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Business, Banking and Contracts No. 02-0071, 7/3/2003. Click here for the full text of this decision FACTS: Nonparticipating royalty interest owners are attempting discovery of the mineral estate owner’s geological seismic data to prove that the mineral estate owner breached an implied duty to develop its land. The mineral estate owner claims that the data are trade secrets. The trial court found that the royalty owners met their burden of establishing necessity and ordered the mineral estate owner to produce the data under a protective order. The court of appeals denied the mineral estate owner’s requested mandamus relief. The mineral estate owner now seeks mandamus relief from this court to prevent discovery of the claimed trade secrets. HOLDING: Conditionally granted. In In Re: Continental General Tire Inc., 979 S.W.2d 609 (Tex. 1998), the court held that “[w]hen trade secret privilege is asserted as the basis for resisting production, the trial court must determine whether the requested production constitutes a trade secret; if so, the court must require the party seeking production to show reasonable necessity for the requested materials.” If a trial court orders production once trade secret status is proven, but the party seeking production has not shown a necessity for the requested materials, the trial court’s action is an abuse of discretion. To determine whether a trade secret exists, this court applies the Restatement of Torts’ six-factor test: 1. the extent to which the information is known outside of his business; 2. the extent to which it is known by employees and others involved in his business; 3. the extent of the measures taken by him to guard the secrecy of the information; 4. the value of the information to him and to his competitors; 5. the amount of effort or money expended by him in developing the information; and 6. the ease or difficulty with which the information could be properly acquired or duplicated by others. Restatement of Torts �757 cmt. B. (1939). The McGills (real parties in interest) argue that in for the seismic data to qualify as a trade secret, the relator must satisfy all six factors. The relator argues that the six-factors constitute a non-exclusive balancing test. The court begins by noting again that the Restatement (Third) of Unfair Competition regards the test as relevant but not dispositive, as “[it] is not possible to state precise criteria for determining the existence of a trade secret.” Restatement (Third) Of Unfair Competition �39 cmt. d. The court agrees with the Restatement and the majority of jurisdictions that the party claiming a trade secret should not be required to satisfy all six factors because trade secrets do not fit neatly into each factor every time. The court additionally recognizes that other circumstances could also be relevant to the trade secret analysis. The court weighs the factors in the context of the surrounding circumstances to determine whether geological seismic data qualify as trade secrets. It is undisputed that the oil and gas industry typically treats seismic data and other methods for obtaining subsurface geological information as trade secrets. Other jurisdictions have recognized this industry wide practice of treating seismic data as trade secrets. Under the six factors, the record demonstrates that the evidence weighs in favor of trade secret protection. The court holds that seismic data and its interpretations are trade secrets protected by Texas Rule of Evidence 507. Because the record fails to demonstrate the existence of an oil and gas lease that would create an implied duty to develop and fails to show that the relator has breached his duty as the executive, the court holds the trial court abused its discretion in compelling trade secret production. OPINION: Schneider, J., delivered the opinion of the court.

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