What Is a Trade Secret in California? The Legal Definition and Examples

Last updated: November 2026

A trade secret in California is information that derives independent economic value from not being generally known and that its owner has made efforts that are reasonable under the circumstances to keep secret. (Civ. Code, § 3426.1, subd. (d).) The statutory trade secret definition lists formulas, patterns, compilations, programs, devices, methods, techniques, and processes, but the label matters less than the two tests. Kolmogorov Law, P.C. litigates trade secret claims for and against businesses in Orange County, Los Angeles, and across California.

Call (909) 235-6116 or contact us online to discuss whether the information at the center of your dispute qualifies.

The trade secret definition: a two-part test

California adopted the Uniform Trade Secrets Act, and the definition lives in Civil Code section 3426.1. Information is a trade secret only if it meets both parts. First, it must derive independent economic value, actual or potential, from not being generally known to the public or to others who could profit from it. Second, it must be the subject of efforts that are reasonable under the circumstances to maintain its secrecy. (Civ. Code, § 3426.1, subd. (d).)

Both parts are fact questions. Nobody gets to decide that something is a trade secret by stamping "confidential" on it. The stamp is evidence of effort, not proof of value or secrecy.

The federal Defend Trade Secrets Act uses a similar definition with one visible difference: it asks whether the information is readily ascertainable through proper means. (18 U.S.C. § 1839(3).) Our page on DTSA and CUTSA claims compared covers the practical consequences.

Examples of information that can qualify

The categories are broad, and courts have protected a wide range of business information when the two tests were met. In my practice the common ones are these.

Customer compilations. A list built over years, with contact persons, pricing history, and the particular needs of each account, can qualify. A list of names anyone could pull from a directory cannot. The Court of Appeal drew exactly that line in a roofing case: the more time and effort it took to gather the information, the more likely it is a trade secret. (Morlife, Inc. v. Perry (1997) 56 Cal.App.4th 1514, 1521-1522.) Our article on client lists as trade secrets goes deeper.

Pricing, costs, and margins. Internal cost structures, discount schedules, and profit margins can be secret when they are unique to the company and not disclosed to customers without restriction.

Technical know-how. Formulas, manufacturing processes, source code, and process parameters are the classic cases. These are the easiest to protect and the hardest to steal without leaving a trail.

Business plans and research. Strategic plans, unreleased product roadmaps, and market research exploring the needs of many buyers can qualify. Research about a single prominent customer, which that customer already knows, usually does not.

Negative know-how. What failed, and why, can be as valuable as what worked, and it meets the definition when it is kept secret.

What is not a trade secret

A large share of the trade secret disputes I handle turn on this list rather than on the previous one.

Information that is generally known in the industry. General skill, knowledge, and experience an employee acquires on the job belong to the employee. California's policy favoring employee mobility is strong, and courts will not let a trade secret claim become a substitute for a non-compete.

Information the company gave away. A price list sent to customers without a confidentiality agreement, a method demonstrated at a trade show, a product that reveals its own design once sold. Each of those loses secrecy because the owner let it go.

Information obtained by reverse engineering or independent development. The statute says that reverse engineering or independent derivation alone is not an improper means of acquisition. (Civ. Code, § 3426.1, subd. (a).) A competitor who buys your product and figures out how it works has not misappropriated anything.

Ideas without secrecy measures. A good idea that was shared freely with vendors, investors, and friends is not protected by trade secret law, whatever its value.

How the question comes up for business owners

Three situations account for most of the calls.

A salesperson leaves for a competitor, and within weeks the company's largest accounts receive pitches that track its pricing exactly. The question is whether the pricing and account details were secret, and whether the departing employee took them or simply remembered them.

A former manufacturing partner begins selling a product that looks like a copy. The question is whether the process was a secret disclosed under a confidentiality agreement or something the partner could have worked out from the finished product.

A company receives a demand letter accusing it of using a competitor's "confidential business information" after hiring that competitor's engineer. The question is whether anything in the letter actually meets the definition, and often it does not.

Why the definition matters in a lawsuit

Everything in a trade secret case flows from the definition. The plaintiff must identify the secret with reasonable particularity before taking discovery about it. (Code Civ. Proc., § 2019.210.) Our page on identifying trade secrets under section 2019.210 explains that step. If the identified information fails either part of the test, the claim fails, and a claim brought in bad faith can shift attorney fees to the defendant. (Civ. Code, § 3426.4.)

The second part of the test, reasonable secrecy efforts, is the one businesses control. Our page on reasonable measures to protect trade secrets describes what courts expect. The broader process of pursuing a claim is covered in our trade secret misappropriation guide.

What to bring to the first meeting

Bring a short written description of the information you believe is secret, who inside and outside the company has had access to it, the agreements those people signed, and any evidence of how the information was taken or used. If you are the one accused, bring the demand letter, your agreements, and an honest list of what you have.

Frequently asked questions

What is considered a trade secret in California?

Any information that derives independent economic value from not being generally known and that the owner has taken reasonable steps to keep secret. (Civ. Code, § 3426.1, subd. (d).) The statute names formulas, compilations, programs, methods, techniques, and processes as examples, but the form of the information matters less than whether it passes the two tests.

Is a customer list a trade secret?

Sometimes. A compilation developed over years that includes pricing, purchasing history, and contact details for decision makers has been held to qualify. (Morlife, Inc. v. Perry (1997) 56 Cal.App.4th 1514, 1521-1522.) A list of names and addresses that anyone could assemble from public directories has not. The effort invested and the secrecy maintained decide the question.

Do I need to register a trade secret?

No. There is no registration system. Protection comes from the nature of the information and from the owner's own secrecy measures. That is the opposite of patents and trademarks, which depend on filings. A trade secret can last indefinitely, as long as it stays secret.

Can an employee's general knowledge be a trade secret?

Generally not. The skills, experience, and general industry knowledge an employee builds on the job belong to the employee and can be used for a new employer. Specific confidential information, such as a secret formula or an internal pricing model, is different. The line is drawn case by case.

What is the difference between a trade secret and confidential information?

Confidential information is a contractual label; a trade secret is a statutory status. A confidentiality agreement can cover information that is not a trade secret, and breach of that agreement is a contract claim. Only information meeting the statutory definition supports a misappropriation claim, with its injunctions, royalty damages, and fee shifting.

Talk to a California trade secret attorney

If you need to know whether your information qualifies, or whether a claim against you can survive the definition, call (909) 235-6116 or contact us online. Kolmogorov Law, P.C. is at 327 Magnet, Irvine, CA 92618, and represents businesses in Orange County, Los Angeles, and throughout California. See also our trade secret attorney page and our guide to pursuing a misappropriation claim.

This page provides general information about California law and is not legal advice. Outcomes depend on the information, how it was protected, and the court.