If your business holds information that holds economic value due to its secrecy, it can be considered a trade secret, as long as you take reasonable measures to safeguard it.
It is crucial to be vigilant in safeguarding trade secrets, as there is always a risk of theft. With advanced technology available to thieves and an increasing number of personal devices and unsecured work-from-home networks, detecting such theft has become increasingly challenging.
To prevent theft and preserve legal remedies, businesses can take reasonable steps to protect their trade secrets.
Access Review
One crucial measure to safeguard trade secrets is to perform an access review, which involves identifying the secrets that require protection and restricting access. Unfortunately, this step is often overlooked, and most companies give their employees unrestricted access to all company information.
Remote work and the use of personal devices for business have become prevalent, creating the risk of disclosure through hacking. A company policy that mandates the use of company-issued devices, company-managed VPN networks, and secure shared drives or file-transfer systems is a necessary first step. But it is pointless to have a policy that is not followed. Therefore, creating a culture of compliance through training and monitoring is crucial.
Departing Employees
Departing employees pose the highest risk of trade secret theft since they have worked with, or even developed, your company's trade secrets and are leaving to work for or become a competitor.
During an exit interview, it is essential to review applicable NDAs and discuss the proprietary information covered by the agreement. While collecting company property is an obvious step, it is also prudent to examine the data transfer history leading up to the employee's departure and promptly disable access to the company network and email system.
If an employee had access to sensitive information, preserving and imaging laptop hard drives, email accounts, and logging external storage devices that were recently connected to the electronic device should be considered.
Employees are most likely to steal a trade secret information when they plan to leave the company or expect termination. While NDAs and security policies usually control the behavior of most former employees, a trust-but-verify approach is recommended, especially if departing employees have worked with valuable and portable trade secrets.
Post-separation monitoring strategies could include periodic checks of social media or more sophisticated measures like monitoring disclosures related to patent filings, depending on the industry.
When Theft Happens
If your company's trade secrets have been stolen despite your NDA, IT security policy, and exit interview, you have two options: pursue civil remedies or refer the matter for criminal investigation. The decision between these options requires careful investigation.
The more common approach is to pursue civil remedies through negotiation and litigation based on claims such as theft of trade secrets, breach of contract, tortious interference, and patent claims. Civil remedies allow companies more control over the process and can lead to resolutions that consider business considerations.
However, pursuing civil remedies may not be effective in cases of egregious theft. In such cases, it may be advisable to refer the matter for criminal investigation and potential prosecution. The Economic Espionage Act makes the commercial theft of trade secrets for economic advantage a federal crime. Other federal and state statutes, including anti-hacking, fraud, obstruction of justice, and transportation of stolen property, may also apply to the theft of trade secrets.
Inviting government agents into the process cedes control but introduces considerable investigative powers into the equation. Prosecutors can serve grand jury subpoenas to collect evidence from third parties and compel testimony from witnesses. These powers can be devastatingly effective, and the deterrent message of a criminal investigation sends a strong message to competitors. However, the wheels of justice turn slowly, and prosecutors require proof beyond a reasonable doubt before bringing charges.
Businesses can protect their trade secrets by limiting access, establishing clear contractual obligations, and adhering to sound IT policies. If a company suspects a theft of trade secrets, they should escalate their suspicions to their in-house counsel and consider hiring an outside law firm with a team of experienced former prosecutors and a strong track record in protecting trade secrets.
