Trade Secrets in 2026: Strategies for Counsel to Protect PI
This article serves as a practical roadmap for small and midsized companies on how to protect what makes your business valuable if copyright, patent, and trademarks are not helpful.
The case, Valeo v. Nvidia, should serve as a warning not to neglect trade secrets. Imagine your company has finally perfected a novel, confidential source code for driving assistance systems. Then, a former engineer leaves for a competitor, jumps on a joint video call, and accidentally shares his screen—revealing your stolen source code.
That is how quickly a trade secret dispute can erupt. In an instant, one careless mistake transforms your confidential information into a multi-national legal battle spanning Germany and the U.S., costing millions to investigate and litigate. This case joins a growing list of blockbuster disputes. It ranks right alongside Waymo's $245 million settlement with Uber over stolen driverlesscar designs and federal indictments against former Apple engineers who fled to China with autonomous vehicle source code.
This article serves as a practical roadmap for small and midsized companies on how to protect what makes your business valuable if copyright, patent, and trademarks are not helpful.
Why Trade-Secrets are More Relevant Now than Ever
First, non-competes are increasingly less enforceable. Although the FTC's categorical ban on noncompetes was ultimately vacated, a growing majority of states outright ban or severely restrict them, employers can no longer rely on broad contracts to keep employees from joining rivals.
Trade secret law is now the primary weapon left to protect your proprietary edge. Second, remote and hybrid work has inconspicuously changed “access.” More employees can reach sensitive files from more places, often through shared drives, personal devices, and third-party apps.
That convenience is great until someone leaves with a full download of your customer data. Third, job-hopping is normal. Employees move more often, and competitors hire aggressively. Even diligent workers in good faith can negligently divulge trade secrets, especially if boundaries were never clearly set. Fourth, organizations are leaner. Downsizing and streamlining often mean more employees are exposed to proprietary information earlier than they used to be. The more broadly sensitive data is shared internally, the more likely it is to walk out the door.
Small and Mid-Sized Companies Misunderstand the Term Trade Secret
Under the federal Defend Trade Secrets Act (DTSA), the legal definition of a trade secret is any information that:
- Derives independent economic value from not being generally known or easily discoverable by others; and
- Is subject to "reasonable measures" to keep it secret.
Common examples include but are not limited to: (1) customer lists with purchasing history; (2) pricing formulas, margin targets, and bid strategies; (3) vendor and supplier terms; (4) scripts, operating procedures, and training materials; or (5) product formulas, recipes, prototypes, and manufacturing methods.
A simple test is this: would a competitor pay to get this information, and would it save them time or money? If yes, it may be a trade secret.
“What Did You Do to Protect It?”
Often business owners neglect a key element of enforcing their trade secrets: preparation. This essentially means you need a credible pattern of protection that matches your business. For example, in Turret Labs USA, Inc. v. CargoSprint, LLC, a federal court dismissed a massive trade secret claim because the company failed to require users to sign Non-Disclosure Agreements (NDAs) before accessing its software. Similarly, in Art & Cook v. Haber, a company lost its trade secret protection over a valuable customer list simply because it didn’t password-protect the file or restrict employee access.
When an employee resigns or is terminated, preventative measures to avoid litigation due to the aforementioned rationales include the following:
- disabling accounts, shared-drive access, and administrative permissions;
- collecting and inventorying all company property, including electronics, badges, and physical files; confirming where work product has been stored and requiring the return or deletion of copies in personal devices and drives;
- following up with a brief written reminder that reattaches the relevant agreement, and restates the confidentiality and non-solicitation obligations; and
- where appropriate, a formal notice to the new employer about existing obligations can further deter misuse.
Effective Use of Restrictive Covenants
A successful trade secret strategy uses contracts thoughtfully, not broadly. To build an enforceable legal fence around your proprietary information, focus on these key principles:
- Target High-Risk Roles: Restrictive covenants are essential for the following candidates: (1) executives and senior managers, (2) sales teams, (3) technical employees, and (4) third parties like contractors, consultants, and service providers.
- Be Specific, Not Expansive: Drafting definitions that are overly broad makes the agreement legally unenforceable, while definitions that are too narrow leave your assets exposed. Define protected information by referencing specific, relevant business data.
- Tailor Your Non-Solicitation Clauses: Courts dislike blanket bans. A restriction is much more defensible if it only applies to customers the employee actually serviced, had material contact with, or learned about through confidential systems. Apply this same precision to time periods, geographic scope, and the definition of prohibited conduct.
- Prioritize Confidentiality Over Non-Competes: Because the enforceability of non-competes is increasingly constrained and varies wildly by state law, businesses are better served by relying on confidentiality and non-solicitation provisions. When paired with clear internal access controls, these provide highly reliable protection.
- Include Compliance Carve-Outs: When drafting, be mindful of language banning legally protected activity. You must include explicit carve-outs, pursuant to federal and state-specific regulations, for lawful whistleblowing, good-faith reporting to government agencies, and protected workplace discussions.
Conclusion & Practical Guidance
The risk to your IP has never been higher. Your competitive edge is only as safe as the practical and legal fences you build around it.
Means of Protection
- Audit Access: Identify your most valuable data and restrict access strictly to a "need-to-know" basis. Password-protect everything.
- Update Your Contracts: Replace unenforceable, blanket noncompetes with tailored confidentiality and non-solicitation agreements.
- Formalize Offboarding: Do not let employees walk out the door without a digital audit of their devices and a written reminder of their legal obligations.Protect your trade secrets today, so you have legal rights to enforce tomorrow.
