5 Critical Ways Employers Can Protect Trade Secrets Amidst Growing Threats

By Todd Shadle, Board Certified in Labor and Employment & Steve Toland, Board Certified in Criminal Law, FBFK Law

Protection of trade secrets – especially now, with Economic Espionage Act (EEA) prosecutions on the rise – has become one of the most important tasks for American businesses. The threats are everywhere – foreign governments, competitors both here and abroad, and from within by your own employees. While theft of trade secrets is usually addressed with civil statutes, it is important to remember that there are criminal statutes available.

Most states have criminal statutes regulating the theft of trade secrets, but now the federal EEA criminalizes the theft of trade secrets for the benefit of someone other than the owner. It is important for business owners to pursue criminal penalties for the theft of their trade secrets to educate bad actors on the consequences and preemptively deter any such conduct. 

Civil enforcement is typically how theft of trade secrets are addressed, primarily because the government has wide discretion on whether to pursue criminal charges. Some of the factors the government will consider include (a) the scope of the criminal activity, including evidence of involvement by a foreign government, foreign agent or foreign instrumentality; (b) the degree of economic injury to the trade secret owner; (c) the type of trade secret misappropriated; (d) the effectiveness of available civil remedies; and (e) the potential deterrent value of the prosecution.

In 2016, the Defend Trade Secrets Act was passed to allow for a private civil cause of action in federal court. Civil litigants have an array of causes of action in state and federal court to enforce their rights in their trade secrets. One particularly effective statute, the Computer Fraud and Abuse Act (“CFAA”), was recently curtailed by the United States Supreme Court (see Van Buren v. United States) by settling a split in the circuits about the definition of “exceeding authorized access.”

The government has wide discretion regarding whether to pursue a criminal case for theft of trade secrets. That, coupled with the Supreme Court’s narrowing application of the CFAA to protect a company’s trade secrets, means it has become more important than ever for companies to take proactive steps in protecting their trade secrets.

Ways to Protect Your Company

Below are five critical ways employers can protect trade secrets within their own companies.

  1. Identify your confidential information, ensure it is labeled, and periodically review which employees “need to know” confidential information;
  2. Monitor where confidential information is stored, including electronic information and assessing risks and vulnerabilities;
  3. Prepare agreements, policies, procedures and records to establish and document protection; train your employees on the agreements, policies, procedures and security; and enforce your policies and procedures, including discipline;
  4. Implement physical and electronic security and confidentiality measures restricting access (including passwords, encryption, biometrics); and
  5. Use non-disclosure agreements with employees, vendors, and third-parties, prohibiting the recipient from making unauthorized use or disclosure of confidential information.

 

The Defend Trade Secrets Act may lead to an increased number of civil trade secret cases. A high-profile civil DTSA case may grab the attention of an aggressive prosecutor. It’s very possible that the new Strike Force – led by the Depart of Justice’s National Security Division and the Commerce Department’s Bureau of Industry and Security (BIS) and is comprised of experts from the FBI, Homeland Security Investigations (HSI) and 14 U.S. Attorneys’ Offices in 12 metropolitan regions across the country – will monitor the federal dockets for civil cases that could also be criminal ones.

If your company faces a civil trade secret case, consult with attorneys who are experts in both civil employment matters related to trade secret theft, as well as criminal law experts.