A former employee left and the customers followed: signs of trade secret theft

The pattern that should make you look closer

The clearest signs are a pattern rather than a single event: a key employee leaves, and soon afterward customers move to their new company, bids arrive priced just under yours, or a competitor suddenly knows your suppliers and margins. Inside your own systems, the warning signs are large downloads, emails forwarded to personal accounts, files copied to USB drives or cloud storage, and deleted data on a returned laptop in the weeks before departure. If you see these, preserve the evidence first and talk to a litigator before you confront anyone.

I represent employers protecting confidential information, and I also represent employees and new employers accused of taking it, so I see these disputes from both directions. Not every departure that hurts is theft; Texas law protects fair competition too. This guide explains how to tell the difference, what Texas law treats as a trade secret, and what to do in the first days. It is general information; your facts need a licensed Texas attorney's review.

What Texas law treats as a trade secret

Texas has adopted a version of the Uniform Trade Secrets Act, found at Section 134A of the Civil Practice and Remedies Code. Its definition is broad: business, scientific, technical, economic or engineering information can qualify, including customer lists, pricing, supplier terms, formulas, processes and plans. But there is a condition that trips up many businesses. The owner must have taken reasonable measures under the circumstances to keep the information secret.

That means the question is not only what was taken, but how you protected it. Passwords, restricted access, confidentiality agreements, marked documents and exit procedures all help show that the information was treated as secret. A customer list printed and pinned on the break room wall is a much harder case than one kept in a restricted CRM with access logs.

The statute also draws a line that protects employees. Under Section 134A.003, a court may not stop a person from using the general knowledge, skill and experience they acquired during employment. A salesperson's relationships and know-how usually leave with them. A downloaded spreadsheet of every customer's pricing and renewal dates is a different matter.

Warning signs before and after the departure

In my experience, the evidence that matters most is created in the last few weeks before someone resigns, and it is often sitting on equipment the company already owns. The signs after departure tell you where to look; the signs before departure tell you what can be proven.

Keep perspective, too. Customers sometimes follow a person they like without any document changing hands, and a competitor can arrive at similar pricing on its own. One lost account is rarely proof of anything. What turns suspicion into a case is the combination: a departure, a spike in downloads or forwarded files, and a pattern of business moving in a way that would be hard to achieve without your information. A careful review of the evidence before anyone is accused protects you from a costly claim you cannot support.

• Large downloads or exports from the CRM, accounting or file systems shortly before resignation
• Company documents emailed to a personal address or uploaded to personal cloud storage
• USB drives connected to a work computer in the final weeks
• Deleted files, wiped phones or a factory-reset laptop at return
• Customers moving to the employee's new company soon after the departure
• A competitor's bids landing just under your pricing on specific accounts
• Vendors or customers mentioning that your former employee contacted them about your terms

What to do in the first 72 hours

The most common and costly mistake I see is reissuing the departed employee's laptop to someone new, or letting IT wipe it. That single step can destroy the best evidence in the case. Pull the devices out of circulation, keep them powered off or as they are, and preserve email accounts, phone records and system logs. A forensic examiner can usually show what was accessed, copied or deleted, but only if the data still exists.

Resist the urge to call the former employee or their new employer in anger. A confrontation tips them off and can lead to more deletion. Do not log into their personal email or social media accounts, even if you know the password, because accessing those accounts can create legal problems of your own. Instead, gather the employment agreement, any confidentiality or non-compete agreement, the exit paperwork and a list of the customers or information you believe are at risk, and bring them to a litigator.

Speed matters here more than in most disputes. If the goal is a court order stopping the use of your information, a business that waits months may struggle to convince a judge the harm is urgent.

• Take the former employee's devices out of circulation and do not wipe them
• Preserve email, chat, CRM and file-system logs
• Disable remaining access to company systems
• Collect the signed agreements and exit paperwork
• List the customers, files or information you believe were taken
• Call a litigator before contacting anyone on the other side

What non-compete and confidentiality agreements add

Trade secret law protects you even without a signed agreement, but agreements make a case stronger and broader. A confidentiality agreement is evidence of the reasonable measures the statute requires. A non-solicitation clause can restrict contact with your customers or employees. A non-compete can restrict working for a competitor for a period, in an area.

Texas enforces non-competes within limits. Under Texas Business and Commerce Code Section 15.50, a covenant not to compete is enforceable if it is ancillary to or part of an otherwise enforceable agreement and its limits on time, geographic area and scope of activity are reasonable. If the limits are broader than necessary, Section 15.51 requires the court to reform the covenant, but damages for breaches before reformation are not available, which makes careful drafting important.

Drafting those agreements is business-law work. If your current agreements are thin or outdated, a business attorney such as Steven Besly can help you put stronger ones in place for the people who remain; my role begins when someone breaks them.

What a court can order

The first relief most employers want is to stop the use of the information, and Section 134A.003 allows a court to enjoin actual or threatened misappropriation. In practice, that often means a request for a temporary restraining order, followed by a hearing on a temporary injunction while the case continues. Courts can also order the return of materials and other affirmative steps to protect the secret.

Money is the second layer. Under Section 134A.004, a business may recover its actual loss and the other side's unjust enrichment, or a reasonable royalty. If misappropriation is willful and malicious and proven by clear and convincing evidence, the court may award exemplary damages of up to twice the other damages. Attorney's fees may be awarded in cases of willful and malicious misappropriation, and also against a party who brings a claim in bad faith, a reminder that these claims must be grounded in evidence.

Owners also worry that suing will expose the very secrets they are protecting. Section 134A.006 directs courts to preserve the secrecy of alleged trade secrets by reasonable means, such as protective orders and sealed records. Where the information relates to products or services in interstate commerce, the federal Defend Trade Secrets Act offers a parallel claim in federal court.

Deadlines that apply

Under Texas Civil Practice and Remedies Code Section 16.010, a suit for misappropriation of trade secrets must be brought within three years after the misappropriation is discovered or, with reasonable diligence, should have been discovered. The federal statute has a similar three-year limit from discovery. Those are outer limits, not targets. The practical deadline for an injunction is much shorter, because the longer you wait, the more customers move and the harder it is to show urgent harm.

Other claims that often travel with trade secret cases, such as breach of contract or breach of fiduciary duty, have their own limitation periods. A litigator should map all of them at the start.

If you are the one being accused

Sometimes the call comes from the other side: a departing employee who received a cease-and-desist letter, or a Dallas company that hired someone and now faces a demand from the former employer. My advice in that position is similar. Do not delete anything, return company property, stop using any material that came from the prior employer, and get counsel before responding. Many of these letters overstate what the agreement or the law actually allows.

I have defended these claims as well as brought them, including defeating a multi-million-dollar non-compete claim at the close of evidence in a federal jury trial. Every case turns on its own facts, but the defense side has real arguments, especially where the employee simply used general skill and relationships.

How I take on a trade secret matter

We start with a conversation, by phone or at my downtown Dallas office, about what happened, what you have preserved and what outcome you want. Often that is stopping the use of the information and protecting key accounts quickly; sometimes it is recovering money; sometimes it is a negotiated exit with clear rules. I review the agreements and early evidence, recommend whether a forensic examination is needed, and explain the options and their costs.

Many of these disputes begin with a firm letter, and my guide on handling a demand letter or lawsuit explains how that stage works. If a lawsuit is needed, the guide on how long a Texas business lawsuit takes shows what follows, and many cases end in an agreed injunction or settlement, which I cover in what to check before signing a settlement agreement.

Questions people ask me