Did you know that trade secret theft siphons billions of dollars from businesses every year? In 2013, American companies lost $300 billion to trade secrets theft. In addition to financial loss, trade secret theft compromises people’s jobs, national security, and business success.
Trade secrets are among the most valued assets for organizations. Therefore, companies must take proactive measures to protect these corporate crown jewels and prevent the detrimental effects of trade secrets theft. This article explains why you should protect trade secrets and outlines seven tips to protect these valuable assets.
Why Protect Trade Secrets?
Trade secrets are any information with economic value for a company. It can include formulas, methods, techniques, recipes, product specifications, or pricing strategies. Below are the reasons why businesses should protect trade secrets.
- Trade secrets offer you a competitive advantage over competitors.
- Trade secret protection is inexpensive compared to the effects of compromised trade secrets.
- When exposed, trade secrets can be misappropriated and used for misrepresentation, espionage, or bribery.
- To avert the enormous financial losses that accompany trade secrets misappropriation.
Tips for Protecting Trade Secrets
1. Identify Trade Secrets and their Value
You cannot protect what you don’t know. Therefore, the first step in trade secret protection is identifying the trade secrets for your business and their value. They can be product profiles, advertising strategies, consumer profiles, scientific formulas, and processes that give your business a competitive edge.
Creating an inventory of trade secrets assists you in developing measures to protect them. The value of a trade secret helps you to determine the ones that are most lucrative to fraudsters. Also, you identify the departments that are most vulnerable to theft and take measures to secure them.
2. Limit and Monitor Access to Trade Secrets
After identifying your trade secrets, you should protect them. One way of doing this is limiting and monitoring access to trade secrets. Ensure that only employees who need trade secrets to perform their roles have access to them. You can restrict access to trade secrets using passwords, encryption, physical security, and data segregation.
Additionally, for employees allowed to access trade secrets, their interactions with the data should be monitored. You can use access logs and tracking mechanisms. Also, alerts can be handy, especially when bulk file transfers take place. You can leverage technology to make the task less stressful and laborious.
3. Implement Non-disclosure Agreements
One research shows that in 85% of trade secret lawsuits in American courts, the alleged misappropriator was an employee or business partner. As such, companies should implement non-disclosure agreements for employees.
Apart from employees, business partners, suppliers, distributors, customers, and other third parties with access to trade secrets should sign non-disclosure agreements. These third parties may access trade secrets during manufacturing, product development, and other collaborations. They can be a source of misappropriation that is too costly to risk.
Non-disclosure agreements alone are ineffective in protecting trade secrets. Organizations must create procedures to ensure that corporate confidentiality policies are adhered to. For example, when employees are leaving a firm, they should be requested to return confidential information. Also, companies should not allow any single employee or third-party to access full processes, formulas, and other sensitive data types.
4. Improve Digital and Physical Security
Depending on where you store trade secrets, ensure you beef up both physical and cyber security. If you store the sensitive data on paper, make sure you lock the cabinet or office. Develop security clearance protocols such as keycards to monitor the people who access the area. In case of theft, the security clearance protocols can determine who accessed the data and when.
If your business stores trade secrets electronically, ensure they are protected. It is best practice to encrypt the data to keep it safe from cybercriminals and other unauthorized persons. Do not forget to secure computers containing sensitive information. Having strong passwords for confidential data is a good place to start.
5. Conduct Employee and Vendor Training
Employee and vendor training is a simple but effective way of protecting trade secrets. Through training, employees and vendors know what your business regards as confidential information and how to handle it. They also learn the essence of keeping trade secrets safe.
Some companies have lost lawsuits in trade secrets misappropriation cases because they lacked corporate training procedures. For example, MBL (USA) Corporation lost a lawsuit against a former employee because it failed to notify employees “what, if anything, the company considered confidential.”
6. Assemble a Trade Secret Protection Team
In case a problem regarding trade secrets arises in your company, who will be held responsible? It is best practice to have a trade secret protection team to secure trade secrets and other confidential corporate information.
You should create a cross-functional team to protect trade secrets and ensure trade secret protection policies are followed. The team will put adequate trade secrets protection measures throughout the company and respond to cases of trade secrets misappropriation.
7. Make Continual Improvements
In the contemporary business world, various factors such as the surge of cyberthreats, digitization of information, and complex supply chains increase the likelihood of trade secrets theft.
Consequently, trade secret protection should not be static. It should be ongoing to accommodate changes in the business world and ensure compliance. Also, trade secrets protection should be monitored and updated as needed.
Numerous businesses attribute their success to a trade secret. It can be a secret recipe from grandma, a formula for making a product, or an advertising strategy. Securing trade secrets is an essential part of guaranteeing the success and survival of your business.
In the last couple of years, several firms across industries have lost trade secrets and trade secrets cases because they did not take ‘reasonable measures’ to protect them. Subsequently, businesses, regardless of size and industry, must take measures to safeguard their trade secrets and prevent the harmful effects of trade secrets theft. Contact Beau Dietl & Associates for corporate investigation services, including trade secrets misappropriation.