SUMMER 2020 TODAY’S GENER AL COUNSEL
Intellectual Property
How In-House Counsel Can Protect Trade Secrets By Steven P. Ragland
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t’s a scenario that strikes fear in the hearts of general counsel everywhere. A new hire brings gigabytes of data over from a prior company and infects your systems. It could be as blatant as plugging a thumb drive into a workissued laptop and copying formulas, semiconductor recipes or product roadmaps onto the laptop — or, even worse, onto a shared network drive. Similarly terrifying is a call from an anonymous tipster revealing that your former employee has been using your trade secret information at your chief competitor for years — finally explaining how that arch-rival leapfrogged past you in the market and took a huge bite out of your sales. Now you need to find actionable evidence, select outside counsel and pray that the expense of pursuing major litigation is worth it. In nearly two decades of litigating cases in Silicon Valley, I have seen these nightmares become reality time and again. As bring-your-own device policies proliferated, and digital storage became cheaper and more prevalent, it has only gotten easier to pilfer trade secrets … or to simply forget where data was socked away during a vacation or work-fromhome stint. Each case is different, but the individuals who improperly use, copy or retain trade secret information tend to fall into four broad categories. The Conspirator: A newly-hired executive downloads key information from a prior employer on her way out the door and aims to build a team at your company to compete head-on with the former employer. She is sophisticated, attempts to cover her tracks and will likely infect your company by incorporating stolen information in whatever she does. She often solicits former coworkers. This is the willful misappropriator, who can present the most danger to your company.
The Gunner: Retains important material from prior employer and intends to use it to get ahead at your company. Does not think he’s doing anything “really illegal,” even if he knows it could be wrong, because he helped develop the information he pilfered. Keeps misappropriated data on home computer or personal storage devices to refer to privately as needed. Still very dangerous because your company may be responsible for everything he does in the course of his work.
Problems often are not discovered until years later, when you discover that your secret sauce has been incorporated into the competitor’s product. The Pack-Rat: Retains everything related to anything she ever worked on at a prior employer, or downloads it all right before leaving. May or may not ever look at, refer to or otherwise use the material, but feels better having it socked away just in case. The digital equivalent of a hoarder. Presents a significant risk because it will be very hard — maybe impossible — to prove she never used the retained information for your benefit if the improper downloads or retention are discovered. The Oopsy-daisy: No intent here, just a bit of absent-mindedness. This is the guy who forgot that he had loaded project documents onto a personal cloud
account or portable drive. Still a potential problem for your company, unless you can prove he never accessed the stuff in any way since leaving his old job. In any of these scenarios, the infection might be caught quickly, the unwelcome data isolated, and the issue solved with minimal disruption and expense. Or the problem could metastasize and create enormous exposure for the receiving company and a major competitive threat for the victim of the theft. Either way, even a single employee’s indiscretion can become a multi-year headache, require huge legal spend and put your company at risk. In-house counsel can do a lot to protect against these problems. First, understanding what constitutes legally protectable trade secret information is key. Second, best practices for on-boarding and off-boarding employees will do much to avoid sleepless nights worrying about what-ifs and, even worse, “whatthe-heck-just-happeneds.” INFORMATION, NOT THINGS
A trade secret is any information or know-how not generally known in the industry that is kept confidential with reasonable protective measures and derives value because of its secrecy. One key point in understanding trade secrets is that the law protects information and not necessarily particular things. This means that any given document might contain lots of protectable information, along with plenty of material that is not protected at all. Additionally, trade secrets can include “negative information” — knowing the dead ends a competitor pursued. For example, if your company is creating a robotic vacuum cleaner and one of your engineers has access to all of Roomba’s design and testing information, your timeline could be shortened and your R&D expense less-
