Tips for protecting your trade secrets

Adequately protecting trade secrets can mean the difference between the success and failure of your business.

by River Braun, J.D.
updated May 11, 2023 ·  2min read

No matter what business you're in, protecting your trade secrets should be a priority. From employee agreements to onsite security, here are some of the best ways your company can protect its most valuable business resources.

Hands presenting a confidential document

Defining Trade Secrets

The Uniform Trade Secrets Act (UTSA) defines a trade secret as "information that has independent economic value by not being generally known and can reasonably be maintained a secret." This can be any piece of confidential information that has the potential to provide a competitive edge for your business, which may be related to:

  • Manufacturing processes
  • Product formulas
  • Distribution methods
  • Customer profiles and lists
  • Advertising and marketing strategies
  • Supplier lists
  • Sales methods

More specific examples include the design of a smartphone or the recipe for a world-famous soft drink. In highly competitive business industries, employees may be tempted to steal these secrets to obtain a more lucrative position or sell those secrets to the highest bidder.

Trade secrets law

Trade secrets are protected by law. In the U.S., the UTSA and the Economic Espionage Act of 1996 forbid their misappropriation for commercial use. If you are a victim of trade secret misappropriation, the Defend Trade Secrets Act of 2016 (DTSA) gives you the right to bring a private civil lawsuit under the Economic Espionage Act.

Prior to the enactment of the DTSA, these cases were tried in state courts. While nearly all states enacted laws using the UTSA model, this process historically led to significant differences in how these cases were decided. Now that the DTSA has federalized trade secret protections, businesses have more certainty regarding litigating violations of these rights.

Protecting trade secrets

Aside from being able to sue for damages in federal court and to seek seizures of stolen information, there are other ways you can proactively protect your business and avoid the significant losses that are inherent in this kind of theft.

You can help safeguard the continued success of your business by:

  • Identifying secrets that need protection
  • Labeling materials that contain protectable trade secrets
  • Limiting access to related materials and requiring those materials to be checked in and checked out
  • Assessing vulnerabilities and risks, both internally and externally
  • Monitoring where confidential information is stored, including electronic items such as computer hard drives, discs, and thumb drives
  • Securing computers and networks via industry-leading standards, including encryption, strong passwords, or biometric locks
  • Executing confidentiality and nondisclosure agreements with employees and vendors
  • Ensuring the physical security of buildings and areas where confidential activities are happening, such as manufacturing plants and labs
  • Limiting public tours of the business
  • Avoiding disclosure of protectable secrets to people in other countries—not every country has the same trade secret protections.
  • Providing employees with ongoing security training
  • Undertaking disciplinary action with employees who have violated your policies and procedures
  • Consistently following your own policies and procedures.

If someone steals your trade secrets and a court finds that you did not take reasonable steps to protect them, you may lose your case, so it's important to take your secrets seriously and take a proactive approach to keeping them safe.

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River Braun, J.D.

About the Author

River Braun, J.D.

River Braun was a business attorney in California for over a decade, assisting entrepreneurs on issues such as incorpora… Read more

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of the author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.