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Trade Secrets

Importance of Trade Secrets

Trade secrets are more important than ever to manufacturers both small and large. Companies rely on trade secrets to innovate, compete, and succeed. However, increasing amounts of trade secret theft by competitors, nation states, malicious insiders, and cyber criminals are undermining fair competition and reducing return on investments.

“Cyber-attacks are a real threat and we must remain ever vigilant in enhancing our IT
systems to protect our trade secrets.”
– Dan Abdun-Nabi, President, Emergent BioSolutions

What are Trade Secrets? picture1

Trade secrets are confidential information that give manufacturers a competitive edge. Information qualifies as a trade secret if the owner has taken reasonable measures to keep such information secret and the information derives independent economic value, actual or potential, from not being generally known to or readily ascertainable by the public.

Learn the Facts

  • As many as 60% of companies report being victims of attempted or actual trade secret theft in a given year.
  • Secrets comprise two-thirds of the value of firms’ data.
  • Estimates of the annual cost of trade secret misappropriation for U.S. companies are as high as $480 billion.
  • 75% of most business organizations’ value and revenue sources are in intangible assets, intellectual property, and proprietary competitive advantages.
  • In 85% of trade secret cases, the alleged ‘misappropriator’ was someone close to home – either an employee or a business partner.
  • 85% of employees say they have access to confidential data they should not be able to see.

Sources: ASIS International, Inc.; Forrester Research, Inc.; PwC;; O’Melveny & Myers; Ponemon Institute

5 Steps for Protecting Trade Secrets

  1. Identify your trade secrets and maintain an up-to-date inventory. Set procedures for securely storing and marking trade secrets.
  2. Require employees, independent contractors, clients, vendors, and suppliers to sign confidentiality agreements. Teach employees and third parties how and what to protect.
  3. Limit disclosure and restrict access by implementing physical and digital security mechanisms.
  4. Consult with an IP attorney and understand your rights under state, national, and international laws.
  5. Evaluate potential risks and develop a response plan for trade secret loss.

picture4Know Your Rights

Until recently, civil trade secrets protection in the U.S. was a matter of state law. However, with the enactment of the DEFEND TRADE SECRET ACT (DTSA) on May 11, 2016, manufacturers now have a new tool to protect and enforce their trade secrets.

“We commend Congress and President Obama for passing this important legislation that will make
it easier and
faster to go after thieves that are using our secrets to compete unfairly.”
– Drew Greenblatt, President, Marlin Steel Wire Products

What DTSA Means for U.S. Manufacturers

  • Access: The DTSA creates a federal civil cause of action for trade secret misappropriation and allows manufacturers to access the federal courts when interstate trade secret theft is discovered.
  • Flexibility: The bill does not preempt state law, thereby preserving the flexibility and legal options of manufacturers.
  • Speed: Federal marshals have the authority to cross state lines to pursue perpetrators nationwide, increasing the speed and likelihood of preventing data from leaving the country permanently. Additionally, to prevent disclosure, victims can obtain an ex parte order for the seizure of property containing stolen trade secrets.
  • Remedies: Remedies include injunctive relief, compensatory and exemplary damages, and the recovery of attorneys’ fees. To take full advantage of the remedies, employers must modify existing confidentiality agreements to include notice of the Act’s “whistleblower” protections for employees who disclose trade secrets to attorneys or government agencies for the purpose of reporting or investigating a suspected violation of law.

Resources: How to Protect Your Trade Secrets



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