How Trade Secrets Are Protected Under U.S. Law

The World's Most Valuable Secret Has Never Been Patented

Coca-Cola's secret formula has been closely guarded since 1886—never patented, so it would never expire, never be disclosed in a public patent filing. That strategic choice illustrates the core logic of trade secret protection: some information is more valuable kept secret indefinitely than protected for a limited term through patents. Trade secrets protect an enormous range of commercial information: formulas, algorithms, customer lists, manufacturing processes, financial projections, and business strategies. Unlike patents, copyrights, or trademarks, trade secret protection requires no government registration and can last forever—as long as the secret is maintained.

Federal trade secret law was dramatically strengthened in 2016 with the enactment of the Defend Trade Secrets Act (DTSA), 18 U.S.C. § 1836, which created a federal civil cause of action for the first time. Before the DTSA, trade secret owners had to rely on state law—primarily the Uniform Trade Secrets Act (UTSA), adopted by 48 states.

Legal Definition of a Trade Secret

Under the DTSA and the UTSA, a trade secret must satisfy two elements:

• Qualifying information: All forms and types of financial, business, scientific, technical, economic, or engineering information—including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes—whether tangible or intangible.
• Reasonable measures and economic value from secrecy: The owner must have taken reasonable measures to keep the information secret, and the information must derive independent economic value, actual or potential, from not being generally known to or readily ascertainable by others who could obtain economic value from its disclosure or use. 18 U.S.C. § 1839(3).

Both elements must be present. Information that is publicly available or that a company has not taken steps to protect cannot qualify as a trade secret.

What Counts as Reasonable Measures

"Reasonable measures" is a totality-of-the-circumstances inquiry. Courts examine what the company actually did—not what an ideal company would have done.

Companies that carelessly share trade secrets—emailing formulas without encryption, posting pricing models on shared drives accessible to all employees—may find courts unwilling to recognize the information as a protected trade secret.

Misappropriation: Civil and Criminal Liability

Misappropriation under the DTSA means acquisition by improper means, or disclosure or use of a trade secret without consent by one who acquired it through improper means or with knowledge that it was improperly acquired. Improper means include theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, and espionage through electronic or other means. 18 U.S.C. § 1839(6).

• Civil remedies under DTSA: Injunctive relief, damages for actual loss plus unjust enrichment, or reasonable royalty. Exemplary (punitive) damages up to two times actual damages and attorneys' fees are available for willful misappropriation. 18 U.S.C. § 1836(b)(3).
• Ex parte seizure: A unique DTSA feature—courts may issue extraordinary ex parte orders seizing property to prevent propagation of misappropriated trade secrets in exceptional circumstances. 18 U.S.C. § 1836(b)(2).
• Criminal prosecution: The Economic Espionage Act of 1996 (EEA), 18 U.S.C. §§ 1831–1839, makes theft of trade secrets benefiting foreign governments a federal crime punishable by up to 15 years imprisonment and $5 million in fines per count.

Trade Secrets vs. Patents: The Strategic Choice

Choosing between patent protection and trade secret protection is a fundamental business decision with lasting consequences.

Trade secret protection makes no sense for inventions that are easily reverse-engineered or that will be publicly observable once released. It is ideal for manufacturing processes, formulas, and algorithms that can be implemented without revealing their contents. The choice is irreversible. Once a patent application is published—typically 18 months after filing—the trade secret is gone. Companies must decide early, and carefully.

This article is for informational purposes only and does not constitute legal advice. Consult a qualified attorney for legal guidance.