A hotly contested issue in many trade secrets cases is whether the alleged trade secret even qualifies as a trade secret at all. Qualifying as a trade secret often turns less on what the information actually is, and more on how the company treated it before it was taken and what the company gets out of its secrecy. This article reviews five North Carolina Trade Secrets cases and examines why the courts did (or did not) consider certain information to be trade secrets.
In North Carolina, information is a trade secret only if it generates value by being secret and the company genuinely protects it. Courts look past labels and focus on how the business handles the information.
The Trade Secrets Protection Act
Under the North Carolina Trade Secrets Protection Act (“TSPA”), a trade secret is defined as:
Business or technical information, including but not limited to a compilation of information, that derives independent actual or potential commercial value from not being generally known or readily ascertainable through independent development by persons who can obtain economic value from its disclosure or use, and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
N.C. Gen. Stat. § 66‑152.
Effectively, courts applying this statute focus on two core elements:
- Whether the information is genuinely secret; and
- Whether the information is genuinely commercially valuable.
First, we’ll look at customer lists, which are often hard to protect because they can be recreated or independently established. Then, we’ll look at more classic trade secrets like financial or sales data or proprietary designs and technology, where the question tends to turn to whether the information provides value to the business.
Customer Lists: The Secrets Must be Secrets
Customer lists are a commonly disputed alleged trade secret. Employers often view them as core business assets, while departing employees see them as relationships they helped build. Courts often draw the line by asking whether the information was genuinely secret, or whether the list could be recreated through public sources or personal experience. The cases below show how that distinction plays out in practice.
Courts are reluctant to treat customer relationships as trade secrets where the information is publicly available or tied to an individual’s own relationships rather than to confidential business systems. In Novacare Orthotics & Prosthetics E., Inc. v. Speelman, an orthodontist left his employer and joined a competing practice. After his departure, he contacted several patients he had treated while working for his former employer. The practice sued, claiming its customer information had been misappropriated.
The North Carolina Court of Appeals was not persuaded. The court emphasized that the employer had no evidence showing it had taken special precautions to ensure the confidentiality of its customer information. In fact, the court noted that any information used to contact patients could be found in a local telephone book, and the departing orthodontist had developed personal relationships with these customers. The pre-existing relationships made it reasonable to expect that some would follow him to a new practice.
On their own, lists of names and phone numbers might not qualify as trade secrets; courts focus on whether the list reflects confidential compilation, protection, and competitive value beyond what a phone book provides.
Even where customer information is compiled internally, courts still ask whether it could be recreated without “improper” means. In Sterling Title Co. v. Martin, an insurance underwriter left his employer and started a competing business. The insurance company alleged that the underwriter improperly contacted several customers he had serviced during his employment.
The company also discovered a file on the underwriter’s work computer: a guest list for an event that included the names and email addresses of 51 contacts associated with the insurance company.
The court acknowledged that a list of names and email addresses could, in theory, qualify as a trade secret. But that protection applies only if the information is not generally known or readily ascertainable through independent means.
Here, the list failed that test. The court found it was nothing more than information the underwriter could have compiled from trade show attendance lists or seminar registrations. Because the information was easily obtainable without misuse of confidential data, it did not qualify for trade secret protection.
By contrast, customer information looks very different when it is bundled with other sensitive business data. In Sunbelt Rentals, Inc. v. Head & Engquist Equip., LLC, several employees left the company and joined a competitor, taking with them a collection of information that included customer data along with pricing guides, salary information, and inventory records.
This time, the court found that the customer information qualified as a trade secret. Several factors were decisive:
- The information was not generally known outside the business.
- It was disclosed only discreetly within the company.
- The company actively guarded the information—removing it from view when non‑employees were present, segregating pricing data, and requiring passwords for access.
- The information had clear competitive value.
- It had been developed at significant cost to the company.
- It was difficult for competitors to duplicate or acquire independently.
Notably, the customer information did not exist in isolation. It was taken alongside “classic” trade secrets such as pricing and inventory data. That broader context helped establish both its value and its protected status.
On their own, a list of names and phone numbers can be a “trade secret,” but courts will focus heavily on whether the list was sufficiently protected and sufficiently different from a phone book before giving it the protections that go along with trade secret status.
Financial Data and Inventions: The Secrets Must Be Commercially Valuable
Unlike customer lists, financial data, and proprietary technical information are more readily recognized as trade secrets because they directly shape how a company competes. Sales histories, forecasts, pricing data, and proprietary designs can give competitors immediate insight into strategy, costs, and product development. As the cases below show, courts are particularly willing to protect this type of information when it provides a clear competitive advantage and cannot be replicated without access to the underlying confidential data.
Financial and sales data often occupy a different category altogether, as courts recognize that historical performance and forward‑looking projections can shape a company’s competitive strategy in ways competitors cannot easily replicate. In GE Betz, Inc. v. Conrad, three former employees left GE Betz and took jobs at a competing water treatment company. During their time at GE Betz, they had received sales reports that contained actual sales and sales forecasts for about 175 of GE Betz’s customers. Even after one of the employees informed the company he was leaving, he continued to receive the sales reports. GE Betz claimed that the employees took with them, in addition to the information from the sales reports, chemical formulations, pricing information, customer proposals, historical costs, and sales data.
The court explained that the sales reports contained a history of actual and forecasted sales, which were analogous to the cost history and financial projections that the courts generally protect. Specifically, the court explained that they had previously determined this type of information was valuable to the owner or to the owner’s competitor.
A glimpse into a competitor’s sales performance and strategy allows a new entrant to identify priority customers and markets, anticipate strategic moves, gain leverage in negotiations, and shortcut years of trial and error—dramatically reducing the cost of entering the market.
In GE Betz, the court further explained that even though one employee continued to receive sales reports after he gave notice, that did not render the information not secret because the employee was still bound by his confidentiality agreement. If an employee can no longer handle confidential information after giving notice, then the company could no longer practically employ them.
The strongest trade secret claims arise where proprietary technical information—such as design documents and manufacturing processes—directly enables a company to produce specialized products that competitors cannot reverse engineer. In Red Valve, Inc. v. Titan Valve, Inc., when employees left and founded a competing company, they took with them design documents and proprietary manufacturing processes. Specifically, the defendants copied and stored detailed engineering drawings, CAD files, and build sheets for valve components.
The court explained that these materials contained technical details developed over years at significant costs and were subject to strict access controls. The access controls included confidentiality agreements, a non-disclosure policy, need-to-know access to the trade secrets, password-protected systems, and physical limitations on access.
With access to these secrets, a competitor would have a “very advantageous” position in the marketplace. Merely possessing the finished product was insufficient to reverse engineer the trade secrets—the design processes were necessary.
Courts are often concerned when a company receives misappropriated trade secrets and is able to defray its cost of research and development, thereby undercutting the original owner’s pricing. By protecting this technical knowledge and proprietary technology, courts ensure that new entrants cannot shortcut the substantial investment required to compete.
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These cases illustrate why courts are willing to protect financial and sales data, inventions, and technical know-how: this information is not incidental or administrative, but it defines how the companies competed. It’s clear that this information is useful to the company, but if the company were forced to publish it, the company would no longer realize any value from the information.
Are You Protecting Your Trade Secrets?
Some practical steps a business can take to protect its trade secrets before a dispute ever arises are
- Limit access to employees on a need-to-know basis;
- Require passwords to access trade secrets;
- Require employees with access to trade secrets to sign an NDA;
- Document the cost associated with creating your trade secrets
- Document how your trade secrets give you a competitive advantage;
- Consistently treat your trade secrets as confidential.
While a court’s determination of whether information warrants trade secrets protection will be made on a case-by-case basis, taking commercially reasonable steps like these will help make it easier for you to protect your trade secrets when the time comes.
The Bottom Line
North Carolina courts consistently send the same message: trade secrets must meet the statutory criteria to qualify, and meeting the statutory criteria starts long before misappropriation happens. To receive protection, companies must do more than label information as confidential—they must actively treat it that way long before a departing employee walks away with it.
For businesses, that means implementing and enforcing reasonable safeguards. For departing employees, it means understanding that while personal relationships may be fair game, confidential compilations of information may not be.
