Presentation on theme: "Preserving Competitive Edge Workplace Tools for Preserving and Protecting Trade Secrets February 9, 2015 By Andre castaybert Castaybert pllc Co-CHAIR."— Presentation transcript:
1 Preserving Competitive Edge Workplace Tools for Preserving and Protecting Trade Secrets February 9, 2015By Andre castaybertCastaybert pllcCo-CHAIR Of trade secrets Subcommittee NYSBA ip section
2 What is the economic impact of trade secret theft to U.S. companies? The loss of trade secret information impacts a large percentage of businesses, and causes significant monetary damage.Estimate of Total Losses3Average Damage – Manufacturing Sector2% of Companies Reporting Lost Trade Secrets1Avg. Cost Incurred When a Business Partner Exploits Its Access to Data463%$50 Million(per incident)$53-59 Billion$362,269(incurred by companies per incident)1-ASIS/PwC “Trends in Proprietary Information Loss Survey,” 20072-ASIS/PwC “Trends in Proprietary Information Loss Survey,” 19993-ASIS/PwC “Trends in Proprietary Information Loss Survey,” 20024-Center for Responsible Enterprise and Trade “Trade Secret Theft – Managing the Growing Threat in Supply Chains,” 20121, 2, 3: Surveys polled CEOs of Fortune 1000 companies and US Chamber of Commerce members
3 What is the economic impact of trade secret theft to U.S. companies? Trade secrets provide a competitive advantageFor many companies, intangible assets, including trade secrets, are the most valuable assets they hold.And some sources say the ratio has shifted from 80/20 tangible to intangible in 1975 to 20/80 in 2013
4 What is the economic impact of trade secret theft to U.S. companies? Estimates of trade secret theft range from 1-3% of the GDP of the United States and other advanced industrial economies*U.S. Senators Coons and Hatch: Estimate $160 to $480 billion lost to trade secrets theft in U.S. each year*CREATe and PWC: “Economic Impact of Trade Secret Theft: A framework for companies to safegaurss trade secrets and mitigate potential threats
5 What is a Trade Secret? The UTSA Definition of Trade Secret The Uniform Trade Secret Act enacted by all states and DC, except New York and Massachusetts, defines a trade secret as:information, including a formula, pattern, compilation, program, device, method, technique, or processthat derives independent economic value, actual or potential, from not being generally known to, or readily ascertainable through appropriate means, by other persons who might obtain economic value from its disclosure or use; andis the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
6 Examples of Trade Secret Information R&DLab testsPrototypesProject researchRecipe developmentStrategyManufacturingProcessesEquipmentRecipesMarketingAdvertising plansConsumer surveysProduct PipelineSalesIncentive plansCustomer contact listsSales promotionsFinancialFinance plansFinancial projectionsQuarterly resultsNegative know-howFormulations solutions that did not workHROrg. chartsCompensation plansSeverance plans
7 How Are Trade Secret Rights Lost? Most losses do not occur by theft. In fact, most losses occur through simple carelessness. The most common mistakes that contribute to loss of trade secrets include:Failure to incorporate or emphasize trade secret protection in the hiring processFailure to limit distribution of sensitive information on a “need to know” basisFailure to follow existing policies and proceduresLack of communication with employees regarding the importance of trade secret protectionFailure to perform exit interviews and remind departing Employees of their confidentiality obligations
8 Framework for Companies to Safeguard Trade Secrets and Mitigate Potential Threats IdentifyDocumentEducateAssessSecure
9 Identify Trade Secrets Identify, locate, and inventory those trade secrets whose theft would cause the most harmBuild a cross-functional team of key stakeholders to define the company’s trade secretsCompliance and legal counselChief information security officer/ ITBusiness unit leaders and corporate function leadersHuman ResourcesCategories of trade secretsProduct information: new hardware designs; updates of existing productsResearch & Development: basic or applied researchCritical and unique business processes: inventory/distribution; manufacturing processes; business modelsSensitive business information: M&A plans; market research; customer lists; info on key suppliers; corporate strategyIT systems and applications: system architecture designs; source code; algorithms
10 Questions to Ask What is the company’s competitive advantage? What is unique about the product or process?What confidential information would competitors want to know?What would you consider the most important trade secrets?
11 Identify and Assess Threats and Vulnerabilities To determine which trade secrets merit the highest protection, and to implement more effective protective measures, you need to identify and assess the potential threats.
12 Potential Threat Actors Malicious insidersCurrent employeesLack of trainingInadvertence (publication, disposal of assets, oversharing)Beware social mediaBeware disgruntled employeesFormer employeesEmployee mobilityHome computersThumb drives
13 Potential Threat Actors CompetitorsNew employees from competitorsDisgruntled employees who go to competitorsCompetitive intelligence programs and market research spies
14 Potential Threat Actors Suppliers, consultants, and customersAccess to your siteWorking with competitorsEncouraging your competitionLoose lips
15 Potential Threat Actors Nation states and places of businessTransnational organized crimeHacktivists
16 Identify Threat and Vulnerabilities Which trade secrets are most vulnerable?Who is a threat?What is the probability of a theft?How severe would the impact be if stolen?What policies, procedures, and controls exist to mitigate theft?
17 Identify and Rank the Threat How significantly would the company’s reputation be impacted by theft?How critical is the trade secret to the fundamental operation of the business?How core is the trade secret the company’s corporate culture?Is the trade secret especially unique in the industry?How valuable would the trade secret be to competitors?How important is the trade secret to current or projected revenue?
18 Document trade secrets and efforts to preserve them Document the nature of the trade secretDocument the company’s investments in the trade secretDocument the steps taken to preserve the trade secret and to maintain confidentialityWritten company policies and proceduresEmployee manualsConfidentiality and NDA provisions in employee, supplier, consultant, and agreementsOnboarding interviews with confidentiality instructionsOffice access and computer access policies and protectionsVisitor sign-in, sign-out, badges and identificationPassword policies
19 Educate Start from the time you onboard new employees Distribution trade secret policies and procedures and obtain acknowledgementsTrade secret trainingConsistent communication and remindersEducation and reminders for departing employees
20 Protecting Trade Secrets Limit access to trade secret materials on a need-to-know basis. Locked filing cabinets with limited accessCreate secure passwords for computer-stored trade secret informationConsider shredding (rather than throwing away) documents containing trade secretsObliterate or wipe clean (rather than merely deleting) any trade secret information contained on computer hard drives
21 Protecting Trade Secrets Require all employees with access to confidential company information to sign confidentiality agreementsHave clear written policies that leave no doubt that any access and use of company information, for purposes other than company business is strictly prohibited and have employees acknowledge receiving copiesSend out regular reminders of the policies and require acknowledgment of receipt.Beware: Under many federal and state laws, employees have privacy rights in their personal information, even if it is stored on company computers
22 Protecting Trade Secrets Companies should safeguard proprietary information by:conducting entrance and exit interviews with employees;educating managers and HR sources professionals regarding the company-owned items that employees must return upon departurecommunicating the company’s policies regarding the monitoring of employees’ electronic devices and communications to employeesdisabling employees’ access to company and computer networks at the time of departurecreating a culture of compliance and confidentiality where employees recognize the value of protecting trade secrets; andsharing best practices within their industries to protect valuable business data
23 Practical Measures: BYOD Policies In light of identified risks to trade secrets portfolio, implement BYOD policy or require employees to use company-issued devices?Different policies for different levels of employees?If adopt BYOD policy:Specify which devices are permittedProvide clear restrictions regarding use and transfer of company dataExplain when company gets access to device and dataIncorporate into exit interview processExplain investigation, incident remote wiping proceduresAddress personal data/privacy concerns consistent with applicable law
24 Practical Measures Exit Interviews Identify the trade secret and confidential information the employee accessed or used.Question the departing employee:Ask employee why he is leavingAsk employee what his new position will beCheck employee’s computer activities and work activities in advance of the meetingEnsure that all company property, hardware, and devices have been returned, including and cloud data, and social media accounts
25 Practical Measures Exit Interviews Ensure that arrangements are made to have all company data removed from any personal devicesDisable access to company computer networksMake sure to obtain user names and passwords for all company social media accountsInform the employee of continuing obligation under agreements with the CompanyConsider letter to new employer and employee with reminder of continuing obligationsConsider having departing employee’s s preserved and electronic devices forensically imaged as appropriateConsider using an exit interview certification
26 Practical Measures Post-Termination Investigation Interview employee’s co-workers; gauge whether employees are hearing about employee in the marketplaceExamine employee’s activityConduct a forensic investigation of employee’s computer activitiesExamine and analyze badge records and access logsExamine phone recordsCheck employee’s social media accounts as appropriate
27 Prepared by Andre Castaybert Esq. CASTAYBERT PLLC830 Third Avenue, 5th floorNew York, N.YIf you would like a copy of this presentation, please Andre at: