NC Trade Secret Protection: Shield Your Small Business
TLDR: North Carolina’s Trade Secrets Protection Act protects confidential business and technical information when you take reasonable steps to keep it secret. If misappropriation occurs, you can seek injunctions and damages, and certain conduct may be criminal. Start now by inventorying your trade secrets, tightening access controls, and using well-drafted confidentiality agreements. For tailored guidance, contact our team.
What Is a Trade Secret Under North Carolina Law?
North Carolina defines a trade secret broadly as business or technical information that has independent value from not being generally known or readily ascertainable and that is subject to reasonable efforts to maintain its secrecy. Examples include formulas, programs, methods, techniques, processes, customer lists, pricing strategies, and supplier terms. See N.C. Gen. Stat. § 66-152(3) (definitions) within the Trade Secrets Protection Act.
Why Trade Secret Protection Matters for Small Businesses
For many small businesses, competitive advantage comes from proprietary know-how rather than patents or copyrights. Trade secret law protects that know-how without registration, provided you take reasonable steps to keep it confidential. Effective protection can deter misuse, support rapid injunctive relief if a leak occurs, and enable recovery of damages for misappropriation. See N.C. Gen. Stat. ch. 66, art. 24.
Key Elements You Must Prove
To enforce your rights, you generally must show: (1) the information fits the statutory definition of a trade secret; (2) you took reasonable measures to maintain its secrecy; and (3) the defendant acquired, disclosed, or used the secret without consent through improper means or breach of a duty. Courts scrutinize the scope of the claimed secret and your safeguards. See § 66-152 (definitions) and Article 24.
Reasonable Measures: Practical Steps You Can Take Now
Courts evaluate secrecy measures in light of your size, resources, and the sensitivity of the information. Practical steps include:
- Identify and label trade secrets: Maintain a registry and mark documents as confidential.
- Access controls: Limit access to those with a need to know; use role-based permissions and MFA.
- Contract protections: Use NDAs, confidentiality, non-solicitation, and tailored restrictive covenants consistent with North Carolina law.
- Employee lifecycle measures: Onboard with confidentiality training and acknowledgments; offboard with reminder letters, return-of-property, and device/account audits.
- Vendor and contractor safeguards: Include confidentiality provisions, data-handling requirements, and audit rights.
- Technical safeguards: Encryption, DLP, logging, segregated repositories, and clean-desk/device policies.
- Physical controls: Locked storage, visitor logs, and badge access.
- Incident readiness: Have a response plan for suspected leaks, including rapid device preservation and counsel engagement.
Noncompetes and Other Restrictive Covenants in NC
North Carolina permits certain restrictive covenants when they are properly tailored and supported by adequate consideration. Overbroad restraints risk being unenforceable. Even where noncompetes are limited or not used, confidentiality and non-solicitation agreements remain important tools. Align your contract strategy with roles that truly require access to trade secrets and focus on protecting specific confidential information. Because this area evolves, consult counsel about current requirements.
What Counts as Misappropriation
Misappropriation generally includes acquiring a trade secret by improper means (such as theft or breach of a duty of confidentiality) or disclosing or using a trade secret without consent by someone who knew or had reason to know it was acquired improperly or was supposed to be kept confidential. See § 66-152(1) (definitions). North Carolina law also criminalizes certain trade secret theft. See § 66-153.
Remedies Available
Available civil remedies can include injunctive relief to stop actual or threatened misappropriation, damages for actual loss and unjust enrichment (or a reasonable royalty), and, in appropriate cases, exemplary damages and attorney’s fees. Courts may also issue protective orders to limit further dissemination of the trade secret during litigation. See N.C. Gen. Stat. § 66-154.
Immediate Steps if You Suspect a Leak
- Freeze and preserve: Secure devices, cloud accounts, and logs; suspend routine deletion.
- Narrow access: Immediately revoke credentials and change shared passwords.
- Fact-gather: Document what information is at issue, who had access, and timelines.
- Engage counsel: Evaluate cease-and-desist letters, negotiations, and potential court relief.
- Coordinate with IT and HR: Conduct exit interviews and recover company property.
- Consider law enforcement: Where applicable, coordinate with counsel on contacting authorities. See § 66-153.
How to Strengthen Your Position Before a Dispute
Proactive documentation is often decisive. Maintain a current inventory of trade secrets, written policies, signed acknowledgments, and training logs. Map access controls to roles. Track vendor and employee access. For especially sensitive projects, use code names and segregated repositories. Review agreements regularly and update them when roles or technology change.
Quick Tips
- Run a quarterly access review for high-value repositories.
- Use project code names in file paths and commit messages.
- Keep a signed confidentiality acknowledgment in every personnel file.
- Segment customer lists by territory and restrict exports.
Checklist: Trade Secret Readiness
- Trade secret inventory documented and dated
- Confidentiality policy published and acknowledged
- Role-based access and MFA enabled
- Standard NDA and contractor agreements updated for NC law
- Onboarding training completed; offboarding process includes device and data return
- Encryption at rest and in transit; DLP rules active
- Physical controls in place for labs and file rooms
- Incident response plan tested in the last 12 months
Common Pitfalls to Avoid
- Calling everything a “trade secret” without specificity
- Providing broad access without logging or need-to-know limits
- Relying on form NDAs that conflict with your practices or NC law
- Failing to retrieve data upon employee departure
- Ignoring cloud collaboration sprawl and shadow IT
- Not training staff on practical confidentiality habits
When to Call a Lawyer
Consult counsel when drafting or updating confidentiality and restrictive covenant agreements, planning to hire from a competitor, onboarding employees with prior confidentiality obligations, conducting internal audits of secrecy measures, or upon any suspicion of misappropriation. If you need help, talk with our North Carolina trade secrets team.
FAQ
Do I need to register trade secrets in North Carolina?
No. Trade secrets are protected without registration, provided you take reasonable steps to keep them secret.
Can former employees use general skills and knowledge?
Yes. NC law allows use of general skills and experience, but not use or disclosure of your trade secrets or confidential information.
What if I shared information without an NDA?
Protection may still exist if circumstances created a duty of confidentiality and you used reasonable secrecy measures, but an NDA strengthens your position.
How fast can I get an injunction?
Courts can grant temporary restraining orders and preliminary injunctions quickly when evidence shows actual or threatened misappropriation.
Are noncompete agreements required to protect trade secrets?
No. Confidentiality and non-solicitation agreements often suffice; use noncompetes only when narrowly tailored and compliant with NC law.
Sources
- North Carolina General Statutes, Chapter 66, Article 24 (Trade Secrets Protection Act) (definitions, civil remedies).
- N.C. Gen. Stat. § 66-152 (definitions).
- N.C. Gen. Stat. § 66-154 (injunctive relief, damages, attorney’s fees, protective orders).
- N.C. Gen. Stat. § 66-153 (criminal remedies for theft of trade secrets).
Ready to Protect Your Trade Secrets?
Get practical, North Carolina-focused advice and templates tailored to your business. Schedule a consult today.
Disclaimer
This overview reflects North Carolina law and is for general informational purposes only. It is not legal advice and does not create an attorney-client relationship. Laws change and outcomes depend on specific facts. For advice about your situation, consult a qualified North Carolina attorney.
