The Rising Importance of Safeguarding Trade Secrets: What Companies Need to Do

August 21, 2017
Categories: Trade Secret Theft

In a recent blog post, CREATe highlighted findings from a Baker McKenzie/Euromoney report focused on trade secret protection across various industries. The report, The Board Room Ultimatum: Protect and Preserve – The Rising Importance of Safeguarding Trade Secrets, summarizes the findings of the survey responses from 404 senior executives from multinational companies across five industries.

In this post, we draw out additional insights including:

  • Fewer than one-third of companies have taken basic measures to protect their trade secrets despite a clear majority indicating that their trade secrets are more important than their patents and trademarks;
  • One-third of respondents place trade secrets among their top five issues, and 69 percent believe trade secret protection is more critical than the protection of other types of intellectual property;
  • Twenty percent have had their trade secrets stolen, and 10 percent indicated they are not sure whether they have been the victim of misappropriation, which increases the likelihood of theft;
  • The value of trade secret theft has been estimated in a 2014 report by PwC and the Center for Responsible Enterprise And Trade to be between one and three percent of the country’s GDP. Based on this information, Baker McKenzie suggests the global cost of trade secret theft could be in the trillions.

Rising Trade Secret Protections in the US, EU and Asia

In recent years, the European Union and the United States have taken legislative measures to help companies have more consistent and better legal protections against the theft of trade secrets. In surveying executives about these laws, more than 70 percent of respondents indicated they completely, mostly or partially understand the implications of the US Defend Trade Secrets Act (DTSA) and the EU Trade Secrets Directive. The purpose of the DTSA and the EU Directive is to harmonize laws pertaining to trade secret protection and enforcement within the respective countries.

Prior to these two pieces of legislation, the trade secret laws varied across state borders in the US and across the various EU member states. Both the DTSA and EU Directive define trade secrets, outline measures companies must take to ensure their protection, and provide legal remedies for victims of trade secret theft, which include court injunctions and damage awards. These new laws have inspired other countries to enhance their trade secret protection laws, including Japan, China and India.

What Companies Need to Do

The greater recognition among governments and senior executives on the importance of trade secret protection is an improvement; however, with just over 30 percent of respondents reporting that they inventory their trade secrets and have action response plans, companies need to do more. Baker Mckenzie suggests that companies preserve their trade secrets by inventorying them, limiting the number of people who know the information, develop technical controls to protect them and train employees on the importance of protecting trade secrets. The controls in place must also be tested and action plans for responding to threats or theft should be implemented. Companies, however, may differ in their approach to protection depending on the level of risk. Companies should also prioritize their most valued trade secrets and make sure employees understand their importance. Types of protective measures can include:

  • Securing computer networks and monitoring employee electronic use,
  • Providing training,
  • Developing corporate policies, and
  • Requiring anyone who comes into contact with trade secrets to sign non-disclosure agreements.

One innovative company highlighted in the report is SCHOTT, a leading international technology group that specializes in making high-quality specialty glass and glass ceramics products. SCHOTT depends on its ability to innovate and has enhanced its trade secret protection measures in order to safeguard its inventions. The German company recently won a contract to create the primary mirror on the world’s largest telescope now under construction in northern Chile.

A challenge for SCHOTT was identifying the company’s trade secrets and prioritizing which ones were the most valuable. To complete an inventory, the company had to identify top trade secrets across each of its seven main business units. Another challenge was ensuring that all of its 15,000 employees understand what trade secrets are, why they are important and how to protect them. Because of strict privacy laws in Germany, SCHOTT relied heavily on education instead of monitoring and surveillance in order to ensure the protection of its trade secrets. Educating all the employees of such a large international company was a challenge. SCHOTT approached this challenge by running an awareness campaign for over two years, which provided training and guidelines.

Read the report here.

Read our blog post on highlights from the report here.

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