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What to Do if Your Trade Secrets Are Misappropriated: A Practical Guide for Businesses

May 1, 2026

Padmini Cheruvu

Businesses invest heavily to develop and protect their trade secrets – confidential information that derives independent economic value from not being generally known and that is subject to reasonable measures to keep it secret. Even with robust safeguards, misappropriation can occur. When it does, swift action can preserve your rights, mitigate damage and future misappropriation, and position you for effective legal and business outcomes.

What is Trade Secret Misappropriation?

A trade secret refers to any unique and secret information that gives an owner or business a competitive business advantage because it is secret, and businesses must take reasonable steps to keep it confidential. When a business or person wrongfully acquires a trade secret (e.g., by theft or by breach of a confidentiality agreement), wrongfully uses a trade secret, or wrongfully discloses it to others, this is called misappropriation of the trade secret. Businesses damaged by the trade secret misappropriation can seek legal remedies in state or federal court.

Trade Secret Protection Under State and Federal Law

In the 1980s, the Uniform Trade Secrets Act (UTSA) was published by the Uniform Law Commission to provide a framework to help states establish standard guidelines for trade secret misappropriation. Most states, including California, adopted the UTSA in some form. In 1985, California created the California Uniform Trade Secrets Act (CUTSA) which was modeled after the UTSA but drafted to fit within California’s legal framework. The CUTSA is the law that governs trade secrets misappropriation within California.

While most states have adopted some form of the UTSA, it is not executed and interpreted consistently across states. Therefore, in an attempt to unify the body of law, president Obama signed the Defend Trade Secrets Act (DTSA) into law in 2016, creating, for the first time, a federal private right of action for trade secret misappropriation related to interstate or foreign commerce.

It is important to note that the DTSA does not preempt the CUTSA. Rather it provides an additional avenue for pursuing trade secret claims at the federal level. Therefore, a party can pursue parallel claims in federal court under both the DTSA and the CUTSA for the same trade secret misappropriation.

Immediate Steps After Misappropriation Occurs: Engage, Investigate, Contain, and Preserve

Once you suspect misappropriation of your business’ trade secrets, act promptly to protect your information, the evidence of misappropriation, and your legal position.

1. Engage legal counsel promptly: It is important to promptly engage an attorney. An attorney can determine if your confidential information qualifies as a trade secret, assess the strength of your case, assist with any investigation and preservation of evidence to ensure that they are handled properly, plan your legal strategy to set you up for success in potential litigation, and implement long-term protection of your trade secrets to minimize future misappropriation.
2. Conduct an internal investigation: The first step is to identify and confirm that misappropriation occurred. Start an internal investigation to determine (a) what was taken; (b) when and how; (c) by whom; (d) where it went; and (e) the potential business impact. Determine what confidentiality policies and security measures your business has in place regarding its trade secret information (e.g., employment and independent contractor agreements, and non-disclosure agreements), and identify any deviations from those policies and measures by an employee or third party. While conducting this investigation, it is important to preserve all evidence that you find, and to avoid altering any metadata in the evidence. It may be beneficial to hire a forensic investigator to conduct this investigation for you, and to create a forensic image of any device that may contain evidence before starting your investigation.
3. Contain the threat: Once you know if and how the misappropriation occurred, the next step is to secure your business’ information to prevent further damage. If the person who misappropriated your business’ trade secrets still has access to that information, immediately revoke or restrict their access credentials and disable their accounts. Additionally, recover any devices and data in their possession.
4. Secure and preserve evidence: Take steps to preserve all relevant evidence such as emails, messages, devices, and access logs. You can do this by implementing a litigation hold, i.e., a preservation order, across relevant systems and individuals who possess relevant information. This includes suspending any auto-deletion policies your business may have in place.

Evaluate Your Legal Options

1. Send a cease-and-desist letter: If you suspect an individual or business of trade secret misappropriation, send them a cease-and-desist letter before filing a trade secret misappropriation lawsuit. This letter can demand that they immediately (a) cease using your business’ confidential information; (b) return or destroy your business’ confidential information in their possession; and (c) cease dissemination of the confidential information to third parties. Additionally, the letter can put the recipient on notice of legal consequences for their actions and failure to comply with your demand.
2. Initiate litigation: File a lawsuit in state or federal court to protect your business’ valuable information. Through litigation, you may recover monetary damages for your business’ actual losses and obtain disgorgement of any profits unjustly earned by the wrongdoer. For willful and malicious trade secret misappropriation, punitive damages and attorneys’ fees may also be recoverable. Additionally, you can seek injunctive relief. This is when a court enjoins a party’s use or disclosure of your business’ confidential information; requires return or destruction of the information; and sets protocols for inspecting and removing confidential data.
3. Seek immediate injunctive relief: In urgent situations, consider filing for a temporary restraining order (TRO) or preliminary injunction to protect your business’ information during the litigation. It is important to seek this relief as soon as possible (either contemporaneously with the initiation of the action or immediately after) because delays can weaken your position in arguing for such relief.

Long-Term Strategies to Prevent Recurrence

Even if you pursue legal action, it is important to address any vulnerabilities that allowed the misappropriation to occur by developing long-term strategies to protect your business’ trade secrets. Demonstrating that your business takes reasonable steps to protect its information is not only good practice, it is a legal requirement for trade secret protection.

This topic is covered in Part 1: Understanding and Protecting Trade Secrets: A Practical Guide for Businesses.

Trade secrets are valuable business assets. Understanding the steps you should take if they are misappropriated is essential for a business. Furthermore, consulting with legal counsel as early as possible can make a decisive difference in the outcome. Padmini Cheruvu and Donahue Fitzgerald’s Intellectual Property and Litigation practice groups have extensive experience in all trade secret matters. If you have any questions, need assistance with strengthening your trade secret protection through appropriate policies and contracts, or need urgent help addressing suspected trade secret misappropriation, please feel free to contact Padmini at pcheruvu@donahue.com.