What you need to know about trade secret theft

Here’s a brief quiz for you about trade secret theft. Who is most likely to steal your trade secrets?

1. State-sponsored hackers from Russia or China.
2. The super-agile burglar who easily defeats your laser grid security system.
3. Your own salesman.

They say it’s who you know

If you chose A or B, you might be watching too many movies. However, if you chose C, you are correct. Surveys of trade secret litigation show that most intellectual property (IP) misappropriations will come from someone you know. One state study found that over 90 percent of the thefts were committed by someone the business owner knew: an employee, business partner or vendor. In fact, on average, the majority of IP thefts are committed by current 37-year-old male employees who are employed in technical positions such as scientists, engineers, programmers and sales.

Trade secret litigation on the rise

The survey found that trade secret litigation has increased primarily in the information technology, healthcare and consumer discretionary sectors. The major influx of trade secret cases involved computer programming and technology, source code, methods, blueprints and design.

How do you protect your trade secrets?

First, unlike patents, trade secrets are protected without registration. This means that a trade secret can be protected for an unlimited amount of time. Drawn from the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), some general standards exist:

• The information must be secret: It is difficult to make a case supporting trade secret theft without first identifying the information deemed to be confidential. An example might be a process you use that allows you to produce goods more cost-effectively. This process is known to just a few inside your company.
• The information must have commercial value: Examples include customer and supplier lists, source code, pricing and margins, formulas, processes and other methods of operation. Any confidential business information which provides your business a competitive edge may be considered a trade secret.
• The information must be subject to reasonable steps to maintain its secrecy:
  • Control access: If your secret is kept digitally, it should be on a secure server with limited access. If the secret is on paper, mark it confidential and keep it in a locked file (think of the Colonel’s secret blend of herb and spices recipe locked in a vault somewhere). The more people with access, the more opportunity for theft. Only the right people should have access to your trade secrets.
  • Confidentiality agreements: Make employees—and vendors—aware of the importance of your company’s trade secrets. Discuss the warning signs of IP theft and how to report suspicious behavior. Make this a part of your employee on-boarding process and have new employees sign an intellectual property agreement. Use periodic reminders and follow-up training to keep the issue current with your employees. Use the opportunity to have staff re-sign IP agreements.

  Prosecute violators to protect your business

  Theft of trade secrets can cripple a company. Consider working with an experienced intellectual property attorney before problems arise. If you suspect your intellectual property is being used or you have uncovered the theft of your trade secrets, consult with an experienced intellectual property attorney right away. Your attorney can guide you through the steps to take to protect your trade secrets and help you keep your competitive edge.