What Is a Trade Secret?

A trade secret is confidential business information that has value because it is secret and that its owner takes reasonable steps to keep secret.

Category: Legal and IP · Reviewed 11 November 2026 · 2 min read

How it works

Under US law, a trade secret is generally information that derives economic value from not being generally known, and that its owner makes reasonable efforts to protect. It can be a formula, process, customer list, source code or method. There is no registration. Protection exists for as long as the information stays secret and the owner keeps taking reasonable steps.

Trade secret law mainly protects against misappropriation, meaning improper acquisition or use, such as theft or breach of a confidentiality duty. It does not protect against someone who figures the secret out independently or reverse engineers a product lawfully. State law and the federal Defend Trade Secrets Act both play a role.

Example

For example, a small company develops a tuned process for producing a food product. It keeps the recipe in a restricted file, limits who can see it, and requires employees and vendors to sign confidentiality agreements. Those steps help show the process was handled as a secret.

Why founders care

Trade secrets can protect things a patent cannot, or things a founder prefers not to publish. A patent application is generally published, which reveals the invention, while a trade secret stays private. The trade-off is that if the secret leaks or is independently discovered, protection can be lost, and there is no fixed term.

Common mistakes

Calling everything a trade secret without marking or restricting it.
Sharing with contractors and partners without a signed NDA.
Forgetting to collect materials when someone leaves.
Filing a patent on something meant to stay secret, which can publish it.

Frequently asked questions