What Makes Your Business Yours? Protecting Trade Secrets in the Digital Age

EDITOR’S NOTE: Most businesses think of their value in terms of what’s visible– revenue, headcount, products on shelves. But some of the most important assets a company owns never show up on a balance sheet or in a public filing. They live in spreadsheets that never leave a locked folder, in processes that took years to refine, in the customer relationships that a competitor would love to have but can’t replicate. A formula, a pricing model, a piece of source code, an internal method—these things can define a company’s edge precisely because nobody else has them. The law calls them trade secrets. And protecting them starts with a deceptively simple set of questions: does the company actually know what information gives it an advantage, does it control who can see it, and is it doing enough to keep it from walking out the door?

What Qualifies as a Trade Secret

Allan Grafman of All Media Ventures put the business question in simple terms: a trade secret is often the information that explains “what makes you, you.” The legal test is more specific. The DTSA takes a broad view of what may qualify as a trade secret. Under 18 U.S.C. § 1839(3), a company’s protected information can take many forms, but the key is that the business has taken reasonable steps to keep it confidential and that its secrecy gives it economic value. The owner must take reasonable measures to keep it secret, and the information must have economic value because it is not generally known or readily ascertainable through proper means.

The slide materials make the rule easier to remember. The information must be secret, it must be valuable because it is secret, and the owner must make reasonable efforts to preserve that secrecy. Those efforts matter in real litigation. A court considering a DTSA claim may look closely at whether the company actually communicated confidentiality expectations and controlled access to the information. Courts have rejected trade-secret claims when reasonable secrecy measures were not adequately maintained.

Patent Protection and Trade Secret Protection Solve Different Problems

A patent and a trade secret can protect different parts of the same business. A patent requires public disclosure in exchange for a limited legal right. A trade secret depends on keeping useful information out of public view. Once confidential information becomes public, the basis for trade-secret protection may disappear.

That difference often shapes strategy. A company may patent a machine or product feature but keep a manufacturing method, internal setting, formula, or process confidential. Some business information is not patentable at all. Other information cannot realistically remain secret because a customer or competitor can discover it by examining or reverse engineering the finished product. Choosing the right form of protection starts with understanding what type of intellectual property the business actually has.

Secrecy Can Last for Years, but it is Never Automatic

Trade secret protection has no fixed expiration date. If the information remains secret and the owner continues to protect it, the protection can continue for many years. That potential longevity is one reason businesses may prefer trade-secret treatment for information that can realistically remain confidential.

A business may also lose its competitive edge when a rival independently develops the same information. Trade secret law generally does not prohibit that kind of independent development. Lawful reverse engineering and independent discovery are recognized limits. A company that spent years developing a customer list does not own every similar list independently created by a competitor.

Contract duties may still apply even when trade-secret law does not. A confidentiality agreement can remain enforceable, which is why businesses often combine contracts with access controls and internal policies.

The Employee Transition is Often the Pressure Point

Many disputes begin with someone who was properly given access to sensitive information and later leaves the business. Grafman described misappropriation in blunt business terms: “Misappropriation is a great word for stealing.” Legally, the DTSA is narrower. Under 18 U.S.C. § 1839(5), misappropriation generally involves acquiring a trade secret through improper means, or using or disclosing it when the person knew, or had reason to know, that the information was obtained improperly or was subject to a duty of secrecy.

Employees may carry their general experience and skills into a new job. They may remember how an industry works or know the major customers. The dispute is usually about where experience ends and protected company information begins.

Inevitable Disclosure and the Non-Compete Concern

The inevitable disclosure doctrine shows how closely trade-secret law can intersect with employment restrictions. In jurisdictions that recognize the doctrine, a court may consider whether a former employee’s new role is so similar that use of the former employer’s trade secrets is likely to follow. Courts may look at the level of competition between the employers, the similarity of the two jobs, the value of the information, and the safeguards adopted by the new employer.

The doctrine is not applied uniformly across jurisdictions, and its use can raise the same policy concerns that surround non-compete restrictions. The central issue is whether trade-secret law is protecting genuinely confidential information without turning ordinary employee knowledge and experience into property of the former employer.

The DTSA Added a Federal Route

Trade secret law was traditionally a matter of state law. The DTSA added a federal civil cause of action in 2016 without eliminating state remedies. The federal route can be useful when employees, records, or competitors are located in different states.

Sometimes the First Priority is to Stop the Disclosure

Money damages matter, but they may not be the first concern. Once the source code, a formula, pricing data, or a strategic plan becomes public, a later award cannot recreate secrecy. That is why temporary restraining orders and injunctions can be central remedies.

The same urgency applies when a problem is discovered. A company that believes sensitive information is about to be disclosed may need to act before the damage becomes irreversible. Monetary recovery can include lost profits, unjust enrichment, reasonable royalties, attorneys’ fees, and, in appropriate cases, exemplary damages.

An NDA Is Useful, but It Cannot do the Whole Job

Non-disclosure agreements remain a common tool, but they work best as part of a larger system. Employment, consulting, joint venture, and research agreements can define confidentiality duties, while internal policies can reinforce them.

Overreaching can backfire. A restriction that reaches too far may raise enforceability concerns, especially if it operates like a broad non-compete or unreasonably limits employee mobility. The better approach is to identify the information that truly needs protection and draft around that legitimate interest. “A well-drafted NDA is a scalpel,” Jonathan Friedland, a partner with Much Shelist, observed, “and a bad one is a dragnet.”

Protect the Information Before a Dispute Starts

The strongest trade-secret work is usually done before a dispute starts. Begin by identifying the information that actually matters. Labeling everything “confidential” may create noise instead of protection.

Access should then be tied to business needs. The slide materials recommend practical controls such as restricted networks and folders, credentials, two-factor authentication, encryption, access monitoring, and clear procedures when employees leave. Especially sensitive information can be kept off-network or in physical form when feasible. These steps reduce risk and also help show that the company treated the information as genuinely secret.

Trade secrets can also carry economic value in a transaction. Sale notices involving intellectual property assets illustrate that source code, know-how, confidential information, customer-related assets, and other intangible rights can be part of the property transferred with a business. Protection is therefore not only about litigation. It can affect the business’s value.

AI Creates New Ways for Secrets to Leave the Building

Technology improves security and creates new exposure at the same time. Encryption, authentication, and monitoring help control access, while mobile devices, remote work, cloud platforms, phishing, and generative AI make it easier to move sensitive information outside a protected environment.

The AI risk is especially practical. An employee may paste source code, a customer issue, pricing information, or an internal strategy into a public generative AI tool simply to save time. That convenience can create a trade-secret problem if the company has not considered where the information goes, who can access it, or what the platform’s terms allow. Friedland noted, “The employee isn’t trying to steal anything. They’re trying to finish a project by Thursday. But the damage is the same if the information ends up somewhere the company can’t control.” Using proprietary information in such tools can also raise questions about whether reasonable secrecy measures were maintained.

AI also raises a harder question when the valuable information is itself generated or organized through automated systems. Businesses may seek to protect proprietary algorithms, data structures, or outputs, while regulators, employees, or counterparties may seek greater transparency. Those questions are still developing, but the basic trade-secret lesson remains familiar.

Conclusion

Trade secret protection depends more on conduct than on paperwork. A company needs to know which information gives it a real competitive edge, decide who should have access, use contracts that fit the risk, and build practical security around the value of the information.

The objective is not to treat each internal document like a state secret. It is to identify information a competitor could use against it and protect it before it leaves the company’s control. When the advantage comes from what others do not know, secrecy is part of the asset itself.

To learn more about this topic, view Leveraging & Protecting Trade Secrets in the 21st Century. The quoted remarks referenced in this article were made either during this webinar or shortly thereafter during post-webinar interviews with Financial Poise Faculty. Readers may also be interested in reading other articles about trade secrets.

This article was originally published on [September 8, 2026].

©2026. DailyDACTM, LLC d/b/a/ Financial PoiseTM. This article is subject to the disclaimers found here.