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Trade Secret

Information that derives value from not being generally known and that its owner takes reasonable steps to keep secret - formulas, customer lists, processes, source code - protected indefinitely under state law and a federal civil statute for as long as it stays secret, and lost the moment it does not.

Informational only - this is not legal advice. These definitions explain general legal vocabulary in plain English. They are not advice about your situation, reading them creates no attorney-client relationship, and the law differs from state to state and changes over time. For advice you can rely on, speak to a lawyer licensed in your state.

What it means

A trade secret is any information - a formula, a recipe, a manufacturing process, a customer list, pricing data, source code, a business plan - that has economic value because it is not generally known or readily ascertainable by others who could profit from it, and that its owner has taken reasonable measures to keep secret. There is no registration, no examination and no fixed term: protection lasts as long as the secrecy does. That is both its advantage over a patent, which expires and requires public disclosure, and its weakness, because a trade secret independently discovered or reverse-engineered by a competitor is lost with no remedy at all.

The claim is misappropriation: acquiring a trade secret by improper means - theft, bribery, misrepresentation, breach of a duty to keep it confidential, or espionage - or using or disclosing one that was acquired that way or under a duty of confidence. A former employee who takes the customer database, a contractor who uses a process learned under a non-disclosure agreement, a competitor who hires away the engineer and puts her to work on the same problem with the old files: each is the typical case. Reasonable measures are the element most often litigated, and they mean what a prudent business would do - confidentiality agreements, access controls, marking, exit interviews - not perfection; a business that shared the information freely inside and outside the company cannot later call it secret.

Every state protects trade secrets, almost all under a version of the uniform act, and since 2016 a federal statute provides a civil claim in federal court with the same core definitions, an ex parte seizure remedy for extraordinary cases, and immunity for an employee who discloses a trade secret in confidence to a government official or a lawyer to report a suspected violation of law - an immunity employers must give notice of in their confidentiality agreements to preserve certain remedies. Theft of trade secrets is also a federal crime. Remedies include an injunction, damages for actual loss and unjust enrichment or a reasonable royalty, and in wilful cases exemplary damages and attorney's fees.

Where this comes from

The Defend Trade Secrets Act of 2016, Pub. L. 114-153, created the federal civil claim at 18 U.S.C. § 1836, with definitions at § 1839, the whistleblower immunity and its notice requirement at § 1833(b), and the criminal provisions of the Economic Espionage Act at §§ 1831-1832. State law is the Uniform Trade Secrets Act as enacted in every state but New York, which follows the common law of Restatement (First) of Torts § 757; Restatement (Third) of Unfair Competition §§ 39-45 restates the modern rule. Kewanee Oil v. Bicron, 416 U.S. 470 (1974), holds that state trade-secret law is not pre-empted by federal patent law. The limitation periods in the federal and uniform acts are not stated here.

When people hire a lawyer for this

For a business the work is preventive and a lawyer does it once: identifying what is actually secret, papering it with agreements that include the federal immunity notice, and building the access and exit procedures that will later prove reasonable measures. When an employee leaves for a competitor with a laptop, the first days matter - a lawyer will send a preservation demand, seek a forensic image and, if the evidence supports it, an emergency injunction before the information is used. An employee accused of taking secrets should get advice before returning or deleting anything, because both can be evidence.

Find a lawyer for this in your state

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Part of the LawyerLand plain-English legal glossary. Definitions are written from primary sources - statutes and court rules - and each entry states the authority it rests on, or says plainly when the doctrine is state law with no national rule.

If you cannot afford a lawyer, civil legal aid programmes provide free help with many of these problems: civil legal aid programmes by state.

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