Which operational records count as trade secrets?

What makes a business record a trade secret?#

A business record is a trade secret when the information in it is not generally known, has economic value because it is not known, and is protected by reasonable measures to keep it secret. That is the general shape of US trade secret law under the federal Defend Trade Secrets Act of 2016 and state laws, most of which follow the Uniform Trade Secrets Act. The federal definition in 18 U.S.C. 1839(3) requires both reasonable measures to keep the information secret and independent economic value from its not being generally known or readily ascertainable through proper means.

Compilations matter for operational records. Federal jury instructions note that a compilation of public information can qualify when it is combined in a novel way, which is why a customer list built from years of buying history can be protected even if each company name is public.

The record type alone does not decide the question. A pricing spreadsheet left on an open shared drive, emailed to former employees and never marked confidential is harder to defend than one kept in a restricted folder with access logs.

Reasonable measures usually include NDAs with employees and partners, need-to-know access controls, confidentiality markings, exit procedures and a written policy that people actually follow. Counsel weighs these facts for each category of information.

Record types and how to treat them for licensing#

The table below sorts common operational records by how often they qualify and what a cautious licensing approach looks like. Every company's facts differ, so treat the middle column as a starting point for counsel's review.

Why routine records can still contain secrets#

Routine records can still contain secrets because people paste whatever they need into the tool in front of them. A support ticket is not a trade secret, but a ticket where an engineer pasted the pricing formula, or a field technician typed the supplier's net cost, carries one.

That means trade secret screening happens at the content level, not only the record-family level. Practical filters include excluding named channels and folders, searching for price, cost, margin and formula fields, and flagging attachments such as spreadsheets and drawings for manual review.

Aggregation can also create a secret. One dispatch record reveals little; the full set reveals every customer location and how often each is served. Look at what the whole package would tell a competitor, not just what each record says.

Other companies' secrets in your records#

Operational records often contain confidential information that belongs to someone else. You cannot license what you do not own, and many contracts require you to protect it.

The practical test is provenance. For each attachment and quoted document, ask who created it and under what agreement it arrived. If the answer is a customer, supplier or client under confidentiality terms, it stays out of the package unless that party agrees in writing.

• 1Manufacturers: customer-owned drawings, specifications and part numbers attached to quotes, NCRs and work orders.
• 2Engineering and architecture firms: client deliverables, owner requirements and project documents governed by client agreements.
• 3Software companies: customer code, configuration files and data pasted into support tickets and bug reports.
• 4Distributors: supplier price lists, rebate programs and allocation terms received under confidentiality.
• 5Consulting firms: client strategy documents, financials and interview notes from engagements.

Does licensing records put trade secret protection at risk?#

Licensing records under a contract with confidentiality, use restrictions and security requirements is generally consistent with keeping information secret, while sharing without those protections can undermine it. The license terms that matter most are permitted use, a ban on disclosing raw records, a ban on re-identification, security obligations and deletion or return at the end of the term.

Contracts have limits, though. Once records have been used to train a model, it may be impractical to pull the information back out. That is why many companies exclude their core secrets entirely rather than relying on contract terms to protect them, and license only the operational history around them.

Reasonable measures to check before any disclosure#

Reasonable measures are the part of trade secret status a company controls, and a licensing review is a good moment to confirm they exist for the records being excluded as well as those being shared. Gaps found now can be fixed before any outside party sees anything.

The measures need not be absolute. DOJ guidance describes them as reasonable under the circumstances and gives examples such as telling employees the secret exists, limiting access on a need-to-know basis, requiring confidentiality agreements and keeping documents locked. One detail is easy to miss: 18 U.S.C. 1833(b) requires employers to give notice of whistleblower immunity in employee contracts governing trade secrets or confidential information, and an employer that omits it may lose exemplary damages and attorney fees under the DTSA against an employee who did not receive it.

• 1Employee and contractor agreements include confidentiality obligations that cover the categories in question, plus the 1833(b) immunity notice where counsel advises it.
• 2Access to pricing, cost and process folders is limited to people who need it, and access lists are reviewed.
• 3Sensitive spreadsheets, drawings and SOPs carry confidentiality markings applied consistently.
• 4Departing employees return or delete company information and confirm it in writing.
• 5Partners, buyers and evaluators receive information only under an NDA with use restrictions.
• 6A written policy describes what is confidential, and managers follow it in practice.

Illustrative: a contract manufacturer screens its quality system#

Illustrative: a fictional precision machining company runs Epicor for orders and a separate QMS for quality records. Leadership wants to know whether its NCRs, CAPAs and maintenance work orders could be licensed.

Counsel finds that NCRs reference customer part numbers and attach customer drawings, which belong to customers. Several CAPAs record the feeds, speeds and fixturing changes that let the shop hold tight tolerances, which is the company's own process know-how. Maintenance work orders describe machine faults and repairs and contain little of either.

The company scopes the package to maintenance work orders and NCR narratives with customer names, part numbers and drawings removed. CAPAs containing process parameters are excluded. The result is a smaller package with every trade secret decision written down.

How SourceX treats trade secrets in a package#

Trade secret screening runs through the Rights and Preparation steps of the SourceX five-step transaction. The rights review identifies the company's own secrets and third-party confidential information; preparation removes confidential details along with personal ones; the supplier approves the final scope in the Approval step.

The SourceX Evidence Packet records licensing rights and permitted use, so both sides can see what was excluded and why. Records are licensed, not sold, and the company keeps ownership.

Under the SourceX Enterprise Data Value Framework, uniqueness and domain expertise increase value and exclusivity increases price. None of that changes the screen: a record that is unique because it exposes a pricing model or a process parameter is excluded, while the surrounding operational history is assessed on its own merits.