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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.

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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 willful 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.

Worried about the cost? A lawyer can be hired for one part of a case only (limited-scope representation), may be paid from what a claim recovers (contingency fee), or may be free through a pro bono program or legal aid; a court can also waive its own filing fees.

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Related terms

Other entries in the same area of law, each written from the same primary sources.

Copyright Registration and InfringementHow copyright arises automatically in an original work and what registration with the Copyright Office adds - the right to sue, statutory damages and fees - together with the elements of an infringement claim, the exclusive rights it protects, and the remedies and defenses on both sides.
DMCA Takedown Notice and Counter-NoticeThe notice-and-takedown procedure under which a copyright owner asks a website, host or platform to remove infringing material, the platform removes it to keep its immunity, and the person who posted it may file a counter-notice to have it restored - with the penalties for a knowingly false notice on either side.
Fair UseThe defense that allows limited use of a copyrighted work without permission for purposes such as criticism, commentary, news reporting, teaching, scholarship and research - the four statutory factors, what "transformative" has come to mean, and why no rule of thumb about word counts or percentages is the law.
Patent (Utility, Design and Provisional Applications)The federal grant that lets an inventor exclude others from making, using or selling an invention for a fixed term - what can be patented, the novelty and non-obviousness tests, the difference between a utility, design and provisional application, and why the first-to-file rule makes the filing date everything.
Right of PublicityThe right to control the commercial use of one's own name, likeness, voice and other identifying features - a state-law right that varies in who holds it, whether it survives death, and how it yields to news, commentary and expressive works under the First Amendment.
Trademark Registration and Likelihood of ConfusionHow a brand name, logo or slogan becomes a federally registered trademark - the distinctiveness spectrum, the use-based and intent-to-use applications, the examination and opposition process - and the likelihood-of-confusion test that decides both whether a mark can register and whether someone else's use infringes it.
Trademark vs CopyrightTwo different protections that are constantly confused: one protects what identifies your source, the other protects what you created.
Work Made for HireThe rule that makes an employer, not the creator, the author and owner of copyright in work created by an employee within the scope of employment - and the much narrower rule for freelancers, under which a commissioned work belongs to the client only if it falls within listed categories and a signed agreement says so.

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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.

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