I recently discussed with a client what steps it should take to protect its trade secrets across the various countries where it manufactures products and conducts business. Although this client has been operating internationally for nearly a decade, it now faces the challenge of bringing its most valuable intellectual property into competitive, and sometimes risky, markets for the first time.
Strangely enough, clients seldom ask me this question, at least in this form. Our international IP lawyers are often asked to draft contracts that contain trade secret provisions and we constantly draft International NNN Agreements designed to protect trade secrets. But this question went beyond that. The question was directed at all of the methods, both legal and non-legal, this client should employ to protect its trade secrets.
I thought for a while and eventually spewed forth the following five keys to international trade secret protection (or something fairly close):
Identify Your Critical Trade Secrets
The first step in protecting trade secrets is to clearly identify what information you consider to be valuable and confidential. This may include proprietary technology, business processes, customer data, or research and development results. A thorough assessment will help you prioritize your protection efforts and allocate resources accordingly.
Assess Your Risks and Implement Preventive Measures
Second, figure out how your trade secrets can be taken and what you can do to protect against them being taken. This involves answering a number of questions. Does it make sense to have your suppliers/vendors sign a code of conduct or a contract making clear they recognize and will protect your trade secrets? What operational structures can you put in place (anywhere along the chain) to protect your trade secrets? Can you register any of these as patents or copyrights and, if so, does it make sense to do so. Be aware of cultural differences and legal frameworks that may impact your trade secret protection efforts, and tailor your strategies accordingly.
Leverage Contractual Protections
Then make sure your contracts (plural) provide trade secret protection. In particular, look at your employment and sub-contracting agreements. Make sure these contracts safeguard your trade secrets both during the business relationship and after the relationship terminates — you would be surprised how many contracts seem to end with the termination of the business relationship. The following are the most common contracts that can aid in protecting your trade secrets:
Make sure there are no weak links where your trade secret can squirt out and you have no contractual protections. Make sure anyone who is going to learn about your trade secrets has signed an NDA or an NNN Agreement (whichever makes the most sense depending on the country and the situation) before they get access to them. This can include both your vendors and your suppliers.
Educate Your Workforce
You also should make sure all your people understand the importance of protecting your trade secrets. I don't have any hard numbers on this, but if I had to guess, I would say that well over half of all trade secret thefts come from your own people and well over half of those come from sloppiness. It is your job to make sure you are employing the right personnel and using the right physical and technical security measures to prevent trade secret leakage. Do the same thing with your suppliers and your vendors and anyone else with access to your trade secrets. Make sure you do whatever you can to ensure your trade secrets remain a secret even after your business relationships end. Go ahead and remind your former business partners and employees of the requirement to maintain your trade secrets.
This is also important because if you are not respecting your trade secrets, most courts will no longer consider them to be trade secrets. My law firm's NNN Agreements are written to protect more than just trade secrets, because it can be so complicated and risky to have to prove to a court that what has been taken was actually a trade secret under the relevant laws. See China NNN Agreements: Essential and NOT for Trade Secrets.
Use Technological Solutions
Use data encryption to ensure your sensitive information is protected against unauthorized access. Utilize secure enterprise content management systems that provide access controls and real-time monitoring of who accesses what data and when. Consider using advanced monitoring systems that include anomaly detection tools that flag unusual access patterns or data transfers, potentially catching breaches before they result in significant damage.
Register Your IP and Take Legal Action
Register your intellectual property, such as trademarks, patents or copyrights, to provide additional protection for your trade secrets, and do so in whatever countries you are doing business.
Be prepared to take legal action if your trade secrets are misappropriated. Consult with legal experts to understand your rights and options. Don't be afraid to sue to protect your trade secrets. Among other things, this tells people you are serious about protecting them.
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