Trade secret theft continues to be a major concern (or it should be) for businesses. And the numbers back up this conclusion; In an article by by Will Yakowicz, appearing in Inc., “How to Avoid Becoming a Victim of Trade Secret Theft,” it’s noted that:
Criminal theft of corporate trade secrets is reaching epidemic levels, experts say … the number of trade secret cases in U.S. federal courts doubled between 1988 and 1995, doubled again from 1995 to 2004, and is projected to double again by 2017.
Mr. Yakowicz’s article goes on to provide business owners with great advice on how to reduce trade secret thefts in your business. Having recently wrapped a trade secret misappropriation trial filed in Michigan state court, I can definitely say that the article is worth reading and the recommendations should be meaningfully considered by any business with information worth protecting.
What happens when a trade secret misappropriation lawsuit falls apart.
For background purposes, I represented a company and its executives who were sued for claims involving trade secret misappropriation, breach of a non-compete agreement, and other business related claims. One problem with any sort of lawsuit is that often times the facts get in the way.
This became clear as two days after the trial began, the lawsuit settled on terms very favorable to my clients (Plaintiff had requested over $860,000 at Michigan’s case evaluation procedure, which resulted in the evaluation panel awarding $175,000 against my clients). However, the parties settled the lawsuit for $8,500.00 payable over time.
In large part, this significant swing in damages – $860,000 to $8,500.00 – was the result of shortcomings in Plaintiff’s treatment of its alleged trade secrets. In fact, prior to the trial, a number of claims were dismissed by way of motion, including the trade secret misappropriation claims against the individual defendants.
The trade secret theft claim that remained was only against the company. However, it was doubtful whether that claim was salvageable based on comments from the judge and because of a pending motion to limit certain evidence and damages (essentially, we argued that plaintiff’s damages should be significantly limited or reduced to zero based on the evidence).
Failing to Protect Trade Secrets Limits Your Options and Damages.
But the preceding settlement would have been unlikely if the plaintiff company had implemented meaningful measures to protect its claimed trade secrets prior to filing its lawsuit. Because that did not happen, we were able to aggressively and convincingly attack the claim.
And this should drive home the point for business owners that measures to protect trade secrets serve a dual purpose: Obviously in the first instance having in place proper trade secret protections reduce the risks of losing “business critical” information to a competitor, a former employee’s competing business, or foreign agents hacking into your company’s computers.
Trade Secret Protection – One Goal, Two Reasons.
But assuming the worst, if your company’s trade secrets are stolen, it will likely need to resort to a lawsuit to mitigate further damage from the theft. But at that point, you can expect that the guilty party will turn a microscope on your business with respect to whether the stolen information meets the statutory definition of a “trade secret.”
At that point, your company will need to show that it has taken reasonable measures to protect the claimed trade secrets. If not, as the case referenced above illustrates, your trade secret claim may not be worth much, if anything.
For more information about protecting trade secrets or defending against claims that you have stolen trade secrets, contact Jason Shinn. He routinely represents clients in trade secret related claims in Michigan and federal courts, as well as advising companies in advance of litigation about protecting trade secret and proprietary information.