Ed. Note: This is the first in a series of articles taken from Gavin Parsons' CLE presentation for the North Carolina Bar Association's Antitrust and Complex Business Dispute CLE Program presented on Thursday, January 30, 2025.
As we navigate through 2025, trade secret protection has become more critical than ever for businesses across all sectors.
Recent developments in workplace dynamics, regulatory changes, and several high-profile cases have highlighted the growing importance of understanding and protecting your company's trade secrets.
For in-house counsel, staying ahead of these developments is crucial to effectively safeguarding your organization's valuable intellectual property.
Why Trade Secrets Matter More Than Ever
The landscape of trade secret protection has evolved dramatically in recent years, driven by several key factors that demand attention from corporate legal departments.
First, the widespread adoption of digital storage and remote work has created new vulnerabilities. The ease with which employees can transfer sensitive information—whether through a simple drag-and-drop to a thumb drive or by forwarding files to personal email accounts—has increased the risk of trade secret misappropriation.
The remote work revolution, accelerated by COVID-19, has further complicated the picture by placing sensitive company information in less controlled environments.
Additionally, the growing hostility toward non-compete agreements, particularly at the FTC and in a number of states, has forced companies to rely more heavily on trade secret protection.
This shift comes at a time when we're seeing increasingly volatile jury verdicts in trade secret cases, with recent awards easily surpassing $100 million. Notable examples include Motorola's $407.4 million verdict against Hytera Communications (2020), Computer Sciences Corp.'s $210 million award against Tata Consultancy Services (2023), and Insulet Corp's $452 million verdict against EOFlow (2024).
The implications of these developments are clear: companies must strengthen their trade secret protection strategies, and in-house counsel need to be prepared to both prevent misappropriation and pursue injunctive relief, and potentially significant damages when necessary.
What Qualifies as a Trade Secret?
Under the federal Defend Trade Secrets Act (DTSA), a trade secret must meet three key criteria:
- It must be information – This can include financial, business, scientific, technical, economic, or engineering information in any form, whether tangible or intangible. The scope is intentionally broad to accommodate various types of valuable business information.
- It must be secret – It must not be known, and the owner must have taken reasonable measures to maintain its secrecy. This doesn't require absolute secrecy, but rather appropriate protective measures given the circumstances.
- It must have independent economic value – This value must derive from the information not being generally known or readily ascertainable by proper means. The key here is that the secret provides a competitive advantage because it's not widely known.
Court decisions have recognized an increasingly diverse array of information as trade secrets. For instance, in Truist Fin. Corp. v. Rocco, "compilations of financial information—which include lists of the revenue-producing employees, historical revenues, operating costs, product mix, and expenses of particular offices."
Similarly, in Koch Measurement Devices, Inc. v. Armke, the court recognized as trade secrets customer lists that included detailed information about ordering habits, contact persons, and company pricing strategies.
Reasonable Measures to Maintain Secrecy
One of the most critical aspects of trade secret protection is demonstrating that your company has taken reasonable measures to maintain secrecy. This requirement often becomes a central issue in trade secret litigation, as courts scrutinize whether companies have implemented appropriate protective measures.
The good news for in-house counsel is that "reasonable measures" doesn't mean implementing extraordinarily expensive or burdensome protocols. Courts have consistently held that absolute secrecy isn't required. However, you must show that your company has implemented meaningful protective measures appropriate for your industry and circumstances.
Some effective measures that courts have recognized include:
- Implementing clear confidentiality policies and procedures that are regularly communicated to employees
- Using appropriate confidentiality agreements with employees, contractors, and business partners
- Maintaining physical security measures for sensitive areas, including visitor logs and restricted access zones
- Implementing digital security protocols, including access controls, monitoring systems, and encryption
- Conducting regular training for employees on handling confidential information
- Clear marking of confidential documents and files with appropriate legends
- Exit procedures for departing employees that address the return of confidential information
- Regular audits of security measures and access logs
Common Misconceptions and Pitfalls
It's crucial for in-house counsel to understand what doesn't qualify as a trade secret.
Basic customer lists, general pricing information, and common business methods typically don't qualify for trade secret protection without additional proprietary elements that add value through their secrecy.
However, when these elements are combined in unique ways or include proprietary analysis or methodology, they may qualify for protection.
A particularly interesting development has emerged regarding compilation of information.
Courts have recognized that even when individual pieces of information might be publicly available, a compilation can qualify as a trade secret if it provides value through its unique organization or analysis.
For example, in Red Valve, Inc. v. Titan Valve, Inc., the North Carolian Business Court noted that "where an individual maintains a compilation of detailed records over a significant period of time, such that they have particular value as a compilation or manipulation of information, those records could constitute a trade secret even if similar information may have been ascertainable by anyone in the business."
Looking Ahead: Strategic Considerations
As we continue through 2025, several factors suggest the importance of trade secret protection will only grow. The increasing difficulty in patenting certain innovations, particularly in the software and computer application space following the Supreme Court's Alice decision, has led many companies to rely more heavily on trade secret protection.
For in-house counsel, this means:
- Regularly assessing your company's intellectual property portfolio to identify potential trade secrets
- Implementing and documenting appropriate protective measures
- Developing clear protocols for handling confidential information in remote work settings
- Creating robust onboarding and exit procedures that address trade secret protection
- Establishing monitoring systems to detect potential misappropriation
- Maintaining detailed records of your trade secret protection measures
Remember that trade secret protection can last indefinitely as long as the information remains secret and maintains its economic value. This makes trade secrets an increasingly valuable tool in your intellectual property protection arsenal, particularly for innovations that might not qualify for patent protection or where patent protection might not be desirable.
In our next article, we'll explore strategies for preventing trade secret misappropriation and what to do when you suspect your company's trade secrets have been compromised.
