Writing in JD SUPRA Law NEWS, Michael Vollkov writes
that one of the drawbacks of a global economy is the rise in trade
secret theft. In the absence of a seamless global enforcement
infrastructure foreign actors have had little fear of being caught
and suffering any consequences. When competition gets tough, some
bad actors – foreign governments or company employees –
like to steal trade secrets in an attempt to catch up in the market
He continues that the FBI in the United States has now listed
economic espionage and trade thefts as its second law enforcement
priority just below terrorism. This is quite the statement when you
think about the increasing amount of white collar fraud and other
Given the draconian provisions of the new Companies Act in South
Africa and the provisions of the King Report and Code
which applies on an apply or explain basis, South African
directors, prescribed officers and committee members should play
careful heed to the issue of trade secrets theft.
Companies and industry associations, and in fact all entities,
should develop and adopt voluntary best practices to protect
themselves against trade secrets theft. In her excellent article
dealing with this issue Lauren M. Papenhausen of McDermott Will and
Emery says that the best solution is to prevent a trade secret
theft from ever occurring. Even if that is not possible, having
taken strong measures to protect trade secrets will aid success
both in any civil litigation against the perpetrator and in any
criminal action the government may bring. Entities should consider
at least the following types of protective measures:
Research and development compartmentalization, i.e., keeping
information on a "need to know" basis, particularly where
outside contractors are involved in any aspect of the process
Information security policies, e.g., requiring multiple
passwords or multi-factor authentication measures and providing for
Physical security policies, e.g., using controlled access cards
and an alarm system
Human resources policies, e.g., using employee non-disclosure
agreements, conducting employee training on the protection of trade
secrets and performing exit interviews.
It also will be important in any future litigation that a
company has clearly designated as confidential any materials it may
wish to assert are trade secrets.
It is recommended that each and every South African business
entity should carefully and urgently review its employment
contracts and ensure that in regard to trade secrets, its policy
framework and best practices are best of breed. Failure to do so
can have disastrous consequences.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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