The COVID-19 crisis has and will continue to change how business is conducted. New risks often emerge during crisis, and risk surrounding the protection of trade secrets might be one that catches a business off guard, and could potentially destroy the value invested in trade secret development. The legal protection of trade secrets depends on whether a business has taken reasonable measures to keep the information secret. Some situations businesses now find themselves in, including a workforce quickly and unexpectedly working remotely, create a risk that may leave them open to exposure.
Understandably, the protection of trade secrets may not rank first on the list of management priorities in the current environment, but when the situation “turns the corner” and businesses again begin to operate normally, steps taken now to protect trade secrets will provide companies with yet another tool to assist in the recovery.
Historically, trade secrets were protected under state statutes, although the laws differed from state to state, both in terms of how the laws are written, as well as how they were applied. These difference included difference in the definition of what constituted a trade secret, and the remedies available for trade secret misappropriation.(1)
While state statutes remain in place, in 2016 President Obama signed into law the Federal Defend Trade Secrets Act of 2016 (the “DTSA”), which allows for federal causes of action involving the misappropriation of trade secrets related to products and services used in or intended for use in interstate or foreign commerce.(2) Under the DTSA, trade secrets are defined as:
“all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if (A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.”(3)
As evidenced by the definition set forth above, protection of a trade secret is subject to “reasonable measures” undertaken to keep the information secret in order to support its economic value, and help to enforce trade secret rights in court.
Most companies have measures in place to protect trade secrets, but many of these measures have not been stress tested environments where a significant portion of the workforce is working remotely or large scale layoffs and furloughs are taking place. As such, the following represents some of the protective measures that may be worth considering to ensure trade secrets continue to receive appropriate protection.
This is not an exhaustive list of all of the protective measures that should be put into place to protect trade secrets, and the measures that may be applicable to one business may not be applicable to another. However, overall awareness of the continued application of these protective measures should be a priority for the board and senior management, and can help to ensure that trade secrets receive the appropriate protection during these unprecedented times.
Connect with your Baker Tilly Global Forensics and Litigation Services professional to discuss your situation and how you can help protect your organization.
(1) Explaining the Defend Trade Secrets Act, https://www.americanbar.org/groups/business_law/publications/blt/2016/09/03_cohen/