October 16, 2018

Four Lessons Every Company Needs to Know About Protecting Its Trade Secrets

I have completed my in-depth analysis of the approximate 115 prosecutions that the government has brought so far under the EEA. The number is sufficient to allow me to draw a number of meaningful conclusions from a review and analysis of them. Indeed, such an examination reveals a number of expected and unexpected results that corporations should strongly consider in implementing or improving upon a trade secret protection program.

Lesson #1: It’s usually an inside job – In more than 90 percent of the EEA prosecutions, the defendant was an “insider” and had access to the trade secrets because he or she was either an employee of the victim or worked for a vendor or contractor of the vendor. Companies should be aware that defendants almost always misappropriate the trade secrets shortly before resigning from the victim company.

Lesson #2: ‘The China connection’ – Companies should be aware that the threat posed by foreign economic espionage is real, and the risk is increasing. In particular, there is a “China Connection” in a strikingly high percentage of the prosecutions. In more than 20 percent of these cases, the defendant misappropriated trade secrets to benefit the Chinese government or an existing Chinese company or to start a company there.

Lesson #3: Just because you don’t live in Silicon Valley doesn’t mean you’re exempt – Although many of the prosecution involved sophisticated technology, there was no shortage of cases involving other types of trade secrets.

Lesson #4: Chances are your safeguards aren’t as safe as you think – A number of cases suggests that regardless of the steps undertaken by a company to protect trade secrets, the protection is only as strong as the weakest link.

If you would like more information about these findings, you should read my article, “Four Lessons Every Company Needs to Know About Protecting Its Trade Secrets,” which was published by Thomson Reuters, and is available on Westlaw (19 No. 1 WJINTPROP1).

I will also post more of my conclusions about the EEA prosecutions in the coming weeks.

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