Session 508 Protecting Trade Secrets With a Remote or Mobile Workforce Tuesday, October 18, :00 AM - 10:30 AM

Overview Elements of a Trade Secret Challenges to Maintaining Confidentiality Best Practices for Establishing Trade Secrets Practical Employment Issues: Hiring and Firing Impact of Increased Employee Mobility Telecommuters: Risks and Strategies International Law and Travel International Espionage Act Defend Trade Secrets Act of 2016 Practical Tips Brief Discussion Patents vs. Trade Secrets

Introduction By keeping your company’s valuable information secret, you can prevent competitors from learning about and using it, and thereby enjoy a competitive advantage in the marketplace.

US Attorney General Only two kinds of companies are affected by trade secret theft: Those that know they’ve been compromised; and Those that don’t know it yet.

What is a Trade Secret? A Trade Secret is information that: Derives independent economic value, (actual or potential) from not being generally known to the public or to others who could derive commercial value from its disclosure or use; and Is the subject of reasonable efforts under the circumstances to maintain its secrecy.

Four Elements of a Trade Secret 1.Information 2.That derives economic value (actual or potential) 3.From not being generally known or readily ascertainable through appropriate means 4. The owner took reasonable measures to keep the info secret Note: Format (paper, electronic, etc.) is irrelevant.

Element 1: Information “Information” is broadly defined to include: Programs Formulas Techniques Patterns Compilations Methods Processes Devices

Information – Broadly Defined All forms and types of financial, business, scientific, technical, economic or engineering information, including: patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs or codes, whether tangible or intangible. Defend Trade Secrets Act

EXAMPLES

Others could use the information to reduce costs, increase profits, etc. Things that do not “derive economic value” include: Old (historic) pricing information Information with no competitive significance (i.e., how to make a floppy disk) Element 2: Derives Economic Value

“Not Generally Known” -- sounds simple, but common area for mistakes. Specific knowledge and information that make up a trade secret are different from the general knowledge about products & methods  Example: Recipe (how to make a burger vs. how to make our burger) Element 3: Not Generally Known or Readily Ascertainable Through Appropriate Means

“Through Appropriate Means” Is reverse engineering an appropriate means? – Sometimes. Some jurisdictions (ex. California) explicitly say reverse engineering is not "improper means" – Caution: Sign a contract (like EULA) saying you would not reverse engineer? Element 3: Not Generally Known or Readily Ascertainable Through Appropriate Means

What specific steps were taken to guard the secrecy of the information and restrict its access to others, including employees not involved in using the info? – Example: Encrypt s? Available on a shared drive? How easy is it for the info to be acquired, duplicated or reverse engineered by competitors? – Could night cleaning crew take it off the top of a desk in a locked office? Answer to: How many people can I tell before it is no longer a secret? Not many! Element 4: Take Reas. Measures To Keep It Secret

Leaving handouts in a hotel ballroom during breaks at Annual Sales Conferences No password protection on stored files No locks on hardcopy file cabinets Printing it in an all-employee newsletter EXAMPLES UNREASONABLE MEASURES

What about conducting an electronic sweep for “bugs” before the annual meeting of a closed corporation? Reasonable under the circumstances REASONABLE MEASURES?

Quick Summary: Trade Secret Simplified TRADE Gives your company a competitive advantage Has the potential to make your company money SECRET Use reasonable efforts to keep it confidential. Question: How many people can I tell before it is no longer a secret?

Best Practices to Maintain Trade Secret s Develop a process to identify and capture trade secrets Physically securing the trade secrets – protected location Limit access to the trade secrets – need to know basis Limit physical copies of the trade secret Include appropriate labeling on documents - “XXXX proprietary and confidential” Ensure all employees sign NDAs (or include in proprietary information agreements) Consider use of vendors to limit their access – e.g. divide work among suppliers, etc.

Practical Employment Issues Hiring: – Review potential employee’s agreements with current or prior employers – Acknowledgement that you instructed new employee not to divulge trade secrets of former employer (“Do not bring anything with you.”) – Execute Confidentiality/Non-disclosure Agreement – Onboarding and Training

Practical Employment Issues – Control access to data Servers USB ports – Distribute info on need-to- know basis – Training on “what is protected” – Training and instruction on how and when to use “confidential” designation – Technology BYOD? Monitoring? Policies? Device “Lojack”? During Employment:

Practical Employment Issues During employment: – Use password protections and encryption – Visitor access – Employee internet and monitoring ICT systems? ing to personal address Policy? – Use a global hotline or tip-line – Open Door Policy – On-going training – Activity Audits

Practical Employment Issues Post-employment: – Exit Interview – Obtain passwords – Review pre-resignation activity – Immediately disable access – Collect devices and access cards – Remind of confidentiality obligations – Alternatives: Garden Leave Consulting Relationship

The Law in the United States Predominately governed by state law, not federal law, under the model UTSA. UTSA: Uniform Trade Secret Act – Drafted by Uniform Law Commission – Codified basic principles of common law trade secret protection – Adopted by 48 States -- all but MA and NY, which allow common law claims

The Law Outside the United States Most countries recognize the value of trade secrets and provide some legal protection for them. Nations that are members of the World Trade Organization and a signatory to the Agreement on Trade Related Aspects of IP Rights (TRIPS) are obligated to provide trade secret protection. But, remedies for misappropriation vary from country to country.

E.U. Trade Secrets Directive In Nov 2013, the EU began the process of harmonizing trade secrets law throughout EU A committee developed a proposal (the “Proposal”) that harmonizes the definition of trade secrets and defines the relevant forms of misappropriation. The Proposal is a set of rules to facilitate consistent access and remedies across the EU

E.U. Trade Secrets Directive Without establishing criminal sanctions, the proposal provided for a consistent means of protecting trade secrets, including: Stopping unlawful use and disclosure of misappropriated trade secrets; Enabling the removal from the market of goods that were manufactured based on a trade secret that was illegally acquired; and Providing compensation for the damages caused by the unlawful use or disclosure of the misappropriated trade secrets.

E.U. Trade Secrets Directive In May 2016, a modified version of the proposal was approved. EU nations have two (2) years to implement the proposal into their laws. Note: Proposal specifically states that “nothing... shall offer any ground for restrict the mobility of employees”

E.U. Trade Secrets Directive Efforts to harmonize trade secrets law throughout EU Currently being debated by the European Parliament- IS THIS OLD NEWS?? DOC_ID=ST INIT DOC_ID=ST INIT Recent results of a “Corruption Index” The world can be a dangerous place. Highly corrupt Very Clean

International and Travel Issues: China September the US and China agreed not to “ conduct or knowingly support cyber-enabled theft of intellectual property, including trade secrets or other confidential business information, with the intent of providing competitive advantages to companies or commercial sectors.” Yet, three (3) weeks after that announcement, cybersecurity firm Crowdstrike reported that China- affiliated actors were continuing intrusions into its customers' systems, including "to facilitate theft of intellectual property and trade secrets [from tech and drug companies]." Crowdstrike

International and Travel Issues: Russia August CNN reported that US intelligence agencies believe “Russian spy agencies are using a wave of cyber attacks, including against think-tanks in Washington, to gather intelligence from a broad array of non-governmental organizations with windows into the US political system.” Germany’s domestic spy agency also claimed Russia has engaged in international cyber- attacks aimed at spying and sabotage.

Recommendationsfor Business Travel Minimize the number of electronic devices you bring. Employ “loaner devices” with only basic data on the hard drive and no connectivity to your server when travelling to higher risk countries. Limit data on electronic devices (tablets, cell phones, computers), since they are vulnerable to being hacked. Don’t use public WIFI networks. Don’t assume your hotel room safe is “safe.”