Protecting assets: trade secrets management

July 2019  |  FEATURE  |  RISK MANAGEMENT

Financier Worldwide Magazine

July 2019 Issue

Trade secrets are among a company’s most valuable assets. Protecting such prized proprietary information against misappropriation by whatever threat vector must therefore be a key priority.

The EU Trade Secrets Directive defines trade secrets as information that is not generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question, has commercial value because it is secret, and has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

The Directive, as well as similar legislation such as the US Defend Trade Secrets Act (DTSA), has done much to harmonise laws pertaining to trade secret protection and enforcement within the respective countries – measures that have also given companies more consistent and better legal protections.

“A trade secret is any information that can be used in the operation of the business or other enterprise and that is sufficiently valuable and secret to afford an actual or potential economic advantage over others,” says R. Mark Halligan, a partner at FisherBroyles, LLP. “Recent studies show that 80 percent of senior executives recognise that trade secret assets are critical and essential to their businesses. Fifty percent of these same executives say that trade secrets are more important than their patents and trademarks.”

Trade secret management

Thus defined and with their importance beyond doubt, a means of protecting trade secrets against a range of threat vectors – be it malicious insiders, organised crime, foreign intelligence services, competitors or hacktivists – is required.

To this end, there is an array of tools companies can utilise to combat potential theft of proprietary information, with a dedicated trade secret asset management programme – implemented in tandem with the relevant legislation – a particularly attractive option.

That said, it needs to be borne in mind that not all trade secrets are alike and some will be deemed more important than others. According to Mr Halligan, they should therefore be classified, scored and ranked accordingly. “There are four stages in a trade secret asset management programme: identification, classification, protection and valuation,” he advises. “These phases cannot be juggled around. Identification precedes classification. Identification and classification precede protection. And identification, classification and protection precede the valuation of trade secrets.

“The problem lies in the starting point for trade secret asset management,” he continues. “Everyone skips the identification and classification phases and starts at the third stage – protection – proceeding with policies, practices and procedures, and a labyrinth of physical, contractual and technical requirements for ‘protecting’ trade secrets. The result is failure.”

In the view of Mr Halligan, a lack of joined-up procedure is the current trade secret conundrum, which is leading to trade secret asset management systems that are non-existent, stalling or continuing to fail in day-to-day operations. “Companies keep adding more security measures but economic espionage and trade secret theft continue unabated,” he says. “While they recognise the importance of trade secret assets, many companies do not have the technological tools, the time or the money to manually identify and classify trade secret assets. There is no audit trail, no ownership and no documentation.”

Automation

It is always considered good practice to keep robust records, marking information and documents as ‘confidential’, restricting and tracking who has access to information, maintaining computer security and securing confidential materials during out-of-office hours. But companies are also turning their attention to technologies such as metadata applications.

“The solution is automated trade secret asset management,” believes Mr Halligan. “Using the power of the computer to create a ‘card catalogue’ of blockchained metadata about the company’s trade secret assets is the goal. Today, using manual methods to identify, classify, protect and value trade secret assets is out of step with automated trade secret asset management systems now available. This will be the next revolution in intellectual property (IP) law.”

Evolving landscape

As the range of trade secret threat vectors increases, companies need to regularly review and update, adopting a range of best practices and evolving strategies in order to address these escalating risks.

“The days of sitting in a conference room with a yellow-lined legal pad and eating doughnuts to conduct ‘trade secret’ ideation sessions on-the-fly are now over,” suggests Mr Halligan. “Using automated trade secret asset management tools will unleash trade secret assets and generate tremendous growth in IP assets in the 21st century.”

In summary, confidentiality is the name of the game in the trade secrets arena. Companies need to know what their trade secrets are on a continuous basis and take appropriate steps to ensure secrecy is maintained and misappropriation averted.

© Financier Worldwide

BY

Fraser Tennant