Every company has trade secrets. Whether it’s particular practices, information, recipes or designs, trade secrets are a must-have foundation in business. This is why it can be so devastating when trade secrets are unlawfully shared.
The misappropriation of trade secrets is illegal in many countries, although the law against it first appeared in England in 1817 and the USA in 1837. When trade secrets are shared they can give a company’s competitors a chance to exceed them, causing serious issues.
A company must first identify its trade secrets
In order to go about protecting trade secrets, a company must first identity what each and every one is.
A trade secret is such if it:
- Was shared with the strictest of confidence within the business.
- Has considerable commercial value, i.e. it brings the business income and could give competitors an advantage if shared.
- The owner of the secret (the business owner or the board of directors) has gone to great lengths to protect it.
How can trade secrets be protected?
The best way to protect any trade secrets is to educate all employees and personnel as to the importance of said secrets.
For example, the business should:
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- Get all employees to sign confidentiality agreements to make it illegal for them to share trade secrets.
Write a clause into all employee contracts forbidding the sharing of trade secrets. - Limit access to trade secrets, whether this is done electronically or by closing off all rooms containing trade secret documents.
- Specifically mark documents and computer files to show that they contain trade secrets, so that they can’t be accidentally discovered or shared.
- Get all employees to sign confidentiality agreements to make it illegal for them to share trade secrets.
What if trade secrets are still shared?
If an employee shares a company’s trade secrets despite the fact that their contract or confidentiality agreement specifically forbids it, the company may then be able to sue them.
In the USA, there is a hefty punishment for trade secret misappropriation. In accordance with Title 18 of the United States Code, the maximum penalty for this crime is a 10 year prison sentence and a $500,000 fine.
In the UK, misappropriation of trade secrets is punishable by two years in prison or a fine. This sentence can also be combined, depending on the degree of the crime.
A company could feasibly take a former employee to court for trade secret misappropriation. However, it is not illegal to uncover trade secrets during fair discovery proceedings.
What a solicitor can do
A solicitor specialising in employment law will be able to represent a business with this kind of claim.
Many cases concerning the misappropriation of trade secrets have huge settlements. For instance, the American company DuPont won a case against the South-Korean company Kolon after trade secrets concerning the exact fibres used in Kevlar body armour were illegally shared. The settlement amounted to $920m (£583m).
Unfortunately, not all law firms have the funds available to bring cases such as these to court, but the winnings could be substantial. In this instance the law firm may wish to apply for litigation funding in order to ensure they could finance the case.
The sharing of trade secrets can be devastating to businesses, but they can always take action by bringing charges against the guilty party.
This article was written on behalf of Vannin Capital, a company specialising in litigation funding.
