# What Qualifies as a Trade Secret? > What legally counts as a trade secret in 2026 — the DTSA/UTSA two-part test, examples, and what does not qualify. Guide | Author: Lidiia Levitska | Source: Intellectual Property Law (outsideipcounsel.com) Canonical: https://outsideipcounsel.com/guides/what-qualifies-as-a-trade-secret/

Quick answer: Information qualifies as a trade secret when it passes a two-part legal test under the federal Defend Trade Secrets Act (DTSA) and the Uniform Trade Secrets Act (UTSA): first, it must derive independent economic value from not being generally known or readily ascertainable by others who could profit from it; and second, it must be the subject of reasonable efforts to keep it secret. Formulas, source code, curated customer lists, pricing models, manufacturing processes, and even "negative know-how" can qualify. Public information, anything easily reverse-engineered, and an employee's general skill do not — no matter how valuable.

People assume a trade secret is defined by *what* the information is — a recipe, an algorithm, a client list. It isn't. The law defines a trade secret by *how you treat it* and *why it matters*, and plenty of genuinely valuable information fails the test. Here is exactly what qualifies, what doesn't, and where the line falls. ## What is the legal definition of a trade secret? Two laws control in the United States, and they say nearly the same thing: - The **Defend Trade Secrets Act of 2016 (DTSA)** created the first federal civil cause of action for trade secret misappropriation (at [18 U.S.C. § 1836(b)](https://www.law.cornell.edu/uscode/text/18/1836)), using the trade secret definition at [18 U.S.C. § 1839(3)](https://www.law.cornell.edu/uscode/text/18/1839). - The **Uniform Trade Secrets Act (UTSA)**, a model statute adopted in some form by 48 states plus D.C. (New York and, historically, North Carolina being the outliers, with New York relying on common law), governs state-law claims. Both define a trade secret as information that meets a **two-part test**: 1. **It derives independent economic value** — actual or potential — from *not* being generally known to, and *not* being readily ascertainable by proper means by, another person who can obtain economic value from its disclosure or use; and 2. **It is the subject of efforts that are reasonable under the circumstances** to maintain its secrecy. Miss either prong and you have no trade secret. That is the entire framework — everything below is just applying those two elements. ## What kinds of information can qualify as a trade secret? The DTSA's definition of "information" is deliberately broad: it covers "all forms and types of financial, business, scientific, technical, economic, or engineering information," whether tangible or intangible, and however stored. Courts have protected an enormous range of material, including: - **Formulas and recipes** — the Coca-Cola formula is the archetype; it has stayed secret for well over a century precisely because it was never patented. - **Source code and algorithms**, especially back-end logic a user never sees. - **Manufacturing and industrial processes** — the specific method, settings, or sequence that makes production faster, cheaper, or better. - **Curated customer and supplier lists** that include non-public buying histories, pricing, and contacts (not bare name lists — more on that below). - **Pricing, cost, and margin data**, bid formulas, and financial models. - **Negative know-how** — the hard-won knowledge of what *doesn't* work, so a competitor can't skip the expensive dead ends you already ran. - **Business plans, marketing strategies, and unreleased product roadmaps.** What unites these is not the category. It is that each is genuinely secret, genuinely valuable *because* it's secret, and genuinely guarded. To see how courts apply these categories to real fights, browse our [trade secret case analysis archive](/topics/trade-secrets/). ## What does the "independent economic value" element mean? The first prong asks whether the information gives you a competitive edge *because* others don't have it. The value can be **actual or potential**, so an unlaunched product formula counts even before it earns a dollar. Two practical points: - **The value must flow from the secrecy itself.** If the information would be just as useful to you whether or not competitors knew it, it probably isn't a trade secret. The classic proof of value is that a competitor would pay to obtain it or save real time and money by using it. - **Effort and cost are strong evidence.** Information that took years and significant investment to develop — and that a rival could not casually replicate — is far more likely to clear this bar. Courts frequently point to the plaintiff's development cost and the difficulty of duplication. This is why "we spent two years and \$400,000 perfecting this process" is a powerful sentence in a trade secret complaint, and "everyone in the industry basically knows this" is fatal. ## What does "readily ascertainable" mean? The value prong has a built-in escape hatch for defendants: even secret-seeming information loses protection if it is **readily ascertainable by proper means**. That means it could be obtained *easily and lawfully* through channels like: - **Public and published sources** — directories, government filings, trade publications, websites. - **Reverse-engineering** a product you sell to the public. Reverse-engineering is an entirely lawful way to acquire information, and anything a buyer can readily learn by taking your product apart is not a secret. - **Independent development** — a competitor who figures it out on their own owes you nothing. The operative word is *readily*. Information isn't ascertainable just because it *could* theoretically be reconstructed with enormous effort. The harder, slower, and costlier it is to duplicate the information through legitimate means, the stronger your claim. A method hidden behind factory walls that would take years to reverse-engineer is protectable; a "secret" printed on your packaging is not. This is also the core reason trade secrets and patents are strategic opposites. A patent *publishes* your invention in exchange for a time-limited monopoly, and it protects you even against independent inventors — but a trade secret gives you no recourse against lawful reverse-engineering. We compare the two paths in depth in [patent vs. trade secret](/guides/patent-vs-trade-secret/). ## What does not qualify as a trade secret? Just as important as the "yes" list is the "no" list. The following generally **cannot** be trade secrets: - **Publicly available information.** Once information is truly public — posted online, disclosed at a conference, printed in a manual — it is no longer secret, and the loss is usually permanent. - **Information disclosed in a patent.** Filing a patent publishes the details, extinguishing trade secret status for what you disclosed. You generally can't protect the same feature both ways. - **Anything readily reverse-engineered** from a product you sell, as discussed above. - **General skill, knowledge, and experience.** This is the big one for departing employees. The law lets people carry their training, expertise, and industry know-how to a new job; only your *specific* confidential information travels with a duty. Courts draw a hard line between an employee's portable general skill and your protectable secrets. (For the practical side of that split, see [protecting trade secrets when employees leave](/guides/protecting-trade-secrets-when-employees-leave/).) - **Information you failed to guard.** Even genuinely valuable, non-public information forfeits protection if you didn't take reasonable steps to keep it secret — which brings us to the second prong. ## How do "reasonable efforts to keep it secret" affect qualification? The second prong is where most trade secret claims are actually won or lost. Information does not qualify as a trade secret unless the owner took **efforts reasonable under the circumstances** to protect it. Defendants attack this element first, arguing: "if it were really a secret, you would have guarded it." "Reasonable" scales with the value of the information and the size of the company — you do not need Fort Knox — but a credible program typically includes: - **Confidentiality and NDA agreements** with employees, contractors, and partners — see [how to write an NDA that holds up](/guides/nda-that-holds-up/). - **Access on a need-to-know basis**, not blanket access for everyone. - **Technical controls** — passwords, encryption, restricted folders, and access logs. - **Marking sensitive material "Confidential"** so there is no ambiguity. - **Onboarding and exit protocols** that reinforce obligations and cut off access. The point is that secrecy is not just a state of fact but a *practice you must document*. Our [reasonable secrecy measures checklist](/guides/reasonable-secrecy-measures-checklist/) turns this prong into a concrete to-do list, and the full [trade secret protection playbook](/guides/trade-secret-protection-playbook/) puts qualification, protection, and enforcement in one place. If your business is in California — where non-competes are largely void and trade secret law does the heavy lifting — see [how to protect a trade secret in California](/guides/protect-trade-secret-california/). ## What factors do courts weigh when deciding if something qualifies? Beyond the statutory two-part test, many courts still consult the six factors from the **Restatement (First) of Torts § 757** as a practical checklist for whether information is a trade secret. Even under the DTSA and UTSA, these factors guide the analysis: 1. **The extent to which the information is known outside your business.** 2. **The extent to which it is known by employees and others inside your business.** 3. **The measures you took to guard the secrecy** of the information. 4. **The value of the information** to you and to your competitors. 5. **The effort or money you spent** developing the information. 6. **The ease or difficulty with which the information could be** properly acquired or duplicated by others. No single factor is dispositive, and you don't need to win all six — courts weigh them together on the specific facts. But notice how much overlap there is with the statutory prongs: value, secrecy efforts, and difficulty of duplication appear in both frameworks. If you can answer each factor in your favor, you almost certainly have a trade secret; if several cut against you, expect a fight over whether the asset qualifies at all. ## Is a customer list a trade secret? (the classic gray area) Customer lists are the most litigated edge case, and the answer is: *it depends on the detail*. - A **bare list of names** that a competitor could compile from a trade directory, LinkedIn, or a phone book is **readily ascertainable** and usually not protectable. - A **curated list** built over years — with non-public buying histories, negotiated pricing, key contacts, purchasing cycles, and preferences — can qualify, because the value lies in the compiled, confidential detail, not the identities. The same logic governs pricing, vendor terms, and margins: raw facts anyone can look up rarely qualify, but the specific, hard-to-assemble, non-public combination that gives you an edge often does — provided you guarded it. ## The bottom line A trade secret isn't defined by what the information is, but by whether it clears two tests: it must have **independent economic value because it is secret and not readily ascertainable**, and it must be the subject of **reasonable efforts to keep it secret**. Formulas, source code, processes, curated lists, and negative know-how routinely qualify; public information, patent disclosures, readily reverse-engineered details, and an employee's general skill do not. Before you rely on trade secret protection, run your information through both prongs honestly — and if it clears them, guard it accordingly, because the moment secrecy lapses, the asset can be gone for good. *This guide is general education, not legal advice, and does not create an attorney-client relationship. Whether specific information qualifies as a trade secret turns on your facts and your state's version of the UTSA — consult an attorney licensed in your jurisdiction before acting.* ## Frequently asked questions ### What legally qualifies as a trade secret? Under the Defend Trade Secrets Act and the Uniform Trade Secrets Act, information qualifies if it meets a two-part test: (1) it derives independent economic value from not being generally known or readily ascertainable by others who could profit from it, and (2) it is the subject of reasonable efforts to keep it secret. Formulas, source code, customer lists, pricing, processes, and negative know-how can all qualify — but only if you genuinely guard them. ### What does not qualify as a trade secret? Information that is public, published in a patent, or readily ascertainable from a product you sell cannot be a trade secret, no matter how valuable. Anything a competitor can lawfully reverse-engineer or independently develop falls out of protection. So does an employee's general skill, training, and industry knowledge — courts distinguish that portable expertise from your specific confidential information. Finally, information you failed to guard is not protected even if it was otherwise secret. ### What does 'readily ascertainable' mean for a trade secret? 'Readily ascertainable' means the information could be obtained easily and lawfully through proper means — public directories, published sources, reverse-engineering a purchased product, or independent analysis. If a competitor can compile your 'customer list' from a trade directory in an afternoon, it is readily ascertainable and not a trade secret. The bar is 'ready' access: the harder, costlier, and more time-consuming it is to duplicate the information legitimately, the stronger your claim. ### Is a customer list a trade secret? Sometimes. A bare list of names anyone could pull from a phone book or LinkedIn is readily ascertainable and usually not protectable. But a curated list reflecting years of effort — with buying histories, pricing, contacts, and preferences that are not public and give you a competitive edge — can qualify if you kept it confidential. The value comes from the compiled, non-public detail, not the names alone.