The movies have conditioned us that stolen trade secrets are the result of an eastern-Europe originated cyber breach or the result of a daring break-in where the Tom Cruise-looking spy navigates through your maze of lasers security system to hack into your data center. And before you know it, your trade secrets are gone.
But is that really how trade secret theft happens? Let’s be real here, you don’t even have a laser maze security system. And a statistical study of trade secret theft shows that it’s far more likely your own employee will be the one stealing your trade secrets.
It’s who you know
State and federal studies 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. 67 percent of employees who took confidential company information did so to help them get or perform at a new job.
How to protect your trade secrets
Protecting your trade secrets is protecting your business, and to do that properly, you will need to involve your entire staff. Studies show that the majority of IP thieves had signed an IP agreement—which indicates that prevention efforts require multiple steps. You can’t just rely on the IP agreement to do the job. Here are seven steps that can help protect your trade secrets:
- Identify your trade secrets: It is difficult to make a case supporting trade secret theft without first identifying the information deemed to be confidential. Any confidential business information which provides your business a competitive edge may be considered a trade secret. Examples include customer and supplier lists, source code, pricing and margins, formulas, processes and other methods of operation. If this information could help your competition, then it should be classified as a trade secret.
- Control access and compartmentalize: 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 in a locked file (think of the Colonel’s secret herb and spices recipe locked in a vault somewhere). Only the right people should have access to your trade secrets.
- Put a trade secret team in place: Best practices suggest establishing a cross-functional team to ensure that trade secret protection policies are being followed. The team could consist of representatives from HR, information security, physical security, legal and others.
- Educate and train staff: 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.
- Hire properly: Check backgrounds of all potential new hires. If a recruit offers to bring competitive intelligence from their former employer—what you would consider a trade secret—walk away. If they would do that to their former employer, you can be confident they will do it to you as well. There is also a legal risk to your business if competitor trade secrets come to your company.
- Understand legal protections: California has trade secret laws adopted from the Uniform Trade Secrets Act, which provides trade secret owners a procedure to file civil lawsuits in federal court. Unlike other types of intellectual property, such as patents, copyrights and trademarks, the law does not provide for registration to obtain legal protections for trade secrets.
- Prosecute violators: 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. A cease and desist letter is often the first step, but your attorney will help determine the most prudent course of action.
Theft of trade secrets can cripple a company. Consider working with an experienced intellectual property attorney before problems arise. Your attorney can guide you through the steps to take to protect your trade secrets and help you keep your competitive edge.
