Trade secrets are the backbone of many businesses. They can range from manufacturing processes, customer lists, proprietary formulas, and more.
According to Bao Tran, the founder of PatentPC, one of the leading IPR law firms in the US, protecting these critical assets is vital to maintain a competitive edge and safeguard the hard work that went into developing them. The landscape of intellectual property law offers several tools for businesses, both startups and established, to ensure their trade secrets remain confidential. Let’s delve into the steps you can take to guarantee this protection.
1. Understanding the Landscape: DTSA and UTSA
Defend Trade Secrets Act (DTSA)
DTSA, enacted in 2016, provides an avenue for businesses to sue in federal court over trade secret misappropriation. Unlike patents, which are publicly disclosed, trade secrets are valuable because they are kept hidden. The DTSA recognizes this and provides businesses with the ability to:
- Obtain injunctions to prevent the dissemination of a trade secret.
- Receive damages for the loss caused due to misappropriation.
- Potentially seize property to prevent the propagation of a trade secret.
Uniform Trade Secrets Act (UTSA)
Before DTSA, most trade secret protection was governed at the state level. UTSA was crafted to provide a consistent framework across states. Currently adopted by most states, UTSA defines a trade secret, describes what constitutes misappropriation, and provides remedies.
For Startups: Leverage these acts by being vigilant. Document your trade secrets, how they’re used, and their value to your business. When a breach occurs, having this documentation will support your claims under DTSA or UTSA.
2. Patenting: A Double-Edged Sword
Patenting can sometimes seem like a logical step for businesses, especially tech startups, but it’s essential to weigh the pros and cons.
Benefits:
- Exclusivity: A patent grants you the exclusive right to your invention for around 20 years.
- Revenue Streams: Licensing your patented technology can be a new revenue stream.
- Defensive Strategy: Protects against infringement claims from competitors.
Drawbacks:
- Public Disclosure: Applying for a patent requires revealing the invention’s details.
- Time and Cost: Patenting is an extensive and sometimes expensive process.
- Enforcement: You’re responsible for enforcing your patent rights, which can be costly.
For Startups: Patent what’s crucial and strategically valuable.
Sometimes, keeping an innovation as a trade secret is more beneficial than patenting, especially when the invention is challenging to reverse engineer or when the 20-year patent period isn’t enough to capitalize on its value.
3. Tightening HR Management: An Insider’s Threat
Employees can be both an asset and a potential threat to trade secrets. Here’s how HR can mitigate risks:
Robust Onboarding and Training:
- Education: Ensure that every new hire understands the importance of trade secrets and the consequences of misappropriation.
- Signed Agreements: Use non-compete, non-disclosure, and confidentiality agreements. Make them specific, reasonable in scope, and duration.
Regular Monitoring and Audits:
- Access Control: Use role-based access control systems. Not every employee needs access to every secret.
- IT Monitoring: Monitor email, file transfers, and other IT communications for unusual activity.
Performance Reviews and Trade Secret Protection:
- Regular Check-ins: Incorporate discussions about the importance of trade secrets into regular performance reviews. This constant reinforcement can ensure employees remain aware of their roles in protection.
- Scenario Training: Periodically, present employees with hypothetical scenarios where trade secrets might be at risk. Gauge their reactions and provide feedback, ensuring they’re equipped to handle real-world situations.
Collaborative Tools and Data Control:
Opt for collaborative tools that offer strong administrative controls and end-to-end encryption.
Also, you need to understand where your data resides. Some collaborative tools store data in the cloud, which might be in jurisdictions with different data protection regulations.
Exit Strategies:
When an employee leaves, especially those privy to trade secrets, conduct a debriefing session. Reiterate the importance of maintaining confidentiality.
Ensure that departing employees return all company property, including documents and electronic devices containing trade secrets.
4. Physical and Digital Safeguards
Physical Security:
- Access Control: Restrict access to areas where sensitive information is stored.
- Surveillance: Implement surveillance cameras to monitor crucial zones.
Digital Security:
- Encryption: Ensure that sensitive information, both in transit and at rest, is encrypted.
- Multi-Factor Authentication (MFA): Implement MFA for accessing digital repositories containing trade secrets.
- Regular Backups: Always keep backups to ensure that information isn’t lost due to malfeasance or accidents.
Intrusion Detection and Prevention:
- Digital: Employ intrusion detection systems (IDS) and intrusion prevention systems (IPS) to monitor network traffic. These tools can detect and prevent unauthorized access and potential breaches.
- Physical: Beyond surveillance cameras, utilize alarms and security personnel to immediately respond to physical break-ins.
Regular IT Audits and Vulnerability Assessments:
- Third-Party Assessments: Periodically, bring in third-party experts to assess your IT infrastructure. Their unbiased view can help uncover vulnerabilities that internal teams might overlook.
- Patch Management: Regularly update all software, ensuring that they’re protected against known vulnerabilities.
5. Cultivating a Culture of Protection
A company’s culture is the sum of its values, behaviors, and shared vision. When protection of trade secrets becomes an integral part of this culture:
- Regular Discussions: Frequently discuss the importance of trade secrets in meetings.
- Rewards: Recognize and reward employees who play a pivotal role in safeguarding secrets.
- Whistleblower Policies: Encourage employees to report any suspicious activities without fear of retaliation.
Feedback Mechanisms:
- Open-door Policy: Encourage employees to approach management with any concerns or suggestions regarding trade secret protection.
- Anonymous Reporting: Some employees may be wary of direct reporting. Offer anonymous channels, like suggestion boxes or digital tools, for them to share concerns.
Training Workshops:
- External Experts: Invite experts in trade secret protection for workshops. They can offer unique insights, case studies, and best practices that can enrich your staff’s understanding.
- Real-world Incidents: Periodically discuss real-world incidents of trade secret breaches (without compromising confidentiality) to understand the implications and ways to prevent similar occurrences.
Final Thoughts:
Protection of trade secrets is not just a one-time effort but a continuous process that evolves with the changing business landscape, technological advancements, and personnel dynamics.
The strategies mentioned above can provide a robust framework, but it’s essential to remain agile and responsive to the emerging challenges.
Regularly revisit your trade secret protection strategies, seek expert opinions, and most importantly, ensure that the importance of this protection permeates every layer of your organization.
Trade secrets are invaluable, and in a world brimming with competition and technological advancements, shielding them effectively is more than just a business strategy; it’s a necessity.
Remember, protection doesn’t mean isolation. The more collaborative your approach is in cultivating a culture of protection, the more steadfast your defenses will be.
Your employees, partners, and stakeholders all play a pivotal role in this protective framework. Engage them, educate them, and together, ensure your business’s intellectual treasures remain safe and sound.
Author Bio:
Adhip Ray is a startup growth consultant working with PowerPatent.com, a legal-tech enabling lawyers to draft patents more effectively and faster using state-of-the-art proprietary generative AI technology.
