Playbook for Protecting Trade Secrets Begins with Protecting Your Home Turf
Regardless of your political preferences, President Obama's election victory offers an important lesson that can be extended to your company's protection of trade secret intellectual property.
In sports - similar to politics or business - a critical strategy for success is the concept of "protecting your home turf." In this regard, after the dust settled on the voting, one point stood out: President Obama and his campaign team was able to hold onto all of the states they won in 2008 with the exception of two (Indiana and North Carolina). In other words, President Obama was able to essentially protect the real estate he won in 2008 on his way to a second-term as the President. For companies, the same concept should extend to their operations when it comes to protecting trade secrets.
What Actions Can Employers Take to Protect Trade Secret Information?
Often times trade secret misappropriation can be entirely avoided or, at least, the likelihood significantly reduced by taking appropriate preventive measures to protect such assets. Developing those measures should be tailored to your specific facts and circumstances and in collaboration with an experienced trade secret lawyer. But the following topics provides preliminary precautions every business should consider to minimize its risk of experiencing or being accused of trade secret misappropriation:
- Perhaps the single most important component of a trade secret protection program involves educating employees, especially those in management, marketing, and sales, about the importance of protecting trade secret and other confidential information. By emphasizing the value of the information to be protected as it relates to the business provides a solid foundation for these constituents to understand the context and rationale for why trade secret precautions are necessary and should be taken seriously.
- The second most important component of a trade secret protection program is identifying what protections are available to protect the information the first place. In this regard, your company's IT professional or professionals play two critical roles in protecting trade secrets: First, IT provides the first line of defense in identifying appropriate security measures, as well as identifying areas where security improvement is needed. Second, IT professionals often will be the "first responders" in terms of identifying tell-tale signs of potential trade secret theft in terms of unusual download activities and access activities. Accordingly, will often be the single best resource for implementing procedures for monitoring and responding to potential misappropriation issues.
Why Should Companies Protect Trade Secrets?
If your company needs convincing of the value in protecting trade secrets, this Blog previously reported that trade secret misappropriation in the U.S. translated into an estimated $45 to $300 billion in annual losses.
And for more specific examples of the costs of trade secret misappropriation, consider the following:
- An employee of Valspar Corporation unlawfully downloaded proprietary paint formulas that were valued at $20 million. This theft represented about one-eighth of Valspar’s reported profits in 2009, the year the employee was arrested.
- Additionally, a trial recently began of a former General Motors Co. engineer and her husband who are accused of stealing GM's trade secrets related to hybrid-car technology. GM estimates the value of the stolen information at $40 million.
And you don't have to be a GM in order to have trade secrets worth protecting. In fact, smaller and medium-sized businesses routinely have "know how," pricing, marketing, or customer data that has been acquired over the years that has immense value to the business, which would be detrimental if a competitor were to acquire such intellectual property.
A company following appropriate trade secret precautions has the beginning point for increases its chances successfully suing to protect its trade secrets and, therefore, maintaining its competitive advantage in the market place.
Contact Jason Shinn for more information about such precautions, including drafting noncompetition provisions in employment agreements to prevent employees from starting and using trade secrets in a competing business; (ii) having appropriate security measures to protect trade secrets and confidential information from disclosure; and (iii) having a comprehensive employee exit/termination procedure intended to prevent trade secrets from walking out the employer's front door when employees leave.