OPSEC and the law of trade secrets

OPSEC and the law of trade secrets

Both federal and state authorities have recognized the need for the protection of trade secrets. At the state level, 41 states and the District of Columbia have passed some form of the Uniform Trade Secrets Act. This act provides civil injunctive relief and damages to the aggrieved party. In 1996, Congress passed the Economic Espionage Act, which makes it a federal crime to steal trade secrets. Unlike the state statutes, the U.S. Attorney brings the federal action on behalf of the complainant in federal district court.

The effects of these laws are twofold.

First, a company may very well be at risk through the inadvertent violation of these laws by its employees, thereby subjecting the company to the penalties outlined in the statutes. The statutes indicate that the actions of the offending party must be “intentional” or that the offending party “had reason to know” that the information was acquired through “improper means.” The latter standard presents a potential problem since it is a subjective standard that has to be applied. However, a company can avoid the appearance of impropriety if its personnel are trained to recognize potential conflicts and how to respond to them

Second is when a company becomes the target of economic espionage. Both the federal and state statutes provide adequate remedies for protection and recovery of damages. However, that is predicated upon the information under scrutiny qualifying as a “trade secret” as defined under the statutes.

Within the definition of “trade secret” are the provisions that:

• The information is of economic benefit if kept secret.

• The owner has taken reasonable measures to keep the information secret.

• The information, if shared, was acquired under circumstances giving rise to a duty to maintain secrecy or limit its use.

Legal commentators agree that the subjective test to be applied to meet the definition is to determine if the scope of the protection afforded the information is commensurate with the value of the information. It is important to note that the owner is REQUIRED to make some reasonable effort to protect the information.

The good news is that while companies have great difficulty identifying critical information (largely because they never think about it), they have no problems whatsoever identifying their trade secrets. The bad news is that they are not very good at figuring out who might try to steal these, nor how. Their protective efforts may be simultaneously reasonable, yet inadequate and inappropriate. This means that a serious industrial spy may find little impediment to acquiring your trade secrets. How many of you seriously feel your company is equipped to deal with an attack by a foreign government intelligence agency or a sophisticated domestic economic spy?

Now, imagine that you make a reasonable, albeit ineffective, effort to protect your trade secret and it is stolen. You most likely discover this when a foreign competitor starts producing a suspiciously similar product at much lower cost, and you are being driven out of business. You are convinced (correctly, in this case) that you are the victim of economic espionage, and would like to prosecute. Unfortunately, you could have four problems.

1. You haven’t caught anyone with their hand in your cookie jar, so you are reduced to a post hoc ergo propter hoc argument.

2. The bad company will insist that they developed this themselves, and it is mere coincidence that the two of you did a simultaneous development of the same product.

3. They will note that you took reasonable precautions to protect your trade secret, and that therefore they couldn’t have stolen it.

4. Even if it is a foreign company with no presence in the U.S., it is still possible to prosecute in the U.S.But it may be hard to ever collect.

The bottom line here is that it is better to adequately protect a trade secret than to try to take legal action after it is stolen. OPSEC professionals can help institute and maintain a program to identify possible adversaries and develop appropriate protective countermeasures. As a side benefit, an active OPSEC program will not only assure that the protection of your proprietary information meets the definition of “trade secrets,” but will also help protect the critical (but not trade-secret) information that you have never even identified as needing protection.

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