Trade Secrets: How Businesses Protect Information

A recipe, a customer list, a pricing formula, or a way of making something faster can be worth a great deal to a business. Unlike a patent or trademark, a trade secret is not registered with a government office. Its protection depends largely on what the business does to keep it secret. This guide explains in general terms what a trade secret is, practical ways businesses protect confidential information, and what the law may offer if a secret is taken.

What counts as a trade secret

The U.S. Patent and Trademark Office (USPTO) describes the basic elements on its trade secret policy page. In plain terms, a trade secret is information that:

• Has actual or potential economic value because it is not generally known
• Gets that value from not being known or easily figured out by others who could use it
• Is the subject of reasonable efforts to keep it secret

The USPTO notes that all three elements are required. If any one of them stops being true, the trade secret stops existing. Otherwise, the USPTO says, there is no set limit on how long a trade secret is protected.

That last element is the one a business controls most directly. Information that is shared freely, posted online, or left unprotected may not qualify, even if it is valuable.

Trade secrets compared with patents

Trade secrets and patents protect information in very different ways. The USPTO explains on its additional resources page that patents require the inventor to give a detailed public disclosure of the invention in exchange for the right to exclude others. A trade secret, by contrast, stays protected only as long as it stays secret.

Each approach has trade-offs, and some businesses use both for different parts of their work. An intellectual property lawyer can help you think through which fits your situation.

Practical ways businesses protect confidential information

There is no single checklist that works for every company, but common steps include:

Know what your secrets are

Make a list of the information that gives you an advantage. It may include formulas, source code, supplier terms, customer data, or internal processes. You cannot protect what you have not identified.

Limit access

Give access only to people who need it for their work. Use passwords, permissions, and locked storage. Remove access when someone changes roles or leaves.

Use written agreements

Confidentiality agreements, sometimes called nondisclosure agreements (NDAs), are common with employees, contractors, vendors, and potential investors. Employment agreements may also address confidential information. The terms, and what courts in your state will enforce, vary. A lawyer can help draft agreements that fit your state's rules.

Mark confidential material

Label documents and files as confidential. Marking alone does not create a trade secret, but it helps show that the business treated the information as secret.

Train your team

Explain to employees what information is confidential and how to handle it. Repeat the training, especially for new staff.

Handle departures carefully

When an employee leaves, collect company devices and files, remind them of their confidentiality obligations, and close accounts. Document these steps.

Be careful when sharing

Before sharing information with a potential partner or buyer, consider whether you need to share it at all, and get a written agreement first.

What the law may offer if a secret is taken

Both federal and state law can apply. The USPTO explains that:

• The Economic Espionage Act of 1996 makes certain theft of trade secrets a federal crime. These cases are prosecuted by the Department of Justice.
• The Defend Trade Secrets Act of 2016 created a private civil claim for misappropriation of a trade secret. The USPTO notes that it does not preempt existing state trade secret law, so owners may have the option of state or federal courts.

According to the USPTO, courts can protect a trade secret by ordering that the misappropriation stop, ordering that the secret be protected from public exposure, and, in extraordinary circumstances, ordering seizure of the misappropriated trade secret. At the end of a case, courts can award damages, court costs, reasonable attorneys' fees, and a permanent injunction where warranted.

These are possibilities, not promises. Whether any of them applies depends on the facts, the evidence, and the court.

Signs you may need legal help

• A former employee or partner appears to be using your confidential information.
• You discover files were copied or sent outside the company without permission.
• A competitor launches a product that closely matches your private work.
• You are hiring someone from a competitor and want to avoid bringing in their former employer's secrets.
• You have been accused of taking someone else's trade secret.

Time can matter in these situations. Evidence can disappear, and legal deadlines apply. If you suspect a problem, preserve records and speak with a lawyer promptly.

Questions to ask a lawyer

• Does our information likely meet the elements of a trade secret?
• Are our agreements and access controls reasonable for what we are protecting?
• Should we pursue a claim in state court, federal court, or not at all?
• What evidence should we preserve now?
• How do you charge for this type of matter?

Frequently asked questions

Do I need to register a trade secret?

No. Trade secrets are not registered with the USPTO. Protection depends on the information meeting the legal elements, including reasonable efforts to keep it secret.

How long does trade secret protection last?

The USPTO says there is no set time limit as long as all the elements continue to exist. Once the information becomes generally known or is no longer kept secret, protection can end.

Is an NDA enough to protect a trade secret?

An NDA is one useful step, but it is usually paired with access limits, training, and careful handling of the information.

Can I bring a case in federal court?

The Defend Trade Secrets Act created a federal civil claim, and state law may also apply. A lawyer can explain which court fits your case.

Related: Browse more legal guides and find intellectual property lawyers near you.

This page is general information, not legal advice. Laws change and every case is different — talk to a licensed attorney about your situation.