The short version
- New York never adopted the Uniform Trade Secrets Act. Protection runs on two tracks: New York common law and the federal Defend Trade Secrets Act (DTSA).
- If your company never took reasonable measures to keep the information secret (NDAs, access controls, confidentiality labels), a court may not treat it as a trade secret at all.
- Your fastest weapon is not a damages award. It is a preliminary injunction. Every week the leak continues, the secret loses value you cannot get back.
- Do not focus on the one employee who left. The competitor who hired them and any third party who used the data can be pulled into the same case for unfair competition and tortious interference.
The call usually comes after the damage has started. A founder realizes a departing engineer or salesperson left with source files, pricing models, or the full client list, and the first instinct is to wait and see. That instinct costs companies the case. In New York, trade secret fights are won by whoever locks down the evidence first and gets in front of a judge first. At our firm, I treat the first 72 hours as the whole ballgame.
What makes something a “trade secret” in New York?
It takes two things: information your company actually treated as secret, and information that carries real economic value. New York courts skip the Uniform Trade Secrets Act and instead weigh the six factors from Restatement of Torts §757 — how widely the information is known outside the business, how widely it is known inside it, the measures taken to guard its secrecy, its value to you and competitors, the effort and money spent developing it, and how hard it would be for others to acquire or duplicate it honestly.
The third factor is where most cases are won or lost. Even genuinely valuable information loses protection if the company took no reasonable secrecy measures. Non-disclosure agreements, segmented access permissions, “Confidential” labeling, and a real offboarding routine that recovers company files are not paperwork — they are the evidence that turns your information into a legally protected asset. That is exactly why I push clients to audit their internal controls long before a dispute starts.
A client list is not automatically a trade secret either. A roster anyone could rebuild from the internet or a public industry directory usually gets no protection. But a list your company spent time and money refining — pricing tiers, purchase history, decision-maker preferences baked in — stands a strong chance of qualifying.
Beyond misappropriation, what else can the employee be liable for?
Breach of the duty of loyalty, and the faithless servant doctrine. New York common law imposes a duty of loyalty on current employees, and an employee who competes against the company or funnels out its information while still on payroll can be hit with the faithless servant doctrine.
This doctrine carries a punch that surprises people: separate from any damages, the company can claw back the salary and bonuses the employee earned during the disloyal period. That matters in cases where the direct loss from a leak is hard to put a number on, because the loyalty breach is its own independent hook. And if the departing employee also pulled away coworkers or clients, tortious interference stacks on top.
Do non-compete and confidentiality agreements actually hold up in New York?
Yes — when they are reasonable. New York courts enforce a non-compete under the BDO Seidman v. Hirshberg standard when the restriction is (1) no broader than needed to protect a legitimate business interest, (2) reasonable in time and geography, (3) not unduly burdensome on the employee, and (4) not harmful to the public.
The agreements that fail are the overbroad ones. A “worldwide, forever” clause invites a court to strike it down or cut it back to something reasonable. By contrast, confidentiality (NDA) and non-solicitation covenants tend to be enforced more readily than raw non-competes. The wording on a single page can decide whether you get an injunction, which is why these agreements have to be drafted to the New York standard from day one — not pulled off a template.
Is there a way to stop the leak while it is still happening?
Yes: a preliminary injunction, and where needed a temporary restraining order. You do not have to wait for a final judgment. You can ask the court for a preliminary injunction under CPLR Article 63 to immediately halt further use of the information, additional disclosure, and contact with your clients.
To win that injunction you generally have to show a likelihood of success on the merits, irreparable harm that money cannot fix, and a balance of the equities in your favor. So the early evidence is everything. System access logs, bulk-download records, and signs of an external drive plugged in right before resignation are the kind of digital forensics you need to secure fast. If the employee broke into company systems they were not authorized to use, you may also have a federal claim under the Computer Fraud and Abuse Act (CFAA). In these cases I file the complaint and the injunction and evidence-preservation motions together, on the same day, so the other side never gets room to scrub the trail.
How are damages measured, and how long do you have to sue?
You can recover your actual loss plus the wrongdoer’s unjust gain — and under federal law, potentially double. New York common law and the federal DTSA (18 U.S.C. §1836) both let you pursue the company’s actual damages alongside the infringer’s unjust enrichment, and where neither is easy to calculate, a reasonable royalty can stand in.
The DTSA goes further: where the misappropriation is found to be willful and malicious, it allows exemplary damages of up to twice the damages award, plus attorney’s fees, and it opens the door to federal court with its procedural advantages. The catch is time. Both the New York common-law misappropriation claim and the DTSA claim carry a three-year statute of limitations, running from when you knew or should have known about the misappropriation. Sit on it after you discover it, and you throw away your strongest card.
Here is how the claims a company can pursue at the same time line up when an employee walks off with information.
| Claim / tool | Basis | Core effect |
|---|---|---|
| Trade secret misappropriation | NY common law (Restatement §757) / federal DTSA | Damages + unjust enrichment; DTSA adds up to 2x + attorney’s fees |
| Breach of duty of loyalty | NY common law | Damages |
| Faithless servant doctrine | NY common law | Clawback of salary/bonuses paid during disloyalty |
| Non-compete / NDA breach | Contract (reasonableness test) | Injunction halting competition and contact |
| Tortious interference | NY common law | Liability for poaching staff and clients |
| Unauthorized system access | Federal CFAA | Separate claim and evidentiary value |
Frequently Asked Questions (FAQ)
Q. The employee never signed an NDA. Can I still stop them?
Possibly. Even without a contract, New York common-law trade secret misappropriation and breach of the duty of loyalty stand on their own. An NDA simply makes proving the case far easier.
Q. The information already reached a competitor. Is it too late?
No. An injunction against further use and spread, plus a damages claim, are still on the table. But evidence disappears as time passes, so moving quickly works in your favor.
Q. Is a client list always protected as a trade secret?
No. A list easily assembled from public sources is hard to protect. The more time and money your company invested in compiling and refining it, the stronger the claim.
Q. Should I file in federal or state court?
It depends on the facts. The DTSA allows a federal filing and offers exemplary damages and attorney’s fees, so we often combine claims strategically across both.
Trade secret theft rarely shows up alone. It usually arrives tangled with other commercial disputes — a business breach of contract or partnership fight, a shareholder dispute, or unpaid-debt collection — which is why the whole matter has to be handled as one strategy, not a stack of separate problems.
A trade secret dispute is a case where a company’s core value can drain out in a matter of days. Don’t stare at the one employee who left. Build the misappropriation, contract, unfair-competition, and federal claims as a single package, and use an injunction to stop the bleeding first. That is how Attorney Jay Koo handles New York trade secret theft.
