A French IP Law Student Asks About Trade Secrets Protection in the U.S.

A couple of weeks ago I had the pleasure of receiving a number of questions concerning trade secrets from Sara A’Attar. Sara is an advanced law student in Paris. She has a Master’s Degree in International Law and Legal studies from the University of Paris and is completing her Master’s Degree in IP Law at the Universite Paris-Est Creteil (UPEC).

AS AN IP INVESTIGATIONS SPECIALIST, WHAT ARE THE DEPARTMENTS THAT YOU DEAL WITH THE MOST?

I primarily deal with general counsel’ of companies, private IP attorneys representing brands, and often with law enforcement when we have developed a case enough that we believe they would want to follow up on and the client wants to take that step.

IS THERE A PRECISE DEFINITION OF TRADE SECRETS?

There are lengthy legal definitions of trade secrets but to use an excerpt of a definition used at the start of a book titled, “Trade Secrets Asset Management 2016,” by IP Attorney and trade secrets protection expert R. Mark Halligan he says, “A trade secret is information that is valuable for being not generally known in the trade and the information holder takes reasonable measures to keep secret.”

DO YOU CONSIDER THAT THERE IS A HIGH PROTECTION OF TRADE SECRETS IN THE USA?

In my opinion, no. The problem begins with companies not accounting for and managing their trade secrets. But even for those companies that actually know what trade secrets they are trying to protect, there are so many ways for the secrets to be lost either intentionally or unintentionally.

Unintentional examples include employees that just talk too much; companies that permit visitors into research and development (R&D) areas of their facility without regard for what the visitors will observe or take and pass onto others.

Or, of course, bad actors that intentionally infiltrate a company to steal. One of the challenges is that companies often need to recruit from other countries (such as China) to get the highly educated and skilled employees needed to advance their R&D, and it’s difficult for the recruiting company to know what the skilled employees’ true intentions are.

DO YOU THINK TRADE SECRETS ARE MORE DIFFICULT TO PROTECT THAN A PATENT, COPYRIGHT OR TRADEMARK?

Well, the upside in the protection of patents, copyright, and trademarks, of course, is that they can all be registered. But as we know, copyright piracy, trademark counterfeiting, and patent misappropriation and trolling is still a huge global problem.

The challenge in protecting trade secrets is that it has to be kept secret, and that, at the most basic level, is very difficult to do. It’s like trying to control a dam leak. You close it up here, and it leaks there.

IS THER ANY REAL CYBERSECURITY FOR TRADE SECRET PROTECTION?

Cybersecurity trade secrets protection has improved with many companies—certainly in the case of large corporations—which have implemented internal monitoring systems to identify employees that transfer data from their work computers to their personal computers.

But trade secrets thieves are always thinking of how they can circumvent a company’s internal monitoring system. In a couple of recent cases I wrote about on my blog, bad actors simply pulled the trade secrets data up on their computer screens and instead of transferring it to another computer they took photographs of the screens (typically with an iPhone.)

DO YOU THINK MOST COMPANIES IN THE U.S. HAVE TAKEN REASONABLE STEPS TO KEEP THEIR INFORMATION SECRET?

No, I don’t.

The concept of protecting trade secrets is still relatively new to American businesses. Often, they don’t know what they should be protecting, and when they do, they don’t take reasonable steps to protect the secrets until some are stolen.

It reminds me a bit of the theft of fine art pieces from museums when I was the Art Liaison for the NYPD. Often, the museums didn’t have an accurate accounting of their pieces in storage, so, when a piece was stolen they wouldn’t learn of it until the piece(s) showed-up on the marketplace.

Similarly, with trade secrets, often a company doesn’t know their secrets have been stolen until they learn another company is actively using their secrets to advance their own business interests.

But even for large corporations that have vigorously implemented programs to protect their trade secrets, they sometimes let their guard down in other situations such as when they are eager to merge with some other company, and later find out the other company used their trade secrets without their knowledge and outside of their agreement.

WHAT IS THE ADVICE GIVEN COMPANIES IN ORDER TO PROTECT THEIR INFORMATION–TO AVOID TRADE SECRET THEFT?

• First, determine what trade secrets they want to protect
• Implement protection policies and systems to do just that
• Establish policies to manage the trade secrets
• Conduct enhanced background screening of prospective employees who will be working on your most important projects
• Establish a vigorous physical protection protocol for the facility itself–Who comes and goes from the facility must be strictly accounted for and what they carry in and out of the facility ideally should be monitored as well, (i.e., no iPhones or other recording devices are permitted into the secure R&D areas)
• Establish an internal computer monitoring system.
• Implement a strategic CCTV system that can capture bad actors that are going to attempt to circumvent the internal computer monitoring system
• Develop a company culture that understands what trade secrets are and why they must be protected–what I call “Trade Secrets Protection Mindfulness”

IN YOUR OPINION, DID THE “DEFEND TRADE SECRETS ACT OF 2016” BRING MORE PROTECTION THAN BEFORE?

Yes, absolutely.

Here is an excerpt from one U.S. IP attorney which I agree with, “Before the DTSA was enacted, trade secret owners were limited to civil action under state law, which varies significantly from state to state, and which provides inadequate protection against trade secret misappropriation spanning multiple jurisdictions.  Additionally, the federally enacted Economic Espionage Act of 1996 only provides for criminal penalties for trade secret theft.

“Therefore, one of the most important features of the DTSA is that it allows private companies to pursue a new civil cause of action under federal law to remedy trade secret misappropriation, providing trade secret owners the option to seek remedies in either federal or state court.  As a result, the DTSA has strengthened the protections provided to a company’s trade secrets by supplementing already existing remedies under state and federal law.”

IS THE PROTECTION OF TRADE SECRETS A REAL THREAT TO FREE SPEECH IN THE USA?

Excellent question. In my opinion, no.

Creations of the mind need to be protected. Persons and institutions that spend years to learn and/or research at considerable expense in time and money or both, deserve to benefit from their hard work.

Others should not be permitted to immediately acquire and share the fruits of their labors, otherwise, it will destroy the incentive to create.

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