Anatomy of a trade secret misappropriation court case

Company ABCD has a portfolio of IP assets, included a number of trade secrets. These trade secrets assets may be found across different functions in the organisation and include:

  • Some algorithms within the R&D function
  • Customer data managed by Sales & Marketing functions
  • Some filtration process held by Operation in the factory
  • Some negative know-how about failed tests by the Test function
  • Some new business plans by the Business Development function

Like many organisations, these trade secrets are of tremendous value to the company and among the most valuable intangible assets it possesses.

Stop thief:

Let us imagine for a moment that one of Company ABCD’s trade secrets was stolen. It may have been stolen by a former executive of the company, a disgruntled employee, a supplier, a competitor or some hacker.

Let’s assume in this case that the trade secret stolen was Algorithm XYZ and that the accused is a former executive who has since joined a competitor.

The key dates:

Let’s also assume that the alleged theft took place on 15 November 2015, a randomly selected date.

A court case then takes place some months later on 27 February 2017 involving Company ABCD and the accused.

A two-step process:

At the court case Company ABCD has to prove two things, namely that Algorithm XYZ was a trade secret as of 15 November 2015 AND that the accused stole the trade secret. Of course the accused will try to prove that Algorithm XYZ was not a trade secret as of 15 November 2015 OR that no misappropriation took place.

Although the court case is taking place on 27 February 2017, Company ABCD must prove that Algorithm XYZ was being treated as a trade secret at the time of the alleged theft, i.e. back on 15 November 2015.

Whether Company ABCD treats Algorithm XYZ as a trade secret on 27 February 2017, the date of the court case, is irrelevant.

The 7 ‘musts’ of trade secrets:

To qualify as a trade secret, Algorithm XYZ …

  • Must be kept secret
  • Must be documented
  • Must have access limited
  • Must be protected using a combination of administrative, legal and technical means
  • Must have value to the company now or in the future
  • Must have the appropriate legal framework in place if shared with a 3rd party
  • Must not be in the public domain

Company ABCD will have to produce evidence that it was treating Algorithm XYZ as a trade secret back on 15 February 2015.

Now, I don’t know about you but I can barely remember what I did last weekend.

Trade secret processes, systems and metadata:

If Company ABCD has a trade secret process underpinned by a trade secret asset management solution with good quality trade secret metadata, then it has put itself is a strong position to be able to show the court that Algorithm XYZ was indeed being treated as a trade secret on 15 February 2015 and met the seven requirements outlined above.

For organizations of any size, it is vitally important to be able to manage and track who has access to the trade secrets of the company, how such trade secrets are protected and if they are been shared with any 3rd parties. It is also crucial to have an audit trail to capture such details back in time.

Without any such trade secret process, system and associated metadata, then proving that Algorithm XYZ was being treated as a trade secret back on 15 February 2015, never mind last weekend, becomes a major challenge.

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