The common and legal definitions of a trade secret overlap, but the legal definition has a great many nuances. In common understanding, a trade secret is something a business or a company keeps secret. Famous examples include the secret formula for Coca-Cola and the recipe for Kentucky Fried Chicken. Note that the “trade” aspect of “trade secret” distinguishes these types of secrets from personal, family, or government secrets. The “secret” must have some relationship to a commercial enterprise, production, services, sales, marketing, or something similar. Commercial trade secrets are protected by a number of state and federal laws. Family and personal secrets might be protected by privacy laws, and government secrets are protected by criminal laws against espionage and the like.

Commercial trade secrets have several characteristics, which are:

• Information or device
• That is “secret” — that is, something that is not publicly known
• That is subject to the owner’s reasonable efforts to keep the information/device secret
• That has commercial value — that provides a competitive advantage vis a vis competitors — because the information/device is kept secret

In more detail, the information/device can be pretty much anything. It may be as simple as a customer/client list or a vendor list kept in hand-written form in a file or on a Rolodex. Knowing the names of customers and clients can provide a competitive advantage to a competitor. Likewise, with knowledge of the source of products, ingredients, and raw materials. As noted, almost anything can be a “secret” in this sense, including processes, instruments, designs, techniques, devices, machines, data, patterns, formulas and recipes, methods, plans, practices, etc.

Under the definition of a trade secret, a trade “secret” is only legally protected if the “secret” is actually secret. Thus, if the information/device is publicly known, then there is no “secret” to be protected. Likewise, if the owner releases the information/device to the public — intentionally or through mistake — the information/device loses its “secretness. As one example, as part of a marketing campaign, McDonald’s once produced and distributed a video showing how to make one of its secret sauces for one of its sandwiches. Obviously, the video removed the recipe from its status as a “trade secret.” As another example, a business held a series of investor “pitch meetings” via public access Zoom meetings. The company’s business plans and methods were fully discussed, and once made public, those business plans and methods were no longer deemed “secret.” The “secret” can also be “lost” if a competitor can reverse-engineer the information/device from public sources.

Under the definition of a trade secret, “reasonable” precautions to keep information/devices secret depend on the circumstances and the type of business. Keeping a Rolodex in a locked room or locked drawer might be sufficient for that type of information. Under other circumstances, more pronounced security measures may be needed up to keeping the information/data in a locked safe or under active security surveillance. Often, the requirement that “reasonable” measures be used to keep information/devices secret is satisfied if the owner requires employees and others given access to the secret to execute non-compete and non-disclosure agreements.

In terms of “commercial advantage,” that hurdle is very low. Courts have held that almost anything can provide a commercial advantage by not being publicly known.

Contact the Trade Secret Attorneys at Revision Legal

For more information, contact the experienced Trade Secret Lawyers at Revision Legal. You can contact us through the form on this page or call (855) 473-8474.

Federal vs. State Trade Secret Law: DTSA and the UTSA

Trade secrets are protected by both federal and state law, and most businesses have access to claims under both frameworks. At the federal level, the Defend Trade Secrets Act of 2016 (DTSA), 18 U.S.C. § 1836, created a federal civil cause of action for trade secret misappropriation for the first time, allowing trade secret owners to file suit in federal court without needing an independent basis for federal jurisdiction. The DTSA also includes a powerful ex parte seizure provision that allows a court, in exceptional circumstances, to order the immediate seizure of misappropriated trade secrets without notice to the accused thief — a remedy available when normal injunctive relief would be inadequate to prevent dissemination of the secret.

At the state level, the vast majority of U.S. states have adopted some version of the Uniform Trade Secrets Act (UTSA), including Michigan, which enacted the Michigan Uniform Trade Secrets Act (MUTSA), MCL § 445.1901 et seq. The MUTSA provides a state civil cause of action for trade secret misappropriation with injunctive relief and damages available, including exemplary damages up to twice the actual damages for willful and malicious misappropriation, and attorney’s fees in cases involving willful misappropriation or bad-faith misappropriation claims. Trade secret owners can pursue claims under both the DTSA and the MUTSA simultaneously, which is often strategically advantageous.

Misappropriation: What Constitutes a Violation?

Under both the DTSA and the MUTSA, misappropriation of a trade secret includes two types of conduct. The first is acquisition of a trade secret through improper means — which is defined broadly to include theft, bribery, misrepresentation, breach of a duty to maintain secrecy, and espionage. The second is disclosure or use of a trade secret without consent, where the person disclosing or using the secret knew or should have known that the secret was obtained through improper means or in breach of a confidentiality obligation.

This second category is particularly important in the employee and contractor context. When a key employee leaves for a competitor and takes customer lists, pricing data, or proprietary formulas, the acquiring competitor may itself be liable for misappropriation if it knew or had reason to know that the former employee was using trade secret information from their prior employer. Companies that aggressively recruit known trade secret holders, or that fail to ask basic questions about the nature of the information a new hire brings with them, take on significant misappropriation risk.

Reasonable Measures: What Courts Actually Look For

The “reasonable measures” element of trade secret protection is often the most hotly contested issue in trade secret litigation. A business cannot claim trade secret protection for information it has not actively worked to protect. Courts look for a combination of physical, contractual, and technological measures tailored to the nature of the information and the size and resources of the business. Common measures that courts have found sufficient include:

• Non-disclosure agreements (NDAs) executed by all employees, contractors, and business partners with access to the information
• Password protection and access controls limiting access to sensitive information to those who genuinely need it
• Clearly marked confidential designations on sensitive documents and files
• Confidentiality training for employees, documenting that they understand their obligations
• Physical security measures for particularly sensitive information (locked filing cabinets, restricted server rooms)
• Contractual limitations on the use and disclosure of information shared with vendors, licensees, and other third parties

Importantly, courts do not require that a business adopt every possible security measure — just that the measures taken be reasonable in light of the circumstances. A small company with three employees does not need the same security infrastructure as a Fortune 500 manufacturer. However, a company of any size that relies on its customer list, proprietary software, or manufacturing process as a competitive differentiator and takes no documented steps to protect that information will struggle to claim trade secret protection if that information is later stolen.

Remedies Available to Trade Secret Holders

Trade secret law provides robust remedies for successful plaintiffs. Injunctive relief — a court order prohibiting the defendant from using or disclosing the misappropriated information — is often the most urgently needed remedy, as it can stop ongoing harm before it becomes irreversible. Courts may issue temporary restraining orders (TROs) and preliminary injunctions on an expedited basis when the plaintiff can demonstrate immediate and irreparable harm from continued misappropriation.

Monetary remedies include actual damages caused by the misappropriation, the defendant’s unjust enrichment attributable to the misappropriation (whichever is greater), and, as noted, exemplary damages of up to twice the actual damages for willful and malicious misappropriation. Attorney’s fees can be awarded in cases involving willful misappropriation or bad-faith claims. In criminal cases — which can be pursued under 18 U.S.C. § 1832 (Economic Espionage Act) for trade secret theft involving foreign actors or interstate commerce — penalties include substantial fines and imprisonment.

Contact the Trade Secret Attorneys at Revision Legal

Whether you are working to establish trade secret protections for your business, pursuing a misappropriation claim against a former employee or competitor, or defending against a trade secret lawsuit, the attorneys at Revision Legal have the experience you need. We handle trade secret matters under both the DTSA and the MUTSA and can advise on practical protection measures, NDAs, and enforcement strategy. Contact us through the form on this page or call (855) 473-8474.