What Constitutes “Reasonable Efforts” to Safeguard a Trade Secret?

When it comes to protecting valuable business information, understanding what qualifies as a trade secret–and more importantly, how to protect it–is essential. Businesses that rely on confidential information to gain a competitive edge must take concrete, proactive steps to safeguard that information. But what exactly are considered “reasonable efforts” under the law? It’s a phrase that sounds vague, but courts take it seriously when determining whether information actually qualifies as a trade secret. Continue reading and reach out to Lemler IP to speak with a knowledgeable New Orleans, Louisiana trade secret lawyer to learn more.

What is a Trade Secret, and Why Does It Need Protection?

A trade secret can be just about anything that gives your business an advantage and is not generally known or readily accessible to others. This might include customer lists, proprietary formulas, internal processes, software code, or marketing strategies. The key is that the information must be valuable because it is secret. Once that secrecy is lost, so is the legal protection.

The Louisiana Uniform Trade Secrets Act (LUTSA) requires that a business must take “reasonable efforts” to keep the information secret. Without those efforts, you may not be entitled to legal recourse if a competitor or former employee misuses or discloses that information. In other words, it’s not enough to simply consider something a trade secret–you have to treat it like one.

Under U.S. federal law, specifically under the Defend Trade Secrets Act (DTSA) of 2016, information can only qualify as a trade secret if the owner has taken “reasonable efforts” or “reasonable measures” to maintain its secrecy. This requirement is an extremely crucial element in establishing and enforcing trade secret rights. Although the DTSA doesn’t explicitly define “reasonable efforts,” federal courts consistently interpret this element as a fact-specific inquiry determined on a case-by-case basis. However, there’s no exact checklist for this element that applies to all trade secrets. Instead, courts take into account the totality of the circumstances surrounding the alleged trade secret and the actions taken by the owner to keep it secret. The core concept is that a trade secret owner must demonstrate that they have made genuine, deliberate attempts to protect the confidentiality of the information, consistent with its value and the nature of their business. Therefore, the standard is one of reasonableness, not perfection.

What Are Some Examples of “Reasonable Efforts”?

While there is no one-size-fits-all checklist, there are several commonly accepted practices that courts have recognized as reasonable efforts to maintain secrecy. First and foremost, physical and digital access to the information should be limited. This could mean locking filing cabinets, password-protecting documents, or restricting access to specific employees on a need-to-know basis.

Non-disclosure agreements (NDAs) are another key tool. If your employees, contractors, or business partners might be exposed to confidential information, having them sign NDAs helps prove that you took appropriate steps to protect your trade secrets. These agreements should be clear, specific, and legally enforceable.

You should also consider employee training. Teaching staff about the importance of confidentiality and how to handle sensitive information is often seen as a reasonable and proactive step. It’s also wise to regularly audit who has access to what, and to update security protocols as your business evolves.

Even seemingly small actions, like labeling documents “Confidential” or using secure Wi-Fi networks, can bolster your claim that you took adequate measures. What’s considered reasonable may vary depending on the size of your business, the industry you’re in, and the type of information you’re protecting, but a consistent, documented approach is always advisable.

What Happens If You Don’t Take These Steps?

If you fail to make reasonable efforts, your business risks more than just losing trade secret protection; you could lose your competitive edge altogether. In litigation, the burden will be on you to prove that the information was both secret and properly protected, a.k.a. treated as a trade secret. Without clear policies and protections in place, courts may determine that your information doesn’t qualify for protection under the law.

In short, courts won’t protect what you didn’t take care to protect yourself. Even if someone clearly stole or misused your information, you may not have a legal leg to stand on if you can’t show that you treated the information as a secret from the start.