News

New Report: Trade Secret Theft

November 5, 2013
Categories: Anti-corruption, Intellectual Property, Intellectual Property Protection, IP Protection, Trade Secret Theft

Report looks at the world’s rugged trade secret protection landscape

Trade secrets, the privately held knowledge of everything from customer lists and strategic plans to proprietary formulas and manufacturing techniques comprise a critical and growing aspect of competitiveness for many companies. But as the value of these intangible assets grows, so do the frequency and value of their theft—especially by electronic means.

Once compromised, trade secrets no longer provide a market edge—unlike intellectual property covered by patents, copyrights and trademarks.

Governments have recognized the problem of trade secret theft and some, led by the United States, have started to formulate policy and legal responses, but they are playing a game of catch-up.

A recently published report by international law firm Covington and Burling in partnership with the George Washington University Cybersecurity Initiative provides a close look at initiatives to protect trade secrets and where such protection is lacking.

Economic espionage and Trade Secret Theft: An overview of the legal landscape and policy responses,” offers proposals for additional policy initiatives and advice to companies operating in this challenging business environment.

Until recently, in the United States, combatting trade secret theft was largely the concern of individual states, under laws loosely modeled after the federal Uniform Trade Secrets Act (UTSA), a civil code first enacted in the 1980s.

The Obama Administration in February sharpened its focus on trade secret theft in February with the release of the “Strategy to Mitigate the Theft of U.S. Trade Secrets,” and an Executive Order on Improving Critical Infrastructure Cybersecurity.

The U.S. Congress passed two pieces of legislation in 2012 to address inadequacies in U.S. law. The first piece of legislation expanded existing trade secret law to computer source code. A second change increased criminal penalties for economic espionage and called on the U.S. Sentencing Commission to increase offense levels for the theft of trade secrets.
The new report recommends ways that Washington can bolster trade secret protections and raise global standards by utilizing trade policy tools, and by improving coordination among the relevant government agencies.

The report also discusses potential reforms being discussed by the European Union to halt mounting losses from trade secret theft—recognizing that it is critical to harmonize efforts across its member countries. These efforts lag the United States in providing consistent and robust trade secret protection.

Elsewhere in the world — most notably in the key emerging economies of Brazil, Russia, India and China — weak laws and ineffective enforcement may do little to help a company’s ability to shield its valuable proprietary information.

Thus, as companies utilize supply chains that traverse the globe, the first line of defense lies with their own trade secret protection program, the authors argue.

The report lays out the elements of a comprehensive regime, including relatively low cost protocols and policies for controlling access and storage of information and employee training as well as more costly security technologies.

“…Companies should be proactive in investing in trade secret protection,” the report argues. “Such expenditures should not be viewed as sunk costs, but rather important investment to preserve and enhance value.”

See a copy of the full report.

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