Trade Secret Theft in AI: What It Is, Why It Matters, and What Happens When Someone Steals It

Trade secrets are one of the most valuable forms of intellectual property in modern business—especially for startups and tech companies building innovative systems, software, and proprietary processes. As artificial intelligence (AI) becomes more competitive, trade secret protection is becoming more important than ever.

A major recent case highlights this perfectly: a former Google engineer was convicted in federal court for stealing AI-related trade secrets in what prosecutors described as a scheme tied to foreign economic benefit.

In this blog, we’ll break down:

• What a trade secret is

• Why trade secrets are so valuable in AI and tech

• What happens legally when trade secrets are stolen

• How founders and companies can protect themselves

  
  

What Is a Trade Secret?

A trade secret is confidential business information that provides economic value because it is not publicly known—and because the business takes steps to keep it secret.

Trade secrets can include:

• proprietary formulas or product designs

• internal processes and systems

• software architecture and source code

• business strategy, pricing, and financial models

• customer lists and vendor relationships

• technical documents and engineering specs

Unlike patents (which require public disclosure), trade secrets can last indefinitely—as long as they remain confidential.

If you’re a founder or business owner, trade secrets may already exist inside your company… even if you’ve never formally labeled them that way.

➡️ Related: What Is Intellectual Property?

Why Trade Secrets Are So Valuable (Especially in Tech and AI)

Trade secrets are valuable because they often represent the “how” behind a company’s competitive advantage.

In industries like AI, cloud computing, and software infrastructure, trade secrets can include:

• training infrastructure systems

• chip design and hardware configurations

• performance optimization strategies

• proprietary workflows that scale computing efficiently

• technical specs that reduce cost and improve speed

For AI companies, the difference between success and failure can come down to efficiency, infrastructure, and execution—and those details are often protected as trade secrets.

This is why trade secret theft cases are taken so seriously, and why the consequences can go beyond civil lawsuits into criminal prosecution.

➡️ Related: Trademark vs. Copyright vs. Trade Secret: What’s the Difference?

Breaking News: Former Google Engineer Convicted of Stealing AI Trade Secrets

In late January 2026, a California federal jury found former Google engineer Linwei Ding guilty of:

• 7 counts of trade secret theft, and

• 7 counts of economic espionage (Economic espionage is a federal crime involving trade secret theft intended to benefit a foreign government or foreign business.)

after a 10-day criminal trial.

According to the reporting, the jury deliberated for less than three hours before returning guilty verdicts on all counts. This case is a major reminder that trade secret theft isn’t just a “company dispute”—it can become a serious federal criminal matter.

➡️ You can read the U.S. Department of Justice materials on the case here:U.S. v. Linwei Ding – DOJ Case Document

What Was Allegedly Taken — and Why It Matters

According to prosecutors, Ding allegedly uploaded more than 14,000 pages of internal Google documents, including 105 trade secrets related to Google’s advanced supercomputing infrastructure used to train and run large language models (LLMs).

The alleged trade secrets reportedly involved highly sensitive technical categories such as:

• internal chip-related details

• design and operations of AI supercomputing data centers

• cloud networking software design documents

• proprietary architecture that supports AI model development

In other words, this wasn’t a situation where someone copied a random file or harmless template. Prosecutors argued the information had the potential to accelerate competitive development in a space where companies invest billions.

What Happens When Someone Steals a Trade Secret?

When trade secrets are stolen, the legal consequences can be severe. Trade secret misappropriation can lead to:

1. Civil Lawsuits (Company vs. Individual or Competitor)

In many cases, the trade secret owner can sue for:

• monetary damages

• injunctions (court orders stopping use of the secret)

• attorney’s fees (in certain situations)

Civil trade secret cases are common when a former employee joins a competitor or launches a competing business using confidential information.

2. Criminal Charges (Federal Prosecution)

In more serious cases—especially those involving foreign entities—the government may bring criminal charges. That’s what happened here. The charges in this case included:

• Trade secret theft (criminal), and

• Economic espionage, which generally involves trade secret theft intended to benefit a foreign government, instrumentalihttp://Congress.govty, or entity.

  
  

➡️ Learn more about trade secret protections under the Defend Trade Secrets Act (DTSA) here: Defend Trade Secrets Act (Congress.gov)

Why This Case Matters for Startups and Business Owners

Even if you’re not Google, the takeaway is clear:

Trade secrets are business assets and if you don’t protect them properly, they can walk right out the door.

Many founders assume their biggest risk is someone “copying their idea,” but in reality, the bigger risk is:

• employees downloading internal docs

• contractors keeping access after projects end

• vendors or collaborators sharing confidential information

• partners using your internal systems to build a competing product

If your company relies on proprietary workflows, internal know-how, customer acquisition systems, or product development processes—those can qualify as trade secrets. But you need the right legal protections in place to enforce them.

How to Protect Your Trade Secrets (Practical Steps)

Trade secret protection isn’t just about saying something is “confidential.” It’s about creating a system that proves you treated it like a secret.

Here are a few foundational steps:

✅ Use NDAs for employees, contractors, and collaborators

✅ Include confidentiality + IP ownership clauses in contractor agreements

✅ Limit access to sensitive documents (need-to-know only)

✅ Use secure file storage + access logs

✅ Create offboarding processes that remove access immediately

✅ Train your team on what qualifies as confidential information

The biggest mistake I see? Businesses waiting until there’s a problem—when the damage is already done.

Want to Protect Your Trade Secrets Before Someone Takes Them?

If your business has valuable systems, processes, software, product designs, pricing strategies, or internal know-how, you may already have trade secrets.

But trade secrets only stay protected when you:

• document them

• control access

• use the right contracts

• enforce confidentiality consistently

If you want to strengthen your legal protection and reduce risk as you scale:

👉 Book a consultation today and let’s build a strategy that protects your business from the inside out.

Book Your Consultation

About the Author: Gaea Kassatly is the Founder and Managing Attorney of GK Law Co., where she supports startups with intellectual property protection, contracts, and fractional general counsel services. If you’re building something innovative and want to protect your “secret sauce,” you can book a consultation here: Book a Strategy Call