Companies have information that gives each of them a competitive advantage over competitors. Patenting this information is sometimes legally impossible or disadvantageous — patents expire, leaving vitally important information publically exposed.

Some companies choose to treat the information as a trade secret because such a designation can offer legal leverage in certain situations. And unlike a patent, a trade secret can last forever.

A patent expires 20 years from its effective date of filing, and that previously protected invention enters the public domain. With a patent, you’re disclosing how to make and practice an invention in exchange for 20 years of exclusive rights to do so,” says Daniel R. Ling, an associate with Fay Sharpe LLP.

He says many companies, especially smaller ones, don’t often consider the role of trade secrets, but in certain instances companies could be well served by recognizing and protecting such valuable information. But there’s one catch: “You have to take reasonable steps to maintain it as a secret.”

Smart Business spoke with Ling about identifying and protecting trade secrets.

What are some examples of information that could be a trade secret?

Customer and supplier lists, the arrangement of equipment in a factory and certain manufacturing processes are examples of valuable proprietary information that may not rise to the level of something that can be patented. Often, it comes down to that which makes your product better than that of your competitors but can’t be patented because it doesn’t meet the basic legal standards, which are that the invention is new, not obvious, useful and eligible to be patented.

How long does trade secret protection last?

Trade secrets last indefinitely, as long as the information is maintained confidential and the holder of the trade secret continues to take reasonable precautions against disclosure.

How are trade secrets best protected?

There are many methods of protecting sensitive information. If it’s a process that involves multiple steps, a company could isolate the responsibility for each of those steps across multiple locations so the entire process isn’t carried out in one place and a single person isn’t privy to the entire production.

It’s also fairly common to include confidentiality agreements and nondisclosure clauses in employment contracts for not only employees who might be aware of a trade secret in its entirety, but also for employees who may have only some knowledge of the process. Companies with such sensitive information should work with a business attorney to put together those agreements.

What can be done if a trade secret is leaked?

If the trade secret was misappropriated — obtained illegally or otherwise improperly disclosed — there are steps that can be taken to prosecute the perpetrator. The Uniform Trade Secrets Act, the general framework of which has been enacted by 46 U.S. states, offers remedies when a trade secret is acquired through improper means or through a breach of confidence. This can provide some relief to a trade secret holder in the form of injunctive relief (e.g., stopping the use of a misappropriated trade secret), monetary damages and/or attorney’s fees.

However, if the information is developed independently or introduced to the public lawfully, nothing can be done. Further, if the secret that was being held is a patentable idea, another company or individual could secure the rights to it and bar others from acting on it. That’s why it’s important to carefully consider what you hold as a trade secret; if it can be easily reverse engineered it’s not right for trade secret protection.

Regardless of whether the secret got out legally or illegally, once it’s widely disclosed the remedies under the law might not be sufficient to make a company whole again — once it’s out, it’s out. The trade secret holder ultimately has an obligation to take reasonable protective measures to guard its secrets.

Daniel R. Ling is an associate at Fay Sharpe LLP. Reach him at (216) 363-9000 or dling@faysharpe.com.

Insights Legal Affairs is brought to you by Fay Sharpe LLP.

Published in Cleveland

When people consider intellectual property (IP) they most often think patent or copyright, which can be very valuable to a business. But, in fact, one form that’s often overlooked is trade secrets.

What constitutes a protectable trade secret varies from state to state, but the gist of what trade-secret law protects is similar in almost every state. A trade secret is any sufficiently valuable, secret information that can be used in the operation of a business to afford an actual or potential economic advantage.

“Given this broad definition, it should come as no surprise that a wide variety of things have been found to constitute trade secrets, including product formulas, data compilations, customer or client lists developed through hard work, manufacturing techniques and some forms of business know-how,” says P. Andrew Fleming, a partner at Novack and Macey LLP. “The point is that many things could be protectable trade secrets if a business took the time to identify and properly protect them. All too often, however, businesses do not do a good job at either.”

Smart Business spoke with Fleming about how your company should be protecting your trade secrets.

How might a company’s trade secrets be vulnerable?

It is hard for a business to protect something unless it knows what it is — a business has to identify its trade secrets before it can protect them. A little common sense goes a long way. Business owners should start by asking a simple question: ‘What does my business do better than the competition that my competition does not know about, and that I do not want them to know about?’

What policies should a company put in place to protect its trade secrets?

The next step is protecting that trade secret. This can be tricky because, as the name implies, a trade secret loses protection when it is no longer secret. Moreover, the law does not protect a trade secret unless its owner takes reasonable steps to keep it secret. Although there is no hard and fast rule, a business should consider:

  • Password-protecting computers containing its secrets.

  • Limiting access to secrets on a ‘need-to-know’ basis.

  • Keeping hard copies of documents containing or describing its secrets under ‘lock and key.’

  • Entering into contracts with its employees that requires those employees to maintain secrecy during employment and after their employment ends.

A business also might consider using reasonable non-compete agreements with employees who know trade secrets to keep them from going to the competition. After all, if a former employee cannot work for a competitor, he or she has little incentive to reveal secrets once employment ends.

How has social media affected a company’s ability to protect its trade secrets?

The explosion of information on the Internet has made it more difficult for businesses to argue information or know-how is sufficiently secret to constitute a trade secret. It is now far easier to find descriptions of techniques, know-how and even customer lists — a point underscored in Sasqua Group, Inc. v. Courtney. There, the defendant allegedly took secret and valuable customer information to her new job, and the plaintiff argued the information was a trade secret. The court acknowledged that the customer information could in the early days, i.e. pre-Internet and pre-social media, have been sufficiently secret, but since virtually all of the allegedly protected information could be found on the Internet, including through social media sites, it no longer qualified.

It is not difficult to imagine other scenarios in which a business could lose trade secrets via the Internet or social media. For example, a disgruntled employee could intentionally post secrets so the otherwise secret information loses its protection. Even a happy employee unwittingly could disclose secrets through careless posting, such as establishing links to all customers on a social media page.

There are no easy answers to such problems, but businesses must remain on guard, take care when creating or posting to social media sites, and educate employees about the pitfalls of using social media.

P. Andrew Fleming is a partner at Novack and Macey LLP. Reach him at (312) 419-6900 or andrewf@novackmacey.com.

 

Novack and Macey LLP social media: Learn more about Novack and Macey LLP on LinkedIn.

 

Insights Legal Affairs is brought to you by Novack and Macey LLP

Published in Chicago

Think your company has no confidential information that needs to be protected? Think again.

“All companies have confidential information which, if compromised, could cause immeasurable damage,” says Kate B. Wexler, an attorney in the Business, Corporate & Securities practice group at Brouse McDowell. “Confidential information can be tangible or intangible and of a technical, business or other nature.”

Wexler says there are occasions where such information needs to be shared with employees, contractors, suppliers, customers, vendors, potential partners and others, and a confidentiality agreement should be put in place to protect the company’s interests.

Smart Business spoke with Wexler about confidential information and situations when you might want a confidentiality agreement.

What needs to be kept confidential?

Any information not generally known to the public should be treated as confidential, provided that you take steps to keep your information confidential as well. When you are sharing your company’s confidential information with any third party, you’ll want to press for a definition of confidential information that is as broad as possible to avoid any argument later on that any particular piece of information was not covered by the confidentiality agreement. It can be as general as all information, whether written or oral, delivered by your company in connection with a contemplated transaction. Of course, as the recipient of such information, you’ll want to limit this definition by requiring that all information disclosed be marked ‘confidential.’

Under what circumstances would you enter into a confidentiality agreement?

Contexts in which confidentiality agreements are used include agreements with individual employees to ensure they understand their obligations to the employer; agreements with potential partners in a joint venture; supplier agreements; and agreements between companies wishing to explore a potential acquisition or merger.

Although parties often rush through the step of entering into a confidentiality agreement when their new relationship begins, and sometimes omit it entirely, it’s critical in defining the relationship’s rules.

These rules not only include defining what’s mine and what’s yours, but they also address the level of care a receiving party must take with your confidential information; prohibitions against reverse engineering; disclosure to governmental entities; compliance with laws to which your company and your information is subject — e.g., HIPAA, GLBA, U.S. export laws; injunctive relief should a party breach the confidentiality agreement; and what happens to the information when discussions end.

Other issues often addressed in confidentiality agreements are confidentiality of the fact that the parties are even in discussion, and nonsolicitation, which prevents a potential partner from attempting to poach your employees that they may meet in the course of exploring this potential relationship.

Are there restrictions?

Yes, there are many situations where the disclosure of confidential information is required by law. For example, judicial or governmental order or by deposition, interrogatory, request for documents, subpoena and civil investigative demand. These situations can be addressed in the confidentiality agreement as permitted exceptions. It is also interesting to note that there are certain non-U.S. jurisdictions that will not recognize an agreement that prohibits reverse engineering.

Are there occasions when you might want to terminate a confidentiality agreement?

One such situation would be when the parties enter into a definitive agreement whereby confidentiality obligations between the parties would be addressed. Another might be when one or both parties no longer wish to pursue the objective of the relationship. In that case, a well-drafted confidentiality agreement would anticipate that situation and while the parties may no longer share information, their obligations to maintain confidentiality with respect to the previously disclosed information continues for a certain period of time.

Kate B. Wexler is an attorney with the Business, Corporate & Securities practice group at Brouse McDowell. Reach her at (330) 535-5711, ext 399 or kwexler@brouse.com.

Insights Legal Affairs is brought to you by Brouse McDowell

Published in Akron/Canton

In the age of social media, it seems everything is transparent. In the case of social media contacts, which can be visible to the public through sites such as Facebook, LinkedIn and Twitter, there are questions as to whether that information can, nonetheless, be deemed a trade secret, and if so, who owns the trade secret.

“It was only a few years ago when businesses began incorporating social media in their marketing strategy,” says Yuri Mikulka, chair of the Intellectual Property Department at Stradling Yocca Carlson & Rauth. “Now, it’s recognized as one of the most powerful marketing and PR tools for companies, whether big or small. In fact, when positioned well, social media data can serve as an important asset of the company, especially for those relying on Web traffic and member lists to generate revenue.”

Smart Business spoke with Mikulka about ensuring social media information receives the highest possible protection and remains an asset even when employees leave.

What constitutes a trade secret?

Generally speaking, a trade secret is information that derives independent economic value, actual or potential, from not being generally known to, and not readily ascertainable through, proper means by the public. A company can enforce its exclusive right to possess and use such information as long as reasonable measures are employed to keep such information secret.

Can you protect your social media profiles as a viable trade secret?

This emerging area of law was preliminarily addressed in two recent court cases. Christou v. Beatport, LLC centered on ownership of a MySpace list used by a nightclub to promote its events. When an employee opened a competitive venture, the club sued him for misappropriating its MySpace profiles. The employee responded that MySpace is public and cannot constitute a trade secret. The Colorado federal court disagreed, noting that ‘Friend- ing’ a business or individual grants . . . access to some of one’s personal information, information about his or her interests and preferences, and perhaps most importantly for a business, contact information and a built-in means of contact . . . ’ and that this information is not necessarily public.

Another case in a California federal court, PhoneDog v. Kravitz, centered on a Twitter account maintained by an employee on behalf of the employer. The departing employee kept the account for his own use but changed its name and erased any reference to his former employer. The employer sued, seeking $340,000 in damages, allegedly based on an industry value of $2.50 per follower. The court rejected the employee’s argument that a Twitter follower list cannot constitute a trade secret.

These recent decisions seem to indicate that even if social media profiles are visible online, they can receive trade secret protection — as long as some portion remains inaccessible to the public and employee passwords and login are required to view the information. Nonetheless, because these decisions were issued during early stages of cases, keep an eye out for new cases in your jurisdiction on these issues.

How do you protect social media information as potential trade secrets?  

Here’s what your company can do:

• Put in place policies, procedures and employee agreements that outline and define acceptable and prohibited use of social media.

• Make it clear in writing that any work-related social media is company property.

• Have employees sign a social media policy. At least one court recognized the importance of the employee’s signature in determining whether the company owned social media contacts.

• Get employee buy-in to effectively enforce your policy by providing training and seeking participation to protect the company’s confidential information.

• Maintain employees’ login and password information to company-related social media, and change it when employees leave.

• Periodically monitor employee online activity because trade secrets lose protection when disclosed. If disclosure is inadvertently made, quickly take down the information.

• Consult an attorney to review your social media policy, agreement and practice.

• Periodically update your policy because law and technology are changing so fast.

Yuri Mikulka is chair of the Intellectual Property Department at Stradling Yocca Carlson & Rauth. Reach her at (949) 725-4000 or ymikulka@sycr.com.

Insights Legal Affairs is brought to you by Stradling Yocca Carlson & Rauth

Published in National

Intellectual property (IP) might be one of the most valuable assets of your company. But if it’s not protected, you can be foregoing a significant advantage in the marketplace.

There are four major IP categories:

  • Patents, which protect inventions;

  • Copyrights, which protect artistic forms of expression;

  • Trademarks, which protect brands; and

  • Trade secrets.

Generally, the types of IP small businesses may be interested in protecting are unique to the kind of company and its core competencies. For example, businesses that are predicated on developing new products or technology will be interested in patent protection, while another business may be identified by its brands and would want to protect those through trademarks.

However, John P. Cornely, of counsel at Fay Sharpe, LLP, says it’s important to take a close look at everything — from catalog photographs to manufacturing processes — to ensure the security of all of your IP.

Smart Business spoke with Cornely about successful strategies to identify and protect IP.

How does a small business identify and track its IP?

In a small business, to some extent, you have IP being created by many people in your organization at many points in the workflow cycle. You want to be systematic about identifying your IP. When it comes to patents, consider using an invention disclosure form. These forms can be made available to employees, especially those involved in the invention creation process, and are used to collect the data necessary for completing a patent application — inventor’s names, the date the invention was created, a description and/or drawings of the invention and the location of records that support the invention, such as a hard drive or lab notebook.

Encourage your inventors to use the forms and have regular sessions to review inventions and the potential for protection. Regular review meetings can also assist in identifying and/or ranking the relative importance of multiple inventions.

This form system can be used with other types of IP to identify creations and have a way to systematically collect information about them.

What are important inventions to protect?

It’s most important to protect those that make a product stand out in the market. As a small business, maybe you don’t have the resources to file 100 patent applications and might only be able to do a couple each year, so it’s critical to identify where to best apply your resources. Find the aspects of your products that make them more valuable and desirable in the marketplace. Think of it in terms of what features of your products your competitors would like to copy and select strategic patent protections that will keep your competitors from doing so.

Should companies federally register their trademark?

Yes. There are procedural benefits to registering your trademarks that will help in potential infringement actions.

When you start using a trademark in commerce you naturally gain common-law rights whether you’ve registered the mark with the federal government or not. However, one of the problems is those common-law rights are limited to the geographic area in which you’re doing business. So if you’re selling a product in Cleveland, Ohio, under a specific mark, you only have common-law rights in Cleveland. A federal trademark registration extends your rights nationally. Further, federal registration of your trademark provides you with procedural benefits if there’s an infringement action.

And, much like patents, you want to register those marks and brands that are most important to you if your resources are limited.

What can a company keep as a trade secret?

Sometimes there may be an idea that’s not a good fit for patenting or that you don’t want to disclose, for example, like a process of manufacturing a product. Trade secrets are great tools for protecting some ideas because, theoretically, the protection can last forever while patents commonly expire after 20 years. However, the secret generally has to be something no one else can easily discover, for example through reverse engineering; you have to treat it cautiously and control its dissemination. Many small businesses may think they have trade secrets, but since they are not effectively treating them as such that information won’t enjoy the legal status of trade secret, which has certain advantages.

Some things are easy to keep secret, such as formulas and manufacturing processes, because only a few people have or can discover that information. If the information can be discovered from viewing or reverse engineering your product, you won’t be able to keep that a secret. One risk is that if your secret is discovered legitimately then you’ve lost your trade secret status, but if someone were to uncover your trade secret through theft or breach of contract, then you have a case.

How does a small business secure rights to the company’s IP from its employees and contractors?

While this is important, it’s also often overlooked. You want to have some language in your employee or contractor agreements that details ownership of any IP rights. Contrary to what some might think, it’s not always the small business that owns the rights to IP developed by contractors. For example, when hiring a contract photographer to take pictures for your website, the copyright for the work (i.e., the photographs) stays with the photographer unless you have a written agreement that says otherwise. That also extends to contract programmers who can retain the copyright for developed software absent a sufficient written contract to the contrary.

In general, it’s a good rule to have your agreements explicitly spell out IP ownership rights in writing up front.

John P. Cornely is of counsel at Fay Sharpe, LLP. Reach him at (216) 363-9000 or jcornely@faysharpe.com.

Insights Legal Affairs is brought to you by Fay Sharpe, LLP

Published in Cleveland

Intellectual property (IP) is an area regularly overlooked; however, this is a pivotal area of law, especially for entrepreneurs and mid-size businesses.

“We often get calls once a client has already landed in some sort of IP trouble, but many of these issues could have been averted through some simple diligence early on,” says Salil Bali, an Intellectual Property Litigator at Stradling Yocca Carlson & Rauth.

Bali says many people are overwhelmed by the topic and might think it to be in the purview of larger companies.

“Surprisingly, for small businesses, this is an area we have seen affect them the most, and often this impact is significant,” he says.

Smart Business spoke with Bali about the importance of protecting your intellectual property, regardless of the size of your company.

What types of businesses are most at risk when it comes to IP?

Most people, when they think about IP, assume it pertains just to tech-based innovations. However, at some level, every company has IP rights to protect. In today’s world, fewer companies have tangible assets such as equipment, manufacturing facilities or real estate. Instead, the vast majority of companies today have most of their assets based on IP rights. This includes the ‘mom-and-pop’ yoga studio that needs to protect its name, all the way to the biotech company that has inventions to protect. No matter what type or size company you have, there are aspects of IP law that touch your company and those rights need to be protected.

What are some common intellectual property issues entrepreneurs should recognize?

The four main areas of IP affecting business today are trademarks, copyrights, patents and trade secrets. Companies need to be aware of all four areas and how to protect themselves with regard to each.

Trademark law deals with the protection of a word, name, symbol or device used to indicate the source of the goods or services. The purpose is to distinguish from other similar goods or services and prevent public confusion. When determining your brand or company name, you should perform trademark clearance to ensure you don’t infringe on pre-existing marks and that your desired mark is strong and protectable. Discussing such issues with a trademark attorney early on can minimize exposure and create IP assets for a company right out of the gate.

Copyright law deals with the protection and permissible uses of original works of authorship, including photographs, videos and written documents. These issues often arise with hastily launched websites, when companies start loading copyrighted images or text without first getting permission or the appropriate licenses. This could lead to cease-and-desist notices and claims for damages. Similar issues can arise with the use of personal likenesses, especially those of celebrities.

Patent law grants an inventor the right to exclude others from making, using or selling his or her invention. If you have an innovative idea, it’s important to talk with an attorney to determine what is patentable and whether or not your idea infringes on other patents. Doing this early diligence can protect your idea from being abandoned to the public domain or help you sidestep and minimize potential litigation exposure.

As far as trade secrets, companies need to be mindful about how they manage information to make sure secrets stay protected. Early-stage companies often aren’t careful about employment contracts and what information is being divulged to whom. This lack of discipline can adversely affect the company’s ability to claim trade secret protection. If you share sensitive information without outlining the recipient’s duties to hold it in confidence, you can lose the ability to protect your trade secrets.

What are the potential consequences of ignoring intellectual property issues?

The risk of not protecting your mark is that someone else assumes a similar name and thus limits or destroys the value of your brand. Though there may still be recourse, it becomes an uphill battle. An infringement lawsuit by a trademark holder for your use of a confusingly similar mark could cost your company its brand and/or logo, the goodwill associated with them and subject you to potential damages.

The risk with copyright infringement is financial penalties. Unlike patent and trademark laws, there are express damages written into the copyright statute that can be considerable.

The consequence for infringing on a patent is litigation, which may result in an injunction preventing further sales or use of the infringing product. Damages and costs in such cases can quickly add up. Conversely, if you fail to seek patent protection for your innovation, you could permanently lose your ability to protect your invention. When you have a new idea, there are key timelines you should be aware of that can be impacted by public disclosure and sale. You must act quickly to secure your idea or you could lose your rights, even if your invention is otherwise patentable.

With trade secrets, it’s simple: If you don’t protect them, you lose them. As soon as a secret enters the public domain, it’s gone.

How could these problems be avoided?

Often, talking with someone who is knowledgeable can help you understand how to protect yourself from infringement. The costs associated with protecting yourself are proportionately low and can have a big impact on your company’s valuation when you’re looking for funding. The stronger your IP portfolio is, the stronger your company is. However, if these issues are ignored, it can become a costly distraction for you and your company. Taking steps early on to make sure your IP house is in order can pay dividends.

Salil Bali is an Intellectual Property Litigator at Stradling Yocca Carlson & Rauth. Reach him at (949) 725-4278 or sbali@sycr.com.

Insights Legal Affairs is brought to you by Stradling Yocca Carlson & Rauth

Published in Orange County

For a company that depends on the confidentiality of its intellectual property, protecting its trade secrets during litigation may be as important, if not more important, than succeeding in the litigation itself.

“Whether the company is a plaintiff or a defendant in litigation, depending on the scope of the case, its trade secret information may be discoverable,” says Joshua E. Liebman, an attorney at Novack and Macey LLP.  “In fact, in some instances, a company may be required to disclose its valuable trade secrets to one of its direct competitors.”

Smart Business spoke with Liebman about how to protect trade secrets during litigation.

What are trade secrets?

To paraphrase Section 1(4) of the Uniform Trade Secrets Act — which has been adopted by most states — a trade secret is information that derives independent economic value from not being generally known to other persons and that is the subject of efforts that are reasonable under the circumstances to maintain their secrecy. It is important to remember that both elements must be met for information to be classified as a trade secret.

In other words, although a customer list that is developed over two decades and that identifies particular needs and price points for each customer clearly provides its owner with economic value, it is a trade secret only if its owner takes reasonable steps to keep the list secret.

Why would a party be required to disclose its trade secrets?

Trade secrets will almost always be disclosed by a party prosecuting a claim for either misappropriation of trade secrets or breach of a confidentiality agreement involving trade secrets.  In addition to those two obvious examples, trade secret information could be responsive to discovery requests served in any other breach of contract or business tort case.

Generally, courts permit broad discovery and require parties to produce documents and other potential evidence that are relevant to any party’s claim or defense, even if the potential evidence constitutes a trade secret. As a result, a defendant company may not only find itself in a lawsuit that it did not initiate but also in a position where it is forced to produce trade secret information to its competitor.

What can a company do to protect its trade secret information from disclosure?

The first step is to identify what it considers to be trade secret information. Once the trade secrets are identified, the company’s attorney should closely scrutinize the discovery requests to determine whether the trade secrets are responsive to the requests. If the information is not responsive, it does not have to be produced.

If the attorney determines that the trade secret information is responsive to one or more requests, he or she should analyze whether there are proper grounds for objecting to those requests. Objecting on the basis that the information requested is confidential or a trade secret is not permitted. Instead, a valid objection is that the discovery request is overly broad because a complete response thereto would require the production of information that is not relevant to any of the parties’ claims or defenses.

Once an objection is made, the attorneys may try to negotiate a limitation on the discovery request. If the attorneys cannot reach an agreement, then the party that served the request can ask the court to intervene by filing a motion to compel the production of documents or other information.

If a company’s attorney or the court determines that trade secret information is responsive to a discovery request and no objection applies, then the information must be produced. However, the information can be protected through the entry of a protective order, which prohibits the use of the disclosed information for any purpose other than the litigation in which it was produced.

How does a protective order work?

Generally, parties negotiate and agree to the terms of a protective order. In some instances, certain provisions of the protective order may be in dispute and require court intervention.In either case, the court must approve of the terms and enter the order so that it is a court order that can be enforced against anyone who breaches it.

Although protective orders vary, typically they divide protected information into two categories: confidential information and attorneys’ eyes only information. Confidential information usually can be shared with the court (but only under seal), counsel for the parties to the litigation and their legal staffs, expert witnesses or consultants retained by the parties, deponents in the litigation and the parties themselves. Most protective orders require expert witnesses, consultants and deponents to sign acknowledgements consenting to be bound by the terms of the protective order prior to reviewing confidential information.

By contrast, attorneys’ eyes only information generally can only be shared with counsel for the parties to the litigation. Highly sensitive and/or competitive information that a company does not want its opponent to access should be designated as attorneys’ eyes only.

That designation, however, should be used sparingly. It places a heavy burden on the attorney reviewing the information because he or she cannot consult with the client to determine whether the information is relevant, accurate or complete. Accordingly, a blanket attorneys’ eyes only designation likely will invoke an objection to the designation, which may result in loss of the heightened protection necessary for the information that truly is a trade secret.

Protective orders generally require protected information to be returned or destroyed at the end or litigation. A party concerned about its opponent using its trade secrets at the close of litigation should demand a signed verification that all protected information, including electronic and hard copies thereof, has been destroyed.

Joshua E. Liebman is an attorney at Novack and Macey LLP. Reach him at (312) 419-6900 or JLiebman@novackmacey.com.

Insights Legal Affairs is brought to you by Novack and Macey LLP

Published in Chicago

The Economic Espionage Act of 1996 was passed by Congress to protect American intellectual property and trade secrets. The act makes the theft or misappropriation of a trade secret involving commercial information a federal crime. Thieves can be inside employees — identified as the culprit 60 percent of the time — competitors, hackers looking to sell the information over the Internet, or foreign governments.

Smart Business learned more from Ron Williams at Talon Companies about protecting the assets that keep your company in business.

Where should businesses begin to protect their data?

To prevent theft of proprietary data a company must first identify what their ‘crown jewels’ are. These trade secrets must be identified and treated as secrets in order to have standing to seek criminal or civil charges against those who steal the information.

The second step is to conduct a physical and IT Security Risk & Vulnerability Assessment to identify how the trade secrets are protected and how a culprit can steal the information.

What are some ways data can be stolen?

Culprits, who are frequently inside employees, are stealing trade secrets and sensitive intellectual property through a variety of straightforward and not highly technical means. For example, culprits are sending e-mails to themselves, including through their personal Web-based e-mail accounts, that contain information in attachments. In addition, portable hard drives can be easily attached to a computer and its contents downloaded in a matter of minutes. In addition to both of these techniques, culprits continue to print hard copy documents and walk out the front door with them.

What preventive measures should companies put in place?

Once the vulnerabilities have been identified, the company must establish an INFO-SEC program to compartmentalize the information and protect the data with firewalls and encryption. An audit system that tracks retrieval of the data should be implemented to determine who accessed the data with time and date.

Employee electronic transmissions should be monitored as well as printers that store valuable data. The IT system should be monitored on a 24/7 basis so that an intrusion or breach can be identified immediately and steps should be taken to thwart the attack.

How can businesses thwart attacks?

In light of the frequent use of portable hard drives as a means to steal trade secrets and sensitive intellectual property, there are significant methods that organizations can embrace to mitigate this risk. In fact, the use of such portable hard drives can be prevented by disabling their access so they cannot be used as a vehicle to house stolen trade secrets.

Risk can be further mitigated by preventing employees from being able to access personal Web-based e-mail accounts. In doing so, organizations can ensure that illicit communications are not taking place and trade secrets and sensitive intellectual property are not being sent by employees to themselves or to untrustworthy third parties.

Lastly, a layered and tiered security program integrating physical, electronic access and egress measures with cameras and IT security together with a training program backed with policies and procedures is the recommended method to protect valuable trade secret information and intellectual property.

For further insight and information:

U.S. Government for victims of identity theft: www.consumer.gov

U.S. Secret Service for victims of identity theft: www.treas.gov

FTC consumer complaint form: https://rn.ftc.gov

U.S. Department of Justice: www.usdoj.gov/

SSA Inspector General for fraud: www.ssa.gov

Ron Williams is the CEO at Talon Companies. Reach him at (800) 808-2566 or rwilliams@talonexec.com to schedule a training program. Reach Talon Companies Headquarters at service@talonexec.com, (800) 808-2566, or www.TalonCompanies.com.

Published in Los Angeles