Authored by: Christopher Smith and Madeline Withers
Trade secrets can be among a company’s most valuable intellectual property. Unlike patents, trademarks, or copyrights, they are not registered with a government agency or published in a public database. Rather, trade secrets derive their value from remaining secret. And their protection can potentially last indefinitely. That protection, however, is not automatic.
A trade secret is protected only for as long as its owner takes reasonable measures to maintain its secrecy. Courts often decide these disputes not on the value of the information, but on whether the owner took reasonable measures to treat the information as a secret. Thus, knowing what those measures require, and why they matter, is the foundation of any trade secret program.
What Qualifies as a Trade Secret
Trade secrets are protected under two primary legal frameworks in the United States.
- At the federal level, the Defend Trade Secrets Act provides a civil cause of action in federal court.
- Most states have also adopted versions of the Uniform Trade Secrets Act, which offers protection at the state level.
The requirements under both frameworks are generally closely aligned. To qualify as a trade secret, information must meet two conditions.
- First, it must derive independent economic value from not being generally known or readily ascertainable.
- Second, the owner of the information must have taken reasonable measures to keep it secret.1
Trade secret disputes can focus on either requirement. The second requirement, however, is where a business can take control to ensure maximum protection by implementing the proper measures to maintain secrecy of its propriety information.
“Reasonable Measures” and Why They Matter
Courts evaluating a trade secret claim do not simply ask whether the information was valuable and whether someone stole it. They ask whether the business that owned the information treated it like a secret.
No statute gives “reasonable measures” a fixed definition, and that is by design. In deciding what constitutes “reasonable measures,” courts have held that it depends on the circumstances, including the size and sophistication of the business, the nature of the information, and the resources available to protect it. For example, the Eastern District of California has held that to satisfy the “reasonable measures” standard, a business must take meaningful steps to guard its information, though it “is not required to turn itself into an ‘impenetrable fortress.'”2 Other courts have emphasized that their efforts must be more than minimal and must treat protected information differently than ordinary corporate data.3 A measure that is reasonable for a global manufacturer may be excessive for a small firm, and the reverse is equally true. The standard does not require perfection, but the absence of meaningful protective measures can defeat a trade secret claim, no matter how valuable the underlying information may be.
Because the inquiry is fact-specific, courts weigh the full picture rather than any single factor. No one step guarantees protection, and no single omission is automatically dispositive. What courts assess is whether, taken together, a company’s measures reflect a genuine and consistent commitment to secrecy.4 The practices below are the ones courts have considered as evidence that reasonable measures were, or were not, in place.
Building a Trade Secret Protection Program
Know and Label What You Are Protecting
Protection starts with identification. Many businesses have never formally cataloged their trade secrets, which may create a vulnerability when a dispute arises. The first practical step is to take stock of what information gives the company a competitive edge and is not known outside the business. Customer lists, pricing structures, proprietary processes, formulas, algorithms, and business strategies are common examples.
Once a business identifies what it is protecting, a common next step is to make that clear to those who encounter the information. Marking documents, files, and materials can help put recipients on notice and reinforce the expectation of secrecy. Courts generally do not require you to use the word “secret” when marking documents, but they often look for some indication that alerts recipients to the information’s confidential nature.
Restrict Access on a Need-to-Know Basis
Courts often consider who within an organization has access to trade secret information. Sharing information broadly, even internally, can factor into how a court views a company’s overall approach to secrecy. A common guiding principle is to limit access to those employees or contractors who need the information to perform their job functions.
In practice, this may include role-based access controls, segmenting sensitive data to help minimize exposure, and revisiting who has access as roles and responsibilities change over time.
Use of Written Agreements
Written confidentiality agreements are among the most valuable tools available to a trade secret owner. Courts have often recognized well-drafted agreements as meaningful evidence that a business treated its secrecy obligations seriously.5
Thus, employees, contractors, and business partners who have access to trade secret information are typically bound by a written nondisclosure agreement regarding that information. These agreements generally work best when they define the scope of the confidential information covered, describe what the recipient may and may not do with that information, and address what happens to the information when the relationship ends.
One drafting detail that deserves particular attention is the duration of the confidentiality obligation. Many standard nondisclosure agreements include fixed terms. For trade secret information, a fixed term can create challenges, because some courts have recognized that once a party’s confidentiality obligation expires, the trade secret protection the agreement was intended to support may expire with it.6 Where information is expected to retain its value indefinitely, a common approach is to structure the confidentiality obligation to last for as long as the information remains a trade secret, or indefinitely, rather than for a fixed calendar period.
Invest in Digital and Physical Security
Because the majority of business information today is stored digitally, technical security measures often play an important role. Courts evaluating reasonable measures have pointed to practices such as password protection, multi-factor authentication, limited login credentials, antivirus software, anti-phishing protections, and encryption as evidence that a business took its digital security seriously. 7
These same practices generally apply when trade secret information is stored with a third party. Using an outside vendor or cloud platform does not shift the owner’s responsibility to show reasonable measures. In Pliteq, Inc. v. Mostafa, for example, a company stored its trade secrets entirely on cloud-based systems, and the court found reasonable measures where the company paired those digital safeguards with limited access, regular IT audits, and physical protections such as keycard access. 8
Physical security can matter, depending on the nature of the trade secret. Restricted access to certain areas of a facility, key card controls, and visitor protocols can all contribute to the overall picture of a business that treats sensitive information with appropriate care.
Manage Employee Transitions Carefully
Employee departures are a common risk to trade secret status and misappropriation. When an employee leaves the company, a prudent practice is to promptly revoke access to systems, accounts, and physical areas where trade secret information is stored. That said, courts generally focus on reasonable promptness rather than perfect timing.9
Beyond revoking access, many businesses find it helpful to use a structured offboarding process that reminds departing employees of their ongoing confidentiality obligations, requests the return of company devices and materials, and documents that those steps were completed. A confidentiality agreement signed at the outset of employment can outline these obligations, and the offboarding process can reinforce them.
The AI Frontier and Emerging Risks
Artificial intelligence tools have become common fixtures in many business workflows, and they introduce a category of trade secret risk that is still taking shape. When employees or contractors input sensitive business information into AI platforms or third-party AI tools, that information may be used or stored in ways the company did not anticipate, which could affect its status as a trade secret.
Courts have offered limited guidance in this area so far. As a practical matter, though, an AI platform is a form of third-party tool, and the principles that apply to other external disclosures may well extend similarly to AI. Businesses that want to preserve trade secret protection over information used with AI systems may find it helpful to treat those systems like any other outside platform. That can include:
- Putting an agreement in place with the provider, including any limits on using the data to train models
- Understanding how the information will be used, stored, and retained
- Restricting access to those with a legitimate need to use the tool
As AI tools become more deeply integrated into business operations, particularly tools that pull information from internal databases or knowledge repositories, the question of what information those systems access and how they handle it will become increasingly important to manage proactively.
If You Suspect a Violation
Even with a strong protection program, misappropriation can still occur. Because these situations often move quickly and involve important legal rights, one of the first steps is typically to consult experienced counsel.
Early on, it also helps to assess the situation internally: identify what information may have been affected and document the measures that were in place to protect it. Examining the circumstances is equally useful, since these disputes frequently involve a prior relationship with the person accused of taking the information, whether a departing employee, a former vendor, or a business partner. The nature of that relationship, the access the party had, and what they appear to have done with it can all shape the strategy going forward.
The available options depend on the circumstances and are best evaluated with counsel. Where ongoing or imminent harm is a concern, they may include emergency injunctive relief, such as a temporary restraining order requiring the other party to stop using or disclosing the information while the matter is resolved.
One point is worth emphasizing: trade secret protection generally cannot be built after the fact. Courts typically assess the measures in place at the time of the alleged misappropriation, not those adopted afterward. The most effective time to establish these practices is well before any dispute arises.
Final Thoughts
A trade secret is protected only for as long as its owner treats it as one. In practice, that means taking deliberate steps: knowing what you hold, limiting who can access it, using written agreements, labeling consistently, securing your systems, and managing employee departures with care.
For businesses that have not recently taken stock of these practices, there is no better time to start than the present.
About Brooks Kushman P.C.
Founded in 1983, Brooks Kushman P.C. has built a national reputation as a premier intellectual property and technology law firm. We accomplish this with the understanding that the most effective IP solutions come from putting great minds together – our clients and our own. With offices across the country, we forge strong relationships with corporations, small to medium-sized businesses, and leading universities across the country.
Brooks Kushman counts a number of Fortune 100 Corporations across a variety of industries among its clients. Our attorneys have a deep understanding and broad range of experience in a variety of industries and technologies, including automotive, AI & data, automation, consumer electronics, manufacturing, medical device, computer technology, aerospace, chemicals, biotechnology, retail, food & beverage, green technology, fintech, and more. We are also recognized by leading legal publications and rankings, including, Best Lawyers, Law360, Intellectual Asset Management, Managing Intellectual Property, and World Trademark Review. For more information, please visit www.BrooksKushman.com.
