Trade Secrets
Trade Secrets and Modern Technology
The proliferation of trade secret theft in recent times represents one of the greatest challenges facing businesses today. As companies seek ways to gain an edge over their rivals by harnessing unique intangible resources or know-hows often associated with trade secrets, criminals are also devising tactics for stealing such valuable information for monetary gains or unfair advantages in markets. Therefore, organizations must take proactive measures towards safeguarding their intellectual property rights and ensuring they remain ahead of these nefarious activities. The question for businesses is finding out what the threats are and what legal remedies are available for them to use in order to combat trade secret theft in the modern day?
Increase in Trade Secret Theft
Cybersecurity concerns are increasingly becoming a critical issue for companies operating within our current digital landscape. A recent study from the US Department of Justice revealed that trade secret theft is on the rise, receiving particular attention for its loss estimate reaching billions of dollars from numerous stolen assets worldwide. [3]
The threat exists today since industry rivals or unscrupulous actors may utilize network infiltration tactics or internal collusion against corporate confidentiality measures both domestically and internationally. As businesses grow their operations beyond national boundaries by outsourcing tasks and relying on sprawling supply chains, they open themselves up to a host of new risks.
Modern Trends
Meanwhile, the trend towards remote working only serves to heighten existing vulnerabilities even further – providing more openings through which intruders can exploit confidential resources.
To address this escalating risk environment proactively, many firms are adopting state-of-the-art cybersecurity solutions aimed at hardening their digital defenses proactively. These measures include leveraging cutting-edge firewalls, dedicated antivirus software packages provided by numerous vendors in the market space; as well as comprehensive data-encryption procedures designed specifically around protecting critical intel and ensuring client privacy. [2]
Non-Disclosure Agreement
By enforcing Non-Disclosure Agreements (NDAs) with all employees, contractors, and business associates who have access to proprietary information can provide legal protection against any breaches or violations. Finally, conducting periodic security audits might reveal vulnerabilities in existing protocols and allow for regulatory compliance. [6]
Legal Frameworks
In response to the growing threat of trade secret theft, legal frameworks have been established to protect businesses and their intellectual property. The Uniform Trade Secrets Act (UTSA) was adopted by most U.S. states to provide a consistent legal framework for trade secret protection . The UTSA defines trade secrets, sets forth the criteria for obtaining trade secret protection, and outlines remedies for misappropriation. On the federal level, the Defend Trade Secrets Act (DTSA) was signed into law in 2016, amending the Economic Espionage Act of 1996 . The DTSA offers a federal civil cause of action for trade secret misappropriation, allowing businesses to seek remedies in federal court. [4] The DTSA also provides for the seizure of property used to commit or facilitate trade secret theft, which can be a powerful tool in stopping the dissemination of stolen trade secrets.
What should businesses do?
To protect their trade secrets for the best legal protection under federal law, businesses should take these steps.
- Identify and document trade secrets: Businesses should identify their trade secrets in writing, such as specific information that constitutes a trade secret and the steps taken to keep it confidential. Basically, one of the first steps in any legal action for a business looking to protect their trade secret is to prove the information they want protected is indeed a trade secret.
- Limit access to trade secrets: Access to trade secrets should be limited. Employees should be required to sign non-disclosure agreements (NDAs) to protect trade secrets.
- Security measures: Companies should implement modern day security measures, such as firewalls, data encryption etc. Legally, this could matter in a court of law as there have been cases where companies not utilizing proper security for their information, they want protected have meant the court did not see that information as a trade secret.
By taking these steps, companies can maximize their legal protection under federal law. Especially looking at the Defend Trade Secrets Act (DTSA), which provides a federal cause of action for trade secret misappropriation and allows companies to seek injunctive relief damages and attorney's fees for trade secret theft.
References:
[1] National Counterintelligence and Security Center. (2021). Foreign Economic Espionage in Cyberspace. https://www.ncsc.gov/publications/Fact-Sheet_Foreign-Economic-Espionage-in-Cyberspace-2020-508.pdf
[2] National Institute of Standards and Technology. (2020). NIST Cybersecurity Insights: Protecting Controlled Unclassified Information in Nonfederal Systems and Organizations. https://csrc.nist.gov/publications/detail/nistir/8011/final
[3] US Department of Justice. (2021). Attorney General’s memorandum on department policies and procedures for domestic terrorism investigations involving activities that are protected by the First Amendment to the Constitution. https://www.justice.gov/ag/page/file/1379221/download
[4] Pace, Christopher Rebel J. "The Case for a Federal Trade Secrets Act." Harvard Journal of Law & Technology, vol. 8, 1995, pp. 427-448.
[5] Lerner, Jonathan J., Nicholas Stevens, and Richard T. Welch. "The Strange Defense of Reverse Engineerability in Trade Secret Cases, and Gaps in the Law of Unfair Competition." New Jersey Lawyer, vol. 250, Feb. 2008, pp. 20-21.
[6] Luo, Shijie. "Trade Secret Protection in the United States and China: A Comparative Analysis." Arizona Journal of International and Comparative Law, vol. 37, no. 2, 2020, pp. 385-426, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3721176.