Trade Secret protection can be used to prevent others from using information that you or your company developed in secret. There are two laws or statutes that govern trade secret protection in North Carolina. First, there is the North Carolina Trade Secrets Protection Act (NCTSPA). Then there is the federal Defend Trade Secrets Act that was passed in 2016. The federal statute is not meant not replace state statutes, but to add to them.
A trade secret is business or technical information that meets two requirements. The first requirement answers the question of what kind of information can be protected. The second requirement deals with what has to be done to keep the information secret.
As for the type of information that can be protected, North Carolina law requires the information to have economic value as a result of it not being generally known or easily obtained by someone who can make use of the information. Note the information must have ECONOMIC value, not sentimental, intellectual or some other type of value. Also, the information does not need to be valuable to all of us, only people that can exploit the information for commercial gain like competitors. More importantly, the information cannot be readily available to people who would want to use it. That means a competitor that independently develops the same information or reverse engineers it cannot be stopped from using that information. And someone who receives the information from someone else who was not under duty to protect the secret can also make use of it.
The NCTSPA also explains what the owner of such information has to do to protect the information as a trade secret. Specifically, the information must be subject to efforts that are reasonable under the circumstances to ensure secrecy. That means there is no formula for what a trade secret owner needs to do to protect the information, but they have a duty to actively take steps to keep the information secret and the steps you take must be “reasonable”. That means a court being asked to protect this information will review the steps the owner took and determine if they think they are reasonable. As a result, a trade secret owner better take steps that they can point to and document.
The purpose of trade secret protection is to protect a company’s investment in time, energy and money to develop information that is not known to competitors. To the extent that a company can demonstrate they have done so, they can usually protect that information. However, wishful thinking does not make for a trade secret, nor does trade secret protection prevent competition – only a form of unfair competition.