In today's digital age, your company's most valuable assets might not be the equipment on your factory floor or the inventory in your warehouse – they might be the confidential information stored on your servers.
For North Carolina businesses, from small manufacturing companies in the Triad to growing tech firms in the Research Triangle, understanding trade secrets has never been more critical.
Recent court decisions have shown just how valuable trade secrets can be. In 2024, multiple companies won verdicts exceeding $400 million in trade secret cases, including a $452 million award involving a wearable insulin pump design and a $604.9 million award in a case involving alternative fuel technology. These eye-popping numbers highlight both the value courts place on trade secrets and the risks of inadequate protection.
But what exactly qualifies as a trade secret in North Carolina?
Under both federal and North Carolina law, a trade secret is business or technical information that has commercial value because it isn't generally known or easily figured out by others. This definition is broader than many business owners realize and can include many types of information your company uses daily.
For example, a Charlotte manufacturer might have trade secrets in its production processes, quality control methods, and supplier relationships. A Raleigh consulting firm might have trade secrets in its pricing strategies, bid formulas, client proposals, and project methodologies. And a small Asheville brewery might have trade secrets in its unique recipes, brewing processes, and distribution strategies.
Here are some specific examples of information North Carolina courts have protected as trade secrets:
- Detailed customer information, including purchasing histories, preferences, and requirements
- Pricing strategies and cost histories used to prepare bids
- Manufacturing processes and quality control procedures
- Product designs and development information
- Sales strategies and market analysis
- Financial projections and business plans
However, not everything your company considers confidential automatically qualifies as a trade secret.
To receive protection under federal law or North Carolina law, the information must meet several key requirements:
First, the information must have independent commercial value, specifically because it isn't generally known. For instance, if your manufacturing process gives you a cost advantage over competitors, that's valuable precisely because competitors don't know how you do it. However, if the information is common knowledge in your industry or could be easily figured out by others, it probably won't qualify as a trade secret.
Second, you must take reasonable measures to keep the information secret. North Carolina courts don't expect perfect security – they look for reasonable efforts appropriate to the circumstances. These might include confidentiality agreements, limited access to information, password protection, and employee training about confidentiality. The key is demonstrating that your company treats the information as truly secret, not just generally confidential.
The rise of remote work and digital storage has made trade secret protection both more important and more challenging for North Carolina businesses. When employees can access company information from home computers and personal devices, maintaining secrecy requires new approaches to security and confidentiality. The convenience of digital file sharing and cloud storage must be balanced against the increased risk of unauthorized access or sharing.
Consider this scenario: Your sales team has built a detailed database of customer preferences, ordering patterns, and pricing structures over several years. This information gives you a significant advantage in serving customers and winning new business. If a competitor got this information, they could immediately target your best customers with competing offers. This type of compiled business information can qualify as a trade secret in North Carolina – but only if you take appropriate steps to protect it.
Are Trade Secrets protected in perpetuity?
Unlike patents, which expire after a set period of time, trade secrets can provide indefinite protection as long as they remain secret and retain their value. This makes them particularly valuable for long-term competitive advantage. However, once a trade secret becomes public, the protection is lost forever. You can't get trade secret protection back once the information becomes generally known.
Non-competes and Trade Secrets in North Carolina
The growing hostility toward non-compete agreements makes trade secret protection even more crucial for businesses. Businesses need to rely more on trade secret protection and less on non-compete agreements to protect their competitive advantages.
For North Carolina business owners, this means taking a fresh look at how you identify and protect valuable company information.
How do businesses protect Trade Secrets?
Start by asking yourself these questions:
- What information gives our company a competitive advantage?
- How difficult would it be for competitors to figure out this information on their own?
- What steps are we currently taking to keep this information secret?
- Who has access to this information, and do they understand its confidential nature?
- How are we protecting this information when employees work remotely?
Remember, you don't need to create an impenetrable fortress around your trade secrets. North Carolina courts understand the practical realities of running a business. They look for reasonable measures to maintain secrecy, considering factors like the nature of the information, the size of your business, and the cost of protection measures.
However, you do need to be proactive. The time to identify and protect your trade secrets is now, before there's a problem. This is especially true in industries where employee turnover is high or where remote work is common.
Conclusion
The key takeaway is simple: your company's confidential information may be more valuable – and more vulnerable – than you realize. Taking steps to identify and protect your trade secrets isn't just good legal practice – it's essential to maintaining your competitive advantage in today's business environment. Identify what makes your business unique, then work with legal counsel to develop a comprehensive protection strategy.
