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April 7, 2020

Don't Lose Your Trade Secrets Amid COVID-19: Some Practical Advice

In previous alerts, we’ve discussed some best practices for protecting your networks as systems come under strain from more employees working remotely as well as tips for avoiding the numerous scams proliferating in the current environment. As businesses scramble to figure out alternative means of operating (including remote working) and how to navigate all of the new and changing laws and guidelines, one shouldn’t lose sight of the confidentiality and precautions necessary to protect valuable trade secrets and confidential information that could be lost if unintentionally shared with third parties.

A trade secret “consists of a formula, process, device, or compilation that one uses in their business and which gives them an opportunity to obtain an advantage over competitors who do not know or use it.” Litigation surrounding the misappropriation of or the unintentional loss of trade secrets has been on the rise given how precarious the loss of these “secrets” can be. 

Unlike other forms of intellectual property, trade secrets, much like other confidential or proprietary information, can be lost by simply or inadvertently failing the keep them secret. For example, failing to shred a document that contains a proprietary formula and placing it in the trash could be enough to terminate trade secret protection. And in today’s cyber world, the click of a mouse or the auto-fill feature in Outlook could similarly kill a trade secret. Therefore, during this unprecedented time, one must be ultra-vigilant in taking the necessary steps to ensure you’re protecting both your trade secrets and those of third parties that you work with—both of which can be detrimental to you and your business. 

So, what steps can you take to protect your business and valuable trade secrets during these chaotic times? Consider the following:

  • Make sure you have a policy—one that’s read and understood by all—regarding how to protect proprietary business information while working remotely, including the catastrophic consequences by failing to do so.
  • If you already have a remote work policy, make sure it addresses:
    • The definitions of “confidential” and “proprietary”
    • What information is considered confidential or a trade secret and its importance to both your business and businesses you work with, including a recommendation to mark documents as “confidential” or “trade secret” 
    • The steps employees must take to ensure information isn’t improperly or inadvertently disclosed
  • If you don’t already have a specific policy in place, make sure you’re at least communicating this information to employees and third parties through documents such as nondisclosure agreements so everyone knows what the business considers to be trade secret information and what the employees’ obligations are to protect the information.
  • If your business deals in any way with another business’ trade secret information, make sure you’ve reviewed any contracts or license agreements to ensure your business is meeting any specific contractual obligations with regard to protecting the other party’s information. Some contracts may even restrict or prohibit remote work where it involves another party’s confidential information. Others require prior consent before remote work would be allowed. Or, there could be particular steps that need to be taken to protect information when working remotely, such as two-factor authentication or data encryption requirements.
  • Ensure that any third parties that have access to your business’ trade secret information are taking necessary steps to protect your information. Much like you need to ensure your business is complying with contractual requirements to protect others’ information, review your contracts with other businesses to determine what obligations they need to meet to protect your trade secrets. Check in with those parties to ensure that necessary steps are being taken to protect your information. Your vendors, suppliers, and licensees are also likely scrambling to deal with the current situation, and you don’t want your trade secrets sacrificed by bad third-party practices.
  • Take this opportunity to review the protections you have in place and evaluate whether there are sufficient and whether different or additional protections might make sense. For example, are you appropriately limiting access to trade secrets to only those people that really have a need to know? Are there other technological protections that you could put in place to limit who has access to information and what those with access can do with the information (e.g., print or download restrictions)? 
  • Are you properly training and educating employees on the policies, practices, and technology you have in place to protect your information? Do you have a dedicated person or team in charge of tracking trade secrets and the protections that’re in place to secure them? 

Documenting your policies, procedures, and efforts to protect your business’ trade secrets is also important. Trade secret cases often hinge on whether (and the extent to which) the business took reasonable steps to protect its confidential information. Having a written record showing the steps taken to protect the information, written policies that show the business is serious about protecting the information, and a dedicated person or team assigned to ensure compliance with policies and practices to protect the information could be the difference in saving or losing an asset that’s at the heart of a business.

With all that’s happening and the extreme measures that’re being taken to stem the spread of COVID-19, it’s easy to overlook this very important and valuable aspect of your business. Taking these simple, inexpensive steps to ensure you’re protecting your confidential information during these difficult times could save you added stress and money and will help ensure that you remain in a secure place when the crisis ends.

Stay safe!

If you have any questions regarding the content of this alert, please contact Nick DiCesare, Cybersecurity Team leader, at ndicesare@barclaydamon.com; Mike Oropallo, Branding, Trademarks & Copyrights Practice Area co-chair, at moropallo@barclaydamon.com; or Chris Harrigan, partner, at charrigan@barclaydamon.com.

We also have a specific team of Barclay Damon attorneys who are actively working on assessing regulatory, legislative, and other governmental updates related to COVID-19 and who are prepared to assist clients. You can reach our COVID-19 Response Team at COVID-19ResponseTeam@barclaydamon.com

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