What Are the Most Important Tips for Preventing Trade Secret Theft?
No matter what form they take, trade secrets can be incredibly valuable to a business. We asked 28 IP experts and business leaders what their most important tips are for keeping them safe.
28 Intellectual Property Experts & Business Leaders Share Their Most Important Tips for Preventing Trade Secret Theft
Trade secrets are among the most valuable information a company has, and it's also among the most sensitive and at-risk. As trade secrets are often a company's key competitive differentiator, it's imperative for companies to follow best practices for protecting trade secrets and other intellectual property. That's why we've gathered this collection of expert tips and best practices for preventing trade secret theft, such as:
- Implementing an intellectual property protection solution like Digital Guardian's Enterprise DLP
- Restricting access to trade secrets to just a few people (and only those who need to know)
- Putting physical protection in place for trade secrets that exist on paper or on a device (such as info saved on a USB drive, paper sketches, or blueprints) secured in a safe
- Implementing cybersecurity best practices to protect trade secrets in digital form, such as strong password protection and encryption
- Having employees and business partners sign non-disclosure agreements
- Training employees on the importance of trade secret protection
- ...and more
We'll discuss these and other best practices in more detail later in this article, but first, let's take a closer look at the growing threat of trade secret theft.
The Growing Threat of Trade Secret Theft
Trade secret theft is a significant concern for businesses spanning all industries today, such as manufacturing companies, food and beverage companies, pharmaceutical companies, and many others. Trade secrets are a type of intellectual property and can include anything from secret recipes to manufacturing processes or even marketing plans — often something that gives the holder of those secrets a competitive advantage. There are three qualifiers that distinguish a trade secret from other information:
- The company must take steps to protect it.
- Disclosure of the information could be harmful to the organization.
- It is known only to a small number of people.
Employees are the biggest threat to trade secrets. According to the North Bay Business Journal, an analysis of federal court cases found that employees and business partners are responsible for 85% of trade secret theft, yet in a survey conducted by PricewaterhouseCoopers, less than half (49%) of companies reported having a plan in place to combat insider threats.
With a growing number of cases involving trade secret theft, new legislation has been introduced to help reduce the threat to intellectual property and help protect businesses that have their trade secrets stolen. For example, a bill introduced in mid-2021, the Stopping and Excluding Chinese Rip-offs and Exports with United States Trade Secrets Act of 2021 (SECRETS Act of 2021), would "provide procedures for national security exclusion from the United States of articles or components of articles that contain, were produced using, benefit from, or use trade secrets misappropriated or acquired through improper means by a foreign agent or foreign instrumentality, and for other purposes."
However, businesses can't rely on government entities for trade secret protection alone. Stopping trade secret theft before it happens is crucial for your company's survival. To learn more about how you can best protect your company's trade secrets, we reached out to a panel of business leaders and asked them to answer this question:
"What's your most important tip for preventing trade secret theft?"
Meet Our Panel of Intellectual Property Experts & Business Leaders:
Read on to learn what our panel had to say about the most important steps you should take today to protect your business's trade secrets.
Ruth Carter is a licensed attorney in Arizona and an authority on intellectual property, business contracts, and internet law. Ruth is the author of three best-selling books on the legalities of guerrilla marketing and social media, including The Legal Side of Blogging: How Not to get Sued, Fired, Arrested, or Killed.
"Trade secrets give a company value by remaining a secret..."
Therefore, the best thing you can do to prevent trade secret theft is to take adequate steps to keep your secrets a secret. This means limiting the number of people who has access to the information and using sufficient measures, which may include passwords, restricted areas, and perhaps even a safe.
Additionally, and maybe most importantly, you need to take care of the people who have access to the information, meaning treating them with respect and endearing them to you, so even if they have an opportunity to double-cross the company by leaking a trade secret or access to it, they wouldn't even consider doing it.
David Clark is a lawyer and partner at The Clark Law Office. David is a seasoned attorney of 35 years, practicing in The State Of Michigan and throughout the United States.
"Too many employers make the mistake of overlooking the value of something as basic as..."
Labeling confidential documents with clear "Confidential" labels to protect their business's trade secrets. Doing so is a trade secret protection policy matched with preventative actions. This practice cultivates an environment that actually highlights which are confidential documents and materials, so it's easier for everyone within the organization to treat it as imposed on the company's confidentiality clauses.
This encourages employees to actually take the necessary steps to keep those specific items confidential and protected. Not to mention, confidential labels on protected documents work the same way as trespassing signs on private real estate properties. The presence of a warning sign, like the confidential label, leaves little to no room for any employee in violation to contest their transgression against the company.
Bruce Dahl is an intellectual property attorney at Fennemore.
"The most important tip I have to prevent trade secret theft is that..."
Wherever possible, the trade secret information needs to be broken or divided up and access internally limited so that no single person has access to the entire trade secret.
An example of this approach would be in the field of chemical processing. The various ingredients and steps involved in combining them to produce the final product should be broken into as many separate, discrete 'black boxes' as reasonably possible. Access to those black boxes should be internally limited so that (ideally) no single person would have access to all the boxes.
Not all trade secrets are amenable to this approach. If the trade secret cannot be broken up, then access must be limited to as few persons as possible. The more persons who know of the trade secret, the more likely it will be to eventually 'go out the door.' Or worse yet, appear on the internet or in the email inbox of your competitors.
Suzi Hixon has been a trademark attorney for almost 20 years.
"As a trademark attorney, I've had the opportunity to offer guidance in other areas of intellectual property..."
When I discuss what is included under the umbrella of intellectual property, I always include trade secrets. I think it is an all-too-often overlooked area of intangible assets, probably because there isn't an avenue to proactively protect the asset, as there is with trademarks and patents (the USPTO) and copyrights (the Library of Congress).
I also see a hole in trade secret protection when employees depart their employment. Hopefully, the asset owner has taken all the reasonable steps and laid the foundation for asset protection, including, but not limited to, developing an internal culture of trade secret awareness and respect.
In particular, every departing employee who had access to the company's confidential or trade secret information should be subjected to a comprehensive exit interview conducted by a trained professional. At that time, the employee should be provided a recently signed copy of the confidentiality agreement and make sure they understand that they will continue to be bound by it even after they leave.
The interviewer may want to inquire about the employee's plans after they leave their current employment. The interviewer can inquire about any additional specific confidential information the employee might have accessed and whether and how that information could still be accessible on company or personal devices.
The interviewer should take possession of any company-owned devices, including but not limited to digital devices, keys, access badges, and swipe cards. And finally, employees' means of accessing the company's systems, including cloud-based and email, are disabled.
These are just a few of the steps that should be added to an exit interview checklist.
After conducting the exit interview, the interviewers should evaluate the employee's credibility and determine if further investigation is necessary. Also, as with any exit interview, it is preferable to have multiple witnesses on the company side of the interview.
Justin McNaughton is a partner in the Intellectual Property practice group at Greenspoon Marder. As a trademark attorney, he assists clients in protecting the hard-earned goodwill their brands represent. He particularly enjoys difficult trademark areas, such as protecting cannabis brands and securing non-traditional trademarks, such as sounds.
"The most important thing companies should do to prevent trade secret theft is to..."
Written confidentiality agreements and thoughtful internal controls on who has access to confidential information so that only people with a need to know have access.
Joe Gutheinz is a Texas Super Lawyer licensed by 10 courts, including the United States Supreme Court. He is a Certified Fraud Examiner, a retired NASA Office of Inspector General Senior Special Agent, and the recipient of the NASA Exceptional Service Medal. He is also a former Army Intelligence Officer and holds 6 college degrees and 8 teaching credentials.
"The United States government, along with governments around the world, make the theft of trade secrets a crime..."
In the United States, the theft of trade secrets is criminalized under Title 18, United States Code 1832, which specifically holds that:
"Whoever, with intent to convert a trade secret, that is related to a product or service used in interstate or foreign commerce, to the economic benefit of anyone other that the owner thereof, and intending or knowing that the offense will, injure any owner of that trade secret knowingly ...steals, or without authorization appropriates, takes, carries away, or conceals, or by fraud, artifice or deception obtains such information shall be subject to a prison sentence up to 10 years and a fine of 5 million dollars or three times the value of the stolen trade secrets."
As there have been billion-dollar trade secret thefts in the past, the possible fines can be enormous.
Whether it's a secret formula for making Coca-Cola or Tesla's battery technology, trade secrets have value to other companies and, even more sinister, other nations. If you doubt this, just look at how the old Soviet Union stole NASA's plans for the Space Shuttle and tried, largely unsuccessfully, to build their own.
Today, predator countries engage in economic crimes as part of their espionage programs. The United States and its companies have had their trade secrets stolen by China and Russia, which occurs multiple times daily, seven days per week, 365 days per year. Even friendly countries like France routinely steal trade secrets from friends, namely, the United States.
Trade secrets are acquired via computer hacking, fraud, disloyal employees and former employees, bribes, sexual seduction, and even tried-and-true burglary. No place is safe, and government employees and others are often told to avoid certain airlines where trade secrets may fall victim to the employees working for those airlines.
If you have a valuable trade secret to protect, you need to limit who has access to those secrets. Keep the secrets off the grid to avoid hacking and keep those secrets within a secured vault. Even then, good luck, as motivated thieves are working overtime to steal what you have.
Freeman is a software engineer with a master's from Harvard University and a bachelor's from Purdue University. He is the director at Nufactur. He has 8 years of industry experience and is passionate about technology, cyber security, and automation.
"The biggest weakness in cybersecurity is always humans..."
When it comes to cybersecurity the biggest risk is former employees. Having strong nondisclosure agreements is important, but my biggest tip is to be wary of which employees are informed of trade secrets.
In addition, employee retention is vitally important for employees with access to trade secrets. Investing in employee morale can be the best way to protect IP.
Eric Florence is a Cybersecurity Analyst at Security Tech. With a strong commitment to online security and digital freedom, Eric is working hard to deliver the content and analysis his audience is looking for when he is not coaching or consulting. His other passions include web development and finding new ways to use VR.
"I was just consulting a company that had intellectual property stolen by an employee..."
Obviously, IP must only be accessible by the employees that are working on it. But since this employee that stole their IP was one of the people working on it, how could they have prevented it? By securing it physically as well as digitally.
I helped them develop a protocol where an executive is the only person that has access to a safe where encrypted drives hold all of their IP. The executives are the only people that can provide the IP to those working on it and then secure it at the end of each day.
Karen Cate Agustin
Karen Cate Agustin is a Business Analyst and the co-founder of Investor Clubs.
"Policy and training are the most effective ways to prevent trade secret theft because..."
The policy makes employees more responsible for data security and creates a fear of data leakage.
You can begin working on the security of trade-related information as soon as you join the company. For example, when I joined the Investor Club, they had a 5-hour course designed explicitly for policy regarding the prevention of trade secrets and my responsibilities in this regard. Policies and training, in my opinion, make you more disciplined and helps you understand the mistakes that can lead to the leakage of any trade secret.
Jon Lynn is the CEO and Founder of My Office Pod.
"Continuously strive to improve..."
Several variables increase the likelihood of trade secrets theft in the modern business environment, including the rise in cyber threats, the digitization of information, and complicated supply networks. As a result, trade secret protection shouldn't remain constant. To account for adjustments in the corporate world and guarantee compliance, it should be continual. Additionally, trade secret protection needs to be watched over and updated as necessary.
Many companies credit a trade secret with their success. It might be a family heirloom recipe, a manufacturing formula, or a marketing plan. Protecting trade secrets is crucial to ensuring your company's success and longevity.
James Rehm is the Chief Operating Officer at Skuuudle.
"Conduct training for both employees and vendors..."
Trade secrets can be protected through employee and vendor training. Employees and vendors should receive proper training on how to handle information that is considered secret by your company. They also must learn about the importance of protecting trade secrets.
Corporate training techniques have cost several organizations lawsuits over the theft of trade secrets. For instance, MBL (USA) Corporation lost a lawsuit against an employee because the company failed to inform their employees of what, if anything, the corporation considered confidential.
Frederic Linfjärd is the Director of Growth Marketing at Planday.
"Non-disclosure agreements should be put in place..."
I believe 85% of trade secret litigation in American courts is brought by employees or business partners, according to one study. Companies should therefore use non-disclosure agreements to protect their employees' confidentiality.
Additionally, third parties that have access to trade secrets should sign non-disclosure agreements with the company. During manufacturing, product development, and other collaborations, third parties may have access to trade secrets. There is too much at stake to take the chance on potential unauthorized use.
Non-disclosure agreements alone aren't enough to keep trade secrets safe. To ensure that the policies of the company are followed, businesses must develop protocols. When employees are leaving a company, for example, they should be asked to surrender confidential information. It's also important for businesses to ensure that no one employee or third party has access to all of the company's processes and formulas.
Lachlan de Crespigny
Lachlan de Crespigny is the Co-Founder and Co-CEO of Revelo, the largest online platform for U.S. companies to hire remote software developers from Latin America. Revelo has helped hundreds of companies, from startups to Fortune 500s, build and scale their engineering teams.
"It's important to identify and value trade secrets..."
I feel that what you don't know can't be protected. As a result, the first step in securing your company's trade secrets is figuring out what those secrets are worth. Product profiles, advertising tactics, consumer profiles, scientific formulas, and procedures that provide your company with a competitive advantage are all examples of competitive advantages.
An inventory of trade secrets helps you devise strategies for securing their safety and security. To identify the most lucrative trade secrets for fraudsters, you must know their value. You can then identify the departments that are most susceptible to theft and take measures to protect them.
Tim Parker is the Director of Marketing at Syntax Integration.
"Improve the security of both your digital and physical devices..."
Depending on where you keep your trade secrets, you may want to consider adding physical and electronic safeguards. Make careful to secure the cabinet or office where you keep the sensitive data if it's on paper. Establish mechanisms for monitoring who has access to the restricted area, such as using keycards. In the event of a data breach, the rules for security clearance can reveal who accessed the information and when.
Make sure your company's trade secrets are safe if they are stored electronically. To protect the data from cybercriminals and other unauthorized parties, it's recommended to encrypt the data. Computers containing sensitive information must be protected. A smart place to begin is by ensuring that confidential data is protected using strong passwords.
Rengie Wisper is the Co-Founder at Ever Wallpaper, a wallpaper company that designs and sells high-quality wallpaper and wall murals online worldwide.
"To prevent trade secret theft, it's important to be aware of your company's weaknesses..."
If you know the weakest links in your company's security, you can put a plan in place to protect them.
For example, if you have a lot of employees who are not as tech-savvy as they should be, then you may want to invest in some training programs or hire an IT specialist who can help out. If most of your employees work remotely and don't have access to encrypted email or messaging apps, then it might make sense for you to set up more secure communications platforms.
Brandon Wilkes is the Marketing Manager at The Big Phone Store. He has managed the marketing activities of The Big Phone Store since the website's release in late 2019.
"Do not wait to terminate access or collect property..."
Trouble can result from forgetting to turn off network access while leaving or from letting a dependable employee keep her computer for a few weeks.
Despite the upfront expense, you should set up logistics by hiring a courier or scheduling a delivery service to pick up any company property (i.e., laptops, external storage devices, hard copy files, or any other company devices). Doing so safeguards your information and supports your assertion that you took appropriate precautions.
Reminding an employee of the company's commitment to secrecy and assisting in the documentation of the company's reasonable precautions in the face of litigation by having the employee certify that she has returned all company property benefits all the parties involved.
Charlie Southall is the founder and CEO of Dragonfly. He is a self-made businessman who is filled with passion and aspirations from very early on. He always offers good tips and techniques to his clients, thereby providing great support.
"When no one within a corporation is in charge of maintaining the confidentiality of trade secrets and other sensitive information, issues start to surface..."
Companies that have not designated a person or group to be in charge of trade secret security have not been viewed favorably by courts. For example, an ex-employee of an accounting firm was accused of stealing trade secrets by utilizing its client lists, but the case was dropped when it was discovered that the public had access to the client names as well.
Creating a cross-functional group with members who can verify that trade secret protection regulations are being implemented is something I would suggest.
Connor Ondriska is co-founder and CEO of SpanishVIP, an online Spanish classes provider on a mission to help people learn more effectively while making language education more enjoyable and accessible for everyone.
"Set up data encryption for all your computers, devices and files..."
Your data should be protected by strong encryption so that if it is stolen, it will be impossible for the thief to read it. You can also set up two-factor authentication to make it more difficult for someone to get access to your accounts. Additionally, you should avoid sending sensitive information via email or text message.
Haris Bacic is the co-founder and CEO of the largest price transparency website in the world, PriceListo. PriceListo enables consumers to view and research pricing information for any business establishment for free.
"If you need to send sensitive information either by phone or email, ensure that it is encrypted in transit..."
Using strong end-to-end encryption software such as Signal or WhatsApp.
Ideally, you should use separate channels for different types of information — think of one channel as being 'public' and the other as being 'private.' This way, if someone does intercept your communications, they are less likely to be able to figure out what is important information versus what is just regular communication.
Morshed Alam is the Founder & Editor at Savvy Programmer.
"One of the best ways to prevent trade secret theft is to ensure that..."
Your employees have a clear understanding of your company's policies about protecting confidential and proprietary information.
Employees should be required to sign confidentiality agreements and should be made aware of the consequences of violating these agreements. In addition, you should keep track of who has access to sensitive information and regularly monitor employee computer usage and Internet activity.
If you suspect that trade secret theft has occurred, it's important to act quickly to protect your business interests. Contact an experienced attorney who can help you assess the situation and develop a strategy for moving forward.
Anthony Martin is the Founder and CEO of Choice Mutual, the largest final expense insurance agency website in the U.S.
"Review forensic activity..."
Whenever an employee leaves your company, there are certain steps you should take to review that employee's forensic activity that will help determine if they may have accessed files outside their normal role. For example, were they printing highly confidential information or emailing company information to a personal account?
You'll need to review the employee's work devices and discover their access to files stored locally on the device and if they used flash drives on those devices. This review should be performed by a third party which will remove any ability for the employee to allege that your company tampered with that device.
Karthik Manoharan is the co-founder of WeCodee Innovations Pvt. Ltd. Karthik has helped several organizations navigate cyber threats as an IT specialist.
"Trade secrets can make or break an organization..."
As such, solid password protection is vital. Only employees who need access to these trade secrets to perform their jobs should have access.
Several agreements under the law can be attached to the agreements made with employees to retain any sensitive information. Getting specialists to monitor access to computers and segregating networks can help enhance your trade secrets' safety.
A firewall or a separate network can help protect your information because a hacker will be able to access only one part of the network and not everything. Tracking devices to locate documents in case of cyber theft should be done. Encrypting trade secrets can also help reduce the damage done by cyberattacks.
Daniel Cook is the Director of Business Development at Mullen & Mullen, a personal injury law firm in Texas.
"If your trade secret falls under the category of intellectual property, you can have it registered for it to have the necessary protection under the law..."
The law will also vest you, as the owner of the said intellectual property, exclusive economic and moral rights as to your I.P. It is a good way to protect your trade secret because its violation might also have consequences under the law.
Another good way to safeguard your trade secrets is by conducting a rigid background check on your prospective employees.
David Wurst is the Founder of WebCitz, a full-service development, digital marketing, and cybersecurity agency founded in 2004.
"Use the threat modeling technique..."
To prevent an attack, you need to think like a trade secret thief thinks. Assess the risk by looking at your data from an outsider's point of view, and think about which areas are the most at risk of leaks and breaches and which departments are most vulnerable.
Once you figure out these critical vulnerabilities, go implement the safety measures you need to plug these holes. This process will help you identify which areas get the least attention in terms of security.
Farzad Rashidi is the Co-Founder of Respona.
"There are a few key things you can do to prevent trade secret theft..."
1. Keep your trade secrets confidential. This may seem obvious, but it's important to make sure that only those who need to know about your trade secrets have access to them. Physical and electronic security measures can help to ensure that your trade secrets are not accessed by unauthorized individuals.
2. Train your employees on trade secret protection. Your employees should be aware of the importance of keeping trade secrets confidential. They should know what measures are in place to protect trade secrets and what their roles are in maintaining the secrecy of the information.
3. Use non-disclosure agreements. When sharing trade secrets with outside parties, such as contractors or consultants, it's important to have them sign a non-disclosure agreement (NDA). This will help to ensure that they understand the confidential nature of the information and that they will not share it with anyone else.
4. Monitor access to trade secrets. It's important to track who has access to your trade secrets. This includes both employees and outside parties. If you suspect that someone has stolen trade secrets, you will need to know who had access in order to investigate the matter.
5. Protect electronic information. In today's world, many trade secrets are stored electronically. It's important to take measures to protect this information, such as encrypting it and storing it in a secure location.
6. Destroy trade secrets when no longer needed. When you no longer need a trade secret, it's important to destroy it properly. This will help ensure it does not fall into the wrong hands.
Max Shak is the CFO of Abtron.com.
"There are a few important tips for preventing trade secret theft..."
1. Consult a local intellectual property lawyer first.
2. In addition, nondisclosure agreements should be used in contracts requiring the exchange of information.
3. Noncompete agreements should also be inserted into contracts with people whose access to trade secrets/practices could enable them to compete with your business.
4. Lastly, you are responsible for any intellectual property that employees or contractors you hire develop as a result of the 'work made for hire' principle.
Kathryn is the founder and CEO of Editor's Pick, a beauty and wellness e-commerce company. Additionally, she's a licensed cosmetologist and registered esthetician, and she has a background in merchandising.
"Put in place a company-wide trade secret policy..."
Once you've established a mechanism to safeguard your trade secrets, make sure all employees are aware of the policy and document how each specific employee will deal with private records like client lists and technical information, which are frequently included in trade secret cases.
Max Hauer is the founder and CEO of Goflow, a fully automated command platform that helps multichannel sellers manage their e-commerce ecosystem in the race for e-tail dominance.
"Choose and guard your most important trade secrets..."
If you haven't identified your trade secrets, it's difficult to keep them safe. Once you've listed them, choose the most effective means of limiting access to any information about those secrets. Both internal and external access should be taken into account by the security system. Recognize the methods via which businesses can lose important trade secrets. Cyberattacks, as well as flash drive and cloud server theft, are on the rise.
Trade secrets are incredibly valuable and can cause a company serious harm if they're leaked. That's why companies must take steps to reduce the risk of trade secret theft. These best practices such as employee training on the importance of trade secrets and how to protect them, developing policies for ensuring former employees no longer have access to trade secrets when they separate from the company, implementing an intellectual property protection solution, and ensuring that only a few people have access to your trade secrets (and only those who need to know them), will help you reduce the risk of trade secret theft so you can maintain your competitive advantage.