Baker McKenzie Survey Exposes Board-Level Risks that Companies are NOT Prepared For[1]

The scenario
Your client’s IT Director tells his boss that he has observed suspicious behavior on the company’s network. It seems a senior software code designer for the high-speed securities trading company is downloading massive volumes of proprietary trading software code and copying it to a CD burner. Not good. The employee has recently complained about the strategic direction of the company and is disgruntled after his mediocre annual review last month.

Action taken
An urgent internal investigation, including a review of software code control system logs, confirms that the employee was accessing and copying the highly valuable code from a server that he had no reasonable business need to access. The resulting interview with the employee and a forensic examination of his work computer confirms that the employee had recently accepted a job offer from a direct competitor, had been archiving sensitive company information to an external cloud storage account, and was prepared to take his company’s trade secrets with him. The employee was terminated, and in the light of the overwhelming digital evidence, signed a settlement document prohibiting him from violating his signed non-compete/non-disclosure agreement. A reasonably happy ending.

Are your clients prepared? Many are not

Data storage. Laptop and files 3dA recent survey of over 400 executives conducted by Baker McKenzie reveals that only 31% of organizations are prepared for a threatened or actual misappropriation of trade secrets. This is a startling revelation, especially when those same executives said their trade secrets are more important than their patents and trademarks. Our digital age has created an environment in which trade secrets are more portable and can be stolen with the click of a mouse or the posting to social media accounts. This means organizations must be more diligent and creative in developing systems that protect what can be a company’s most valuable assets.

Key findings from the survey

  • One in five companies has suffered a trade secret theft
  • Corporate leaders are most concerned about theft by former employees
  • Only one-third of companies maintain inventories of their trade secrets
  • Trade secrets and IP play an essential role in company brand value and corporate strategy

The takeaways
Organizations must create a trade secret protection culture that starts with the highest levels of company leadership. In addition, these precautions should be taken:

  • Take the time to inventory critical trade secrets
  • Treat them like secrets! It can be hard to assert a trade secret misappropriation claim if your client has not taken reasonable measures to protect them
  • Train employees on the importance of trade secret protection
  • Make trade secret protection a part of your manager’s annual performance review
  • Have a plan in place for responding to trade secret misappropriation events

For more information on our FREE one hour, Trade Secret Protection CLE click here!

[1]“The Board Ultimatum: Protect and Preserve. The Rising Importance of Safeguarding Trade Secrets”. Baker McKenzie Survey, 2017