Code § 38.001 – “A man or woman might also recover affordable legal professional’s charges from an person or organisation, in addition to the quantity of a legitimate claim and expenses, if the claim is for: (1) rendered services; (2) performed labor; (3) furnished fabric; (4) freight or specific overcharges; (five) lost or damaged freight or specific; (6) killed or injured stock; (7) a sworn account; or (eight) an oral or written contract.” In federal cases, a party can always ask the choose to use his inherent electricity to sanction the opposite litigant and award lawyer’s expenses. Dorsaneo p. 200-fifty five. Now, underneath § 134.1/2(b), “anyone who prevails in a suit below this bankruptcy shall be presented court charges and reasonable and essential legal professional’s costs.”

Notably, the TTLA does no longer define who constitutes a “individual who prevails in a in shape.” Some have argued that a celebration who in the end prevails on its declare beneath the TTLA, although it recovers zero damages, must be entitled to get better lawyer’s fees. See, e.G., Johns v. Ram-Forwarding, Inc., 29 S.W.3d 635, 638 (Tex. App.-Houston [1st Dist.] 2000). However, in light of new instances, a finding of liability alone on a party’s TTLA declare, without an award of damages does now not bestow “winning birthday celebration” repute and precludes the birthday celebration from recuperating attorney’s fees. See, e.G., Glattly v. Air Starter Components, Inc., 332 S.W.3d 620, 640-forty one (Tex. App.-Houston [1st Dist.] 2010). This line of reasoning stems from the cause installed by means of the Texas Supreme Court in Intercontinental Group P’ship v. KB Home Lone Star L.P. There, the Texas Supreme Court confronted the issue of a agreement that furnished for lawyer’s costs for the winning party however that did now not outline “prevailing party.” See Intercontinental Group P’deliver v. KB Home Lone Star L.P., 295 S.W.3d 650, 653-54 (Tex. 2009). The court docket cited that during such case the normal that means of prevailing birthday party should be used. See identification. The courtroom held that a party, who does now not achieve damages or other comfort on its declare, could not be a triumphing birthday celebration. See id. At 655-56. Thus, so as for a winning celebration to be entitled to prices and affordable and vital legal professional’s expenses, the prevailing birthday party need to obtain some award of damages.

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