Theft of Trade Secrets: Laws, Penalties, and Civil Remedies

The theft of trade secrets is both a federal crime and a civil wrong. Under 18 U.S.C. Chapter 90, the owner of a stolen trade secret can sue in federal court for injunctions, actual damages, and in willful cases exemplary damages up to twice the compensatory award, while federal prosecutors can bring criminal charges carrying up to 10 years in prison for ordinary theft and up to 15 years when the theft benefits a foreign government. Civil claims must be filed within three years of discovery, so the response window is short.

What the Law Protects as a Trade Secret

Not every piece of sensitive business information qualifies. The federal definition in 18 U.S.C. § 1839 reaches formulas, designs, compilations, programs, techniques, and processes, stored in any form, but only if two conditions are both met.¹

First, the owner must have taken reasonable measures to keep the information secret. Courts look at what you actually did: access controls, encryption, limited internal distribution, nondisclosure agreements, documents marked confidential. A company that shares information freely cannot later claim it was a trade secret.

Second, the information must derive economic value from the fact that it is not generally known and not readily ascertainable through proper means. A customer list built over years, a manufacturing process that cuts costs, a proprietary algorithm driving a product’s core feature; each has value precisely because competitors do not have it.

One boundary catches companies off guard. General confidential information that fails these two tests, like routine internal pricing or draft business plans, can still be protected by contract, but it cannot support a misappropriation claim under federal or state trade secret law. The only recourse there is a breach-of-contract action, which typically offers narrower remedies.

What Counts as Theft or Misappropriation

Section 1839 defines misappropriation along two tracks.¹ The first is acquiring a trade secret by improper means, defined to include theft, bribery, misrepresentation, breach of a duty to maintain secrecy, and electronic or other espionage. Inducing someone else to breach a confidentiality duty counts too.

The second is using or disclosing a trade secret when you know, or have reason to know, that it was obtained improperly or carries a duty of confidentiality. This reaches the downstream user, not just the initial thief. If a departing employee hands a competitor a drive full of proprietary files and the competitor builds a product from it, both face liability. Liability can even attach when someone acquires a trade secret by accident, if they learn of its status before making significant business changes based on it.

Two activities are explicitly carved out. Reverse engineering a legitimately acquired product is not improper means. Neither is independent development. The law targets the subversion of trust and the use of deception, not the result of someone arriving at the same information honestly.

Civil Lawsuits Under the Defend Trade Secrets Act

A trade secret owner can file in federal court under 18 U.S.C. § 1836 whenever the trade secret relates to a product or service used in, or intended for use in, interstate or foreign commerce.² The DTSA does not preempt state trade secret laws, so federal and state claims can be pleaded together.

Injunctions

The most immediate remedy is a court order telling the defendant to stop using or disclosing the trade secret. Courts can also order affirmative steps, like returning files or wiping copied databases. Where an injunction would be impractical, a court can instead require the defendant to pay an ongoing reasonable royalty for continued use.³ One limit matters for employee cases: a federal court cannot enjoin someone from taking a new job. Any restriction on the new employment must rest on evidence of actual or threatened misappropriation, not merely on the fact that the person knows sensitive information.

Damages

Courts can award the actual loss caused by the theft, plus any additional profits the defendant gained that are not already captured in the actual-loss figure. When those numbers are hard to prove, the court can impose a reasonable royalty instead. If the misappropriation was willful and malicious, the court may add exemplary damages of up to twice the compensatory award. Attorney fees go to the prevailing party when a claim or defense was brought in bad faith, or when the theft was willful and malicious.³

Ex Parte Seizure Orders

In extraordinary cases, a court can order the seizure of property without advance notice to the other side. The applicant has to show that a standard restraining order would not work because the defendant would likely destroy, hide, or move the materials, that irreparable injury would otherwise occur, and that the harm of denying the order outweighs the harm of granting it.³ Courts grant these sparingly, require the seizure to be narrow, and hold a follow-up hearing within seven days.

The Three-Year Deadline

You have three years to file a civil claim, measured from the date you discovered the misappropriation or should have discovered it through reasonable diligence. A continuing misappropriation counts as a single claim, so the clock starts from discovery of the ongoing conduct, not from each individual act.³ Missing the federal deadline can bar the DTSA claim, though a parallel state claim may survive if the state limitations period is longer.

Federal Criminal Penalties

Criminal prosecution runs on a separate track from the civil case, and the two often proceed in parallel. Which statute applies depends on who the theft was meant to benefit.

Section 1832: General Theft of Trade Secrets

Stealing a trade secret related to a product in interstate or foreign commerce is a federal felony under 18 U.S.C. § 1832. An individual faces up to 10 years in prison and a fine of up to $250,000 under the general federal felony fine ceiling in 18 U.S.C. § 3571.⁴⁵ An organization can be fined the greater of $5 million or three times the value of the stolen trade secret, with the value calculation including research and design costs the organization avoided by stealing rather than developing the information.

Section 1831: Economic Espionage

When the theft is intended to benefit a foreign government, foreign agent, or foreign entity, 18 U.S.C. § 1831 applies and the penalties rise. Individuals face up to 15 years in prison and fines up to $5 million. Organizations can be fined the greater of $10 million or three times the value of the trade secret.⁶

Forfeiture

Convictions under either statute can trigger criminal forfeiture under 18 U.S.C. § 1834, meaning the government can seize property connected to the offense, including profits, equipment, and other assets derived from the theft.⁷

The Whistleblower Exception

Federal law protects a narrow category of disclosures. Under 18 U.S.C. § 1833, an individual is immune from criminal and civil liability under any federal or state trade secret law for disclosing a trade secret in confidence to a government official or an attorney, solely to report or investigate a suspected violation of law. A disclosure in a court filing is also protected, but only if the document is filed under seal.⁸ The immunity covers the act of disclosure, not the underlying acquisition. Someone who stole the information in the first place is not shielded.

Employers have a compliance duty tied to this provision. Any contract with an employee, contractor, or consultant that restricts the use of trade secrets or confidential information must include notice of the whistleblower immunity, which can be satisfied by cross-referencing a separate policy. An employer that fails to give this notice cannot recover exemplary damages or attorney fees in a DTSA case against that employee.⁸

What to Do If Your Trade Secret Has Been Stolen

Preserve evidence first. Access logs, email records, download histories, badge-swipe data, and signed nondisclosure agreements become central to both civil litigation and any criminal referral. Delay gives the other side time to cover tracks.

For criminal prosecution, contact the FBI, which investigates both ordinary trade secret theft and economic espionage. The Bureau publishes a reporting checklist covering the information agents need to evaluate the case: what was taken, how it was protected, and who had access.⁹ A criminal referral does not block a parallel civil case.

On the civil side, the three-year clock is running from the moment you discover the theft, or should have. If the theft is ongoing and the stolen materials are at risk of destruction, an ex parte seizure order or a temporary restraining order may be available, but both demand strong evidence assembled fast. The cases are usually won or lost in the first few weeks.

State Trade Secret Claims

The DTSA is not the only option. Nearly every state has adopted some version of the Uniform Trade Secrets Act, with definitions and remedies that track the federal statute closely, though specific provisions vary. Some states set different limitations periods, and a few treat issues like the inevitable disclosure doctrine differently.

Because the DTSA does not preempt state law, owners routinely plead federal and state claims in the same action. An owner who misses the federal three-year deadline may still have a viable claim under a state statute with a longer limitations period, which is one reason to review both tracks at the outset.

1
Office of the Law Revision Counsel. 18 USC 1839 – Definitions
2
Office of the Law Revision Counsel. 18 US Code 1836 – Civil Proceedings
3
Office of the Law Revision Counsel. 18 USC 1836 – Civil Proceedings
4
Office of the Law Revision Counsel. 18 USC 1832 – Theft of Trade Secrets
5
Office of the Law Revision Counsel. 18 US Code 3571 – Sentence of Fine
6
Office of the Law Revision Counsel. 18 USC 1831 – Economic Espionage
7
Office of the Law Revision Counsel. 18 USC 1834 – Criminal Forfeiture
8
Office of the Law Revision Counsel. 18 US Code 1833 – Exceptions to Prohibitions
9
Federal Bureau of Investigation. Checklist for Reporting an Economic Espionage or Theft of Trade Secrets Offense