Spies in our Midst: The Reality of Trade Secret Theft

The mild-mannered person in the office next to yours may be guilty of committing trade secret theft. Economic espionage is a reality to the tune of up to $480 billion in lost revenue annually.

By Michelle Valigursky
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“Every company needs to embrace the importance of its own trade secrets,” says litigation attorney Benjamin Fink 92L. “Maintaining a competitive edge often begins by establishing an effective trade secrets protection strategy before information has been freely shared with employees, customers, and oftentimes, vendors.”

“Step one is to understand the threat and create an office culture where trade secret protection is taken seriously,” Fink says. Typically, information can only be protected through legal action if it is “the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”

Though non-disclosure and non-compete agreements are commonplace for employees, “misunderstandings about what information belongs to the company versus the individual employee do occur. Often this is as a result of the company having not defined the information it owns,” Fink explains. “Making employees aware of what information the company believes is owned by the company and the employees’ confidentiality obligations with respect to that information is critical.”

To prevent protracted legal actions and business losses, Fink recommends taking the following steps toward building a strategy for protection of this important aspect of your intellectual property:

  • Understand the threat. Understand who your competitors and potential competitors are. Then ask yourself which aspects of your company’s data set you apart, and what would it cost you if you were to lose it.
  • Identify and inventory competitive information. Think about the formula for Coca-Cola, or a precise algorithm for the latest social media calculation, or the plans for a next generation game-changing product. Make a list of what information is known only to you and makes your company unique.
  • Conduct a trade secret audit.  A trade secret audit can provide a thorough directory of trade secrets, making it easier to identify and prove any misappropriation. Failing to identify trade secrets can make them more vulnerable to theft and may hinder the company’s ability to recognize when valuable, confidential information has been misappropriated. An audit can also be a key step to identifying the best, most cost-efficient protection measures.
  • Develop a trade secret protection plan. Protect your company’s intellectual property by establishing processes for maintaining confidentiality of existing information and managing new trade secrets as they are developed. If everyone in the company has access to the information, it may not qualify for trade secret protection. Access to trade secrets should be on a limited, need-to-know basis. If something is not labeled ‘confidential’ or ‘secret,’ chances are a court will not help prohibit the unauthorized disclosure or use of the information by a former employee or anyone else. Written confidentiality and non-disclosure agreements are imperative.
  • Keep pace with technology and prepare for vulnerabilities. More and more frequently, data is stolen electronically. As soon as a program to protect it is created, someone is trying to figure out how to break in to get at it. Internal threats must be considered at least as much as external ones. Companies must stay on top of technology and design a plan to manage theft scenarios. Thinking about what opportunities employees and others have to copy, e-mail, download or upload information is important. Is critical information available on smartphones and other devices? If so, who owns those devices and what is being done to protect that information when the relationship ends?

Ben FInk
Fink points out, “Trade secrets are often some of the most valuable intellectual property a company has. Thinking about those secrets and how they are being protected can be the difference between success and failure for a company.”

Editor’s Note: Fink is a shareholder at Atlanta-based Berman Fink Van Horn P.C. where he practices business and employment litigation, with a particular emphasis on non-compete, trade secret and unfair competition litigation. He recently shared this information and answered questions at the Emory Entrepreneur Network breakfast series. Learn more about how you can become a part of this exciting network of Emory alumni.