Infringement of Trade Secrets: Strategies, Protections, and Remedies

Trade secrets are often the most valuable asset a company holds, from proprietary formulas and customer lists to innovative processes and business strategies. When those secrets are exposed, stolen, or misused, the resulting infringement can cause significant financial harm and long-lasting competitive damage. This article explains what constitutes infringement of trade secrets, how it is proven in different jurisdictions, the common remedies, and practical steps organizations can take to protect themselves while remaining compliant with the law.

What is a trade secret?

A trade secret is information that a business keeps confidential because it derives economic value from that secrecy and is itself subject to reasonable efforts to maintain its secrecy. Unlike patents, trade secrets require no formal registration. The key elements are:

Secrecy: The information is not generally known or readily accessible to others in the field.
Economic value: The information gives the owner a competitive edge because it is not publicly available.
Efforts to maintain secrecy: Reasonable measures are taken to protect the confidentiality of the information, such as access controls, NDAs, and secure storage.

Examples include manufacturing formulas, source code, client databases, pricing strategies, and unique business methods. What distinguishes a trade secret from confidential information is the combination of secrecy and economic value that is maintained through deliberate protective measures.

Legal frameworks: a global view

Different jurisdictions regulate trade secrets through a mix of civil and, in some places, criminal provisions. Some of the most influential frameworks include:

United States: The Defend Trade Secrets Act (DTSA) provides a federal claim for misappropriation, while state-level protection relies on the Uniform Trade Secrets Act (UTSA). The Economic Espionage Act (EEA) punishes the theft of trade secrets with criminal penalties.
European Union: The Directive on Trade Secrets (Directive 2016/943) has been implemented across member states, providing harmonized standards for misappropriation and civil remedies, including injunctions and damages.
Other regions: Many countries have national laws that reflect the core principles of secrecy, value, and protective measures, often aligning with international norms under agreements such as TRIPS.

Across borders, enforcement challenges can arise from differences in remedies, standards for secrecy, and available remedies. In cross-border disputes, courts may apply the law of the jurisdiction where the misappropriation occurred or the jurisdiction that has a meaningful connection to the case, depending on the governing agreements and statutes involved.

How infringement typically happens

Infringement of trade secrets can occur through deliberate theft, unauthorized disclosure, or use of secret information obtained through improper means. Common scenarios include:

Employee departure: A former employee who retains confidential materials or learns sensitive processes shares or uses them at a new employer or in a competitive venture.
Outside contractors and vendors: Third parties who gain access to confidential information during a project and disclose or misuse it after the engagement ends.
Insider threats and social engineering: Individuals who manipulate or exploit internal processes to obtain secret data.
Data exfiltration and copying: Unauthorized copying of databases, files, or code, often via removable media or cloud backups.
Reverse engineering with a secret twist: While legal reverse engineering is often permissible in some contexts, combining reverse-engineered insights with copied trade secrets can form a misappropriation claim if the secrets were obtained by improper means.

Not every breach of confidentiality constitutes misappropriation. For a claim to succeed, the information must qualify as a trade secret, and the defendant’s acquisition, disclosure, or use of that secret must have involved improper means or a breach of duty or contract.

Proving misappropriation: the elements courts look for

While the exact elements vary by jurisdiction, typical requirements include:

The information in question qualifies as a trade secret (secret, valuable, and subject to reasonable protective measures).
There was misappropriation, either through improper acquisition (the secret was obtained by theft, bribery, unauthorized copying, or other improper means) or through disclosure or use by someone who obtained knowledge of the secret under a duty to maintain confidentiality.
The defendant knew or had reason to know that the information was a trade secret and protected information was used or disclosed without authorization.

To establish misappropriation, plaintiffs often rely on a combination of documentary evidence (confidentiality agreements, data access logs, security policies), testimony from witnesses, and technical evidence (IP addresses, metadata, access patterns). Early and thorough investigations help preserve evidence and support claims for injunctive relief and damages.

Remedies and damages you might seek

Infringement cases typically pursue a mix of equitable and monetary remedies:

Injunctions: Preliminary and permanent injunctions prevent further disclosure or use of the trade secret. They are a common first line of relief to stop ongoing harm.
Damages: Plaintiffs may recover actual losses resulting from the misappropriation and may also seek the defendant’s unjust enrichment attributable to the use of the secret. Some jurisdictions allow for the recovery of reasonable royalties on the unlawful use of the trade secret.
Disgorgement: The court may require the violator to disgorge profits gained from the misappropriated secret.
Attorney’s fees and costs: In some cases, prevailing parties can recover legal costs, especially if the misappropriation was willful or the conduct was exceptionally egregious.
Criminal penalties: In many jurisdictions, criminal sanctions exist for theft or theft-related misappropriation of trade secrets, with penalties ranging from fines to imprisonment under statutes like the Economic Espionage Act in the United States.

Remedies may vary depending on whether the misappropriation is ongoing, the extent of damages, and the level of willfulness. Courts often tailor remedies to prevent recurrence, protect other confidential information, and deter similar misconduct in the market.

Preventive measures: strengthening your defense

Prevention is the most effective strategy. A robust program combines legal instruments, technical safeguards, and organizational culture. Key steps include:

Inventory and classification: Identify what constitutes your trade secrets and categorize assets by sensitivity and economic value.
Formal protections: Implement strong non-disclosure agreements (NDAs), employee handbooks, and vendor contracts that clearly specify trade secrets and the consequences of misappropriation.
Access controls and data security: Enforce least-privilege access, multi-factor authentication, encryption at rest and in transit, and routine security audits.
Monitoring and incident response: Establish monitoring for unusual access patterns, and create a rapid incident response plan to contain potential breaches and preserve evidence.
Secure knowledge transfer: Use formal exit procedures, return of materials, and clear restrictions on post-employment use of confidential information.
Trade secret policy and training: Educate employees, contractors, and executives about the importance of confidentiality, the difference between trade secrets and general know-how, and how to report concerns.
Vendor risk management: Require confidentiality agreements and security commitments from suppliers and service providers who handle sensitive data.

Cross-border considerations and practical realities

In multinational organizations, trade secret protection must align with varying legal standards. Practical considerations include:

Choosing the governing law and venue in contracts to facilitate efficient enforcement and predictable remedies.
Coordinating civil and criminal avenues when misappropriation crosses borders, including cooperation with law enforcement and international anti-corruption efforts.
Managing data localization and privacy compliance while maintaining secrecy, especially when data must be stored or processed in multiple jurisdictions.
Balancing employee mobility with protective measures, particularly in industries where talent moves rapidly and confidential know-how is highly portable.

A practical takeaway: a checklist for organizations

Use this concise checklist to reduce risk and accelerate response if infringement occurs:

Identify and label trade secrets; categorize information by sensitivity and value.
Adopt robust NDAs and confidentiality provisions in all agreements with employees, contractors, and partners.
Implement access controls, encryption, and security monitoring; document protective measures.
Develop a clear incident response plan and appoint a point person for trade secret matters.
Maintain thorough documentation of misappropriation evidence, including timelines, communications, and data access logs.
Seek legal counsel promptly to assess available remedies and potential cross-border enforcement options.
Provide ongoing training to reinforce the importance of protecting confidential information and recognizing risks.

Conclusion: safeguarding value and enforcing rights

Infringement of trade secrets poses a real and ongoing threat to a company’s competitive position. By combining solid legal grounds with rigorous technical safeguards and a culture of confidentiality, organizations can deter misappropriation, respond quickly when it occurs, and pursue appropriate remedies to recover losses and prevent future harm. Trade secret protection is not a one-time project; it is a continuous program that evolves with technology, market dynamics, and regulatory developments.