Protecting what matters

In today’s competitive business world, ideas, processes, and know-how are often more valuable than physical assets. For manufacturers, engineers, and innovators, trade secrets—like proprietary formulas, customer lists, or manufacturing techniques—can be the key to long-term success. Understanding how to protect these assets under Illinois and federal law is critical.

What is a trade secret?
A trade secret is confidential business information that provides a company with a competitive advantage. This could include:

• Recipes, formulas, or chemical processes.
• Technical designs, prototypes, or software code.
• Pricing models or supply chain strategies.
• Customer or vendor lists.

To qualify as a trade secret, the information must not be publicly known, must derive value from being secret, and the owner must take reasonable steps to keep it confidential.

State and federal trade secrets law
Illinois protects trade secrets under the Illinois Trade Secrets Act, which mirrors the federal standard. It gives businesses the right to sue anyone who misappropriates (steals, discloses, or uses without consent) a trade secret.

At the federal level, the Defend Trade Secrets Act (DTSA), passed in 2016, allows trade secret owners to bring cases in federal court and provides additional tools, such as seizure of stolen information in extreme cases. DTSA also protects whistleblowers who report misconduct using confidential information.

Both laws offer similar protections:

• Injunctive relief (court orders to stop further misuse).
• Monetary damages (for actual loss or unjust enrichment).
• Punitive damages and attorney’s fees (in cases of willful misconduct).

Best practices to protect your trade secrets
Legal protections only apply if you take active steps to protect your information. Here are key strategies every business should consider:

1. Identify and classify your trade secrets
Start by auditing what information your company considers confidential. Label sensitive documents and files clearly. Not everything needs to be a trade secret—focus on what gives you a competitive edge.

2. Use confidentiality agreements (NDAs)
Have employees, contractors, and vendors sign non-disclosure agreements before accessing sensitive information. For employees, include confidentiality clauses in their employment agreements.

3. Limit access
Use the “need-to-know” rule. Restrict access to trade secrets to only those who require it to do their jobs. Implement digital access controls and physical security measures for sensitive materials.

4. Train your team
Educate employees about what trade secrets are, why they matter, and how to handle them. Reinforce these principles during onboarding and through regular training.

5. Protect digital assets
Use strong passwords, encrypted file storage, and secure networks. Regularly review IT policies and monitor for unusual activity or data transfers.

6. Follow exit protocols for departing employees
When someone leaves the company, remind them of their confidentiality obligations, retrieve company devices, and restrict system access immediately.

7. Document your efforts
Courts look at whether you took “reasonable measures” to protect your secrets. Keep records of your policies, training programs, and security measures.

Trade secrets can be more valuable than patents or trademarks, because they don’t expire and don’t require public disclosure. But once they’re out, they’re gone. By taking proactive steps to safeguard your confidential know-how, your business stays competitive and legally protected.

The views expressed are those of the author(s) and do not necessarily represent those of the Greater Rockford Chamber of Commerce.