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In-house counsel reveal how they protect trade secrets

Cross-industry sources give advice on how best to protect their trade secrets from competitors with the use of contract agreements and training

How to best protect trade secrets is becoming a more pressing concern for in-house counsel as more businesses turn to trade secreting rather than patenting some inventions.

The 2016 EU Trade Secret Directive defines the term as any information that is secret, not generally known to those in the field, and has commercial value because it is secret.

Most importantly, the directive stipulates that businesses must prove they have taken “reasonable measures” to maintain the confidentiality of the information.

What the directive does not stipulate is what qualifies as a reasonable measure. Sources from TiVo, the pharmaceutical, biotech, and manufacturing industries concur that the biggest asset and risk a company has in the protection of trade secrets is its own people. While employees contribute vastly to the value of a company, the first reasonable measure is proper training, to make sure they understand how confidential information should be handled.

Educate your employees

“It all comes down to the people,” says an IP manager at a semiconductor manufacturing company. “No organisation can hope to have a successful trade secret policy if the people who come up with the IP don’t recognise or appreciate what it is that they have come up with.”

Employees need to have a thorough understanding of what trade secrets they have before they can attempt to protect them. In many cases information is shared among different members of a company, and if each person in that chain does not understand the nature of the information, the trade secret becomes vulnerable.

Mohammed Karim, senior legal counsel at TiVo, adds: “Just having a record of the information isn’t enough to show a reasonable measure. You need to conduct training.” “An example of training is making sure employees don’t make simple mistakes like lending their access card if someone needs to pop out of the building. Make sure there is a level of awareness to protect the information.”

Know who’s in the know

Finding out who already knows or has access to the trade secret is another vital step. Sources say once a business has identified who already has the knowledge, that knowledge should be kept on a need-to-know basis.

“The second question is determining how many people need to know the confidential information in order to protect it,” says the IP manager at the semiconductor company. “Find out where the knowledge is now – whether that is internal counsel, the research team, or management.”

One good way of identifying and maintaining a trade secret is to involve those who generate the knowledge in the decision to make it secret. A research manager at a European biotech company tells Patent Strategy: “We have a procedure where each year our results are reviewed and we record it in order to make them a secret. The decision on what needs to be protected by trade secret is made by our research team and we discuss it together. It is very important that the research team is made aware of the commercial implications of their work.”

Document the top secret

Unlike a patent, a trade secret has no concrete form. It comes without structure and is not an active right unless the company takes deliberate steps to maintain it.

Proper documentation is a crucial step. The head of IP for a pharmaceutical innovator says: “For a patent, our research team might send a formal record or a memo that says what they invented to the IP department. But if the decision is made to keep it as a trade secret, that record forms the basis of what we are establishing as the trade secret.”

Who has access to the record should also be limited. Documents that contain the trade secret could be marked as such, and only those who need the information should have access to it. Karim from TiVo adds: “Make sure the documents are marked and the information goes on a need-to-know basis. Minutes from meetings should be marked as confidential and there can be physical restrictions to certain rooms. Same thing with technology, make sure confidential information is password protected.”

Keeping contracts watertight

The dream tool to protect trade secrets would be a Men In Black-style memory stick to erase all information from the memories of employees who wish to leave the company.

In reality, however, sources say that employment contracts with clear confidentiality agreements are key to guarding trade secrets safely within a company. Employees need to be made aware of what they are handling and the consequences of divulging a trade secret to an unauthorised third party.

“Everything begins with an employee contract,” says Karim. “Make sure that those who have access to the trade secrets have confidentiality agreements written into their employment contracts.”

He adds as that as technology moves at a fast pace, one way to keep confidential information within a business is by updating employee contracts to include any modification to trade secrets.

Notice periods and non-competition clauses should also be stipulated within employment contracts, while exit interviews are another way of trying to ensure that information is not given to a competitor. “Be sure during the exit interview to remind the employee of the confidentiality agreement in their employment contract,” says the IP manager at the semiconductor company.

Be balanced

In innovative fields companies want their employees to collaborate. If too many barriers are put in place it could stifle innovation by keeping employees from communicating. A balance should be found that promotes innovation while also allowing employees to advance their expertise.

“Never underestimate the importance of the people that hold the knowledge and who come into contact with the knowledge,” says the IP head at the semiconductor company.

“After all, these trade secrets are part of their acquired expertise that they will need in their careers. Restrictions should not be made that keep them from using knowledge that was fairly acquired during their career.”

The cross-industry sources agreed that with more technologies such as software and AI falling outside of the realm of patentability, more companies will be relying on trade secrets to protect their inventions. If proper measures are put in place, a business can hope to keep their trade secret as long as Coca-Cola has kept theirs.

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