Trade Secrets are a creation of state law. The North Carolina Trade Secrets Protection Act (NCTSPA) creates civil penalties for the unauthorized acquisition, disclosure or use of certain types of information and under the right circumstances, Courts will allow owners of such information to obtain injunctive relief to restrain competitors from making use of the information and they will award damages including attorneys’ fees. Trade secret protection extends beyond mere confidentiality, a term synonymous with non-disclosure, and can be used to prevent competitors from using the information even if they have acquired it innocently. The purpose of the NCTSPA is to protect a company’s investment of time, energy and money into developing information useful in their operations – information that is not otherwise available without the investment. The statute can be used to protect a variety of types of information as long as the information has actual or potential value to those in a particular industry or market, as a result of not being generally known or readily ascertained through independent development or reverse engineering and that is subject to reasonable efforts to ensure secrecy.
First, the information must have actual or potential commercial value. Information that is not commercially valuable in some way is not protectable under the NCTSPA. Second, the information’s value must come from the information not being generally known to those who would make commercial use of the information, e.g. competitors and former employees. As the name implies, the information cannot be commonly known in the industry and still protected under the Act. Third, if the nature of the information is such that it can be derived from an examination of a publicly available disclosure or product, i.e. it can be reverse engineered, then the information is not protectable. In addition, if the information can be derived from independent investigation, it is not protectable under the NCTSPA. After all, if the information is easy to come by or readily apparent from something the company produces, then it is not really a secret.
More important than the type of information, the manner in which the information is treated is more determinative of whether the Courts will extend protection. The NCTSPA requires the information to be subject to efforts to ensure its secrecy that are “reasonable under the circumstances.” As a result, there is no magic formula or minimum amount you can do to ensure the information will remain protected. Trade secrets require planning and strategy and waiting until a disgruntled employee shows signs of leaving to try to protect sensitive information is a mistake that cannot easily be corrected. The best form of protection consists of a mixture of employment agreements, company policies, and security agreements.
The attorneys at the Humphries Law Firm can assist you and your business with planning and protecting your valuable business information and enforcing those rights against those who violate them.