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Third Circuit rules that an employer’s passwords are not “trade secrets”

11/10/25

By: Shane Miller

Key takeaway

An employer’s passwords may protect valuable information, but the passwords themselves lack independent economic value and thus fail to qualify as “trade secrets” under the Defend Trade Secrets Act.

Understanding trade secrets

Trade secret misappropriation claims often turn on whether the disputed information qualifies as a “trade secret.” A trade secret is generally defined as information with independent economic value that the owner has taken reasonable measures to keep secret. The definition sounds simple enough, but it is often difficult to determine what qualifies. Courts in the Third Circuit have previously ruled that marketing strategies, financial projections, business plans and terms of specific customer accounts can constitute trade secrets. On the other hand, an employee’s general know-how, common industry knowledge, public knowledge and information that can readily be obtained from another source (like prices charged or information marketed to the public) usually do not qualify.

Case background: NRA Group, LLC v. Durenleau

In NRA Group, LLC v. Durenleau, No. 24-1123, 2025 WL 2835754 (3d Cir. Oct. 7, 2025), the U.S. Court of Appeals for the Third Circuit provided additional guidance on this fact-intensive inquiry.

Here’s what happened: An employee was out sick when an urgent business problem arose. She lacked access to her work computer, but her boss instructed her to fix the issue immediately. To do so, she shared her computer login credentials with a coworker, who accessed an Excel spreadsheet the employee had created. That spreadsheet contained passwords for the employer’s systems and accounts.

The coworker retrieved the necessary information, and the problem was resolved. The next day, still out sick, the employee received the password spreadsheet via email from the coworker.

The legal dispute

The company later sued both employees for trade secret misappropriation, among other claims. The employer argued that the passwords in the spreadsheet were “trade secrets” and that the employees violated the Defend Trade Secrets Act by creating and emailing the document.

The Court’s ruling

Both the district court and the Third Circuit rejected the employer’s argument. The Third Circuit held that while the passwords may protect valuable information, such as company databases, the passwords themselves lacked independent economic value.

Additionally, the company had promptly changed the passwords after the incident, eliminating any potential harm. Ultimately, the Third Circuit concluded that the passwords were merely “numbers and letters” without independent economic value and therefore were not trade secrets.

For more information, please contact Shane Miller at shane.miller@fmglaw.com or your local FMG attorney.

Information conveyed herein should not be construed as legal advice or represent any specific or binding policy or procedure of any organization. Information provided is for educational purposes only. These materials are written in a general format and not intended to be advice applicable to any specific circumstance. Legal opinions may vary when based on subtle factual distinctions. All rights reserved. No part of this presentation may be reproduced, published or posted without the written permission of Freeman Mathis & Gary, LLP.