You may have a sinking feeling of one of those uneasy scenarios that happens when sensitive business data ends up where you don’t want it: in someone’s hands who decides to pass it along to another business, or in a case you are not quite anticipating: in a dispute with someone else. Prior to this, something within your operations, customer data, pricing approach or even your product concepts might have seemed like they were safe. Once it occurs, it all gets revealed. Yes, under North Carolina law, information can be a trade secret if it is not generally known or readily ascertainable, it has independent economic value and there has been an effort to keep it a secret.
The name seems straightforward enough, Strianese Huckert LLP, but when the up and down of your business, job or reputation depends on the details, that seems straightforward enough! Appreciating all of these should help to slow down a bit because of that tension and force one to examine precisely what the law protects, what courts are often more concerned with and when it may be time to call an employment lawyer.
So what does North Carolina actually protect as a trade secret?
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North Carolina defines a trade secret in G.S. 66-152. In plain terms, protected information can include business or technical information such as formulas, patterns, programs, devices, compilations, methods, techniques, or processes. However, labels are an insufficient measure. The use of the term confidential doesn’t automatically make something a trade secret.
There are truly two essential requisites to a piece of information being considered for inclusion. First the information should have commercial value in some genuine way that would not be common knowledge or deducible by other people. Secondly, reasonable business measures must have been taken to keep it secret. This is the connection between the idea of secrecy and value. In the event of the lack of one, the claim is complicated.
What does that make you do in the real world? Consider a customer list. The Internet-derived public contact list is probably not a trade secret. That’s a whole other ball game if it has internal notes, private buying history, key decision makers, pricing preferences, etc. that have been accumulated over the years. It is similarly true when it comes to manufacturing techniques, source code, bidding techniques, training systems in addition to nonpublic economic models.
Why do reasonable secrecy efforts matter so much?
Many disagreements end in this arena at this stage. Even if a company has valuable information, it may ask itself if that information has been dealt with with casualness, if it should indeed be considered ‘secret’. There’s no need for extreme levels of security measures in Reasonable efforts but there needs to be consistent practices. The use of password protection, restricted access, confidentiality contracts, locked files, training, good company practice and company policies all demonstrate that the business really took the information seriously.
If there were no restrictions on employees accessing sensitive files via their personal email, everyone had access to shared drives and even no one kept files as confidential, what would happen? In such a case, information, even that which is of high value, may be more difficult to safeguard. If access was restricted to certain roles, confidence was acknowledged and certain rules were enacted and observed, and if you were deemed to use or download, this goes in your favor!
If you want to review the broader statutory framework, North Carolina’s laws on trade secrets and related business protections can be found in Chapter 66 of the General Statutes.
Can public records or shared information still be treated as secret?
Generally information which is publicly available or easily available will not qualify. That means information that is readily revealed by public documents, marketing to the general public or industry practice. In addition, however, businesses may have to deal with public record concerns in G.S. 132-1.2 in the context of business interaction with public agencies and concern to keep trade secret material confidential.
This can cause stress to businesses that need to send data to vendors, contractors, government agencies and more. Sometimes sharing won’t kill protection, but sometimes it will. If disclosed (or not) in an unlimited way, or if inconveniently identified as non-confidential, the case for protection may be more tenous. That’s why contracts, notice, and document handling policies are important long before a dispute begins.
What kinds of information usually do and do not qualify?
There’s a bit of confusion here because technically not everything that can be useful in a business is a trade secret. The overall skill, knowledge and experience is normally the employee’s. However, some kinds of internal systems that the employer has used to keep things confidential, may not. That line can get blurry particularly when a person transitions a career.
| Information Type | More Likely to Qualify | Less Likely to Qualify |
|---|---|---|
| Customer information | Private client lists with buying history, pricing, and strategy notes | Names and contacts available from public sources |
| Business methods | Internal pricing formulas or nonpublic bidding methods | Standard industry practices known to competitors |
| Technical data | Source code, formulas, prototypes, or process details kept secure | Published product features or patent disclosures |
| Employee knowledge | Protected files or internal systems copied from the employer | General know how, training, and personal experience |
When discussing the protection of a trade secret, the question that isn’t asked is whether this information aided in conducting the business. But whether it had any secret economic value and whether its owner used it as such remains the question. That’s the crux of the vast majority of trade secret misappropriation cases.
What can you do right now if you think trade secrets are at risk?
- Identify the information clearly. List items that you consider to be confidential. Be specific. Identify the names of the systems, categories of data, devices and accounts. Imprecise allegations are more difficult to prove than a list of missing or exposed items.
- Preserve the evidence. Capture emails, download data, receipts, text messages, device return records and access logs. Avoid changing the metadata and do not overwrite systems if possible. Sometimes it’s more about when the activity occurred, particularly a resignation, competitor move, and/or odd filings occurred in proximity.
- Review your protections before the dispute grows. Review your confidentiality policies, new hire documents, exit guidelines and access rights. When a person is accused of taking confidential information, check what he or she has signed and what information he/she used. But a sound legal analysis can determine what is covered under the privilege and what is not part of regular business knowledge.
When does it make sense to talk to an employment lawyer?
If your company feels a former employee took your proprietary data, if you’ve been accused of using proprietary data where you’re now working or if your company believes you’ve taken proprietary data where you’re currently employed, seeking early counsel could be a lifesaver. Such conflicts can come and go. They may impact job placements, contractual arrangements, customer relationships and digital evidence before you can even begin to figure out what went wrong.
North Carolina law does provide protection for certain confidential business information, but it is not a right that is automatic. Facts, the documents and the company’s own security practices are all important. When you have questions about what constitutes a trade secret or any other employment law matter related to confidential information, having a clear answer ahead of time can save you from worse, large-scale damages later on.
There’s no need to guess. An in-depth legal analysis of the information, along with the agreements and the timeline, can provide some clarity to an already hectic situation and help you determine what you should do next.
