corporate trade secret management and strategy …...2019/09/27 · corporate trade secret...
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Corporate Trade Secret Management and Strategy in the US-China Trade War
2019 Global IP Strategy & Marketing Forum
James PooleySeptember 27, 2019
AgendaThe increasing importance of trade secrets as IP
Understanding trade secrets
Managing trade secrets
2
The effect of the trade war: strategic and operational issues
Increasing reliance on data and other intangibles
17%32%
68%80% 84%
83%68%
32%20% 16%
0%
50%
100%
1975 1985 1995 2005 2015
Intangible Assets Tangible Assets
Source: Ocean Tomo, LLCJanuary 1, 2015 3
These valuable assets are also vulnerable
• Cyberattacks make headlines, reinforcing external threats
• Open innovation, and a modern workforce, require close management
These valuable assets are also vulnerableVulnerability of secrets in the digital age
4
AgendaThe increasing importance of trade secrets as IP
Understanding trade secrets
Managing trade secrets
5
The effect of the trade war: strategic and operational issues
History & Examples
6
How Lawyers see Trade Secrets
“Real” IP
PATENTS
©
TM
Unfair Comp?
Trade Secrets?
Tort? Labor?
Departing employees
Non-competes
Contract?
7
How Clients see Trade Secrets
- IT- Lawsuits- Government- Cyber threats- Employees
- Foreign operations- Governance- Risk management - Compliance - NDAs
- Comp. intelligence- Comp. advantage - Acquisitions - Licensing - Partners
- Big data/ IoT- Market analysis- Customer info- Strategy for $$- IP- R&D
8
Assets
Liabilities
Broader than other forms of IP
• Protects specific new technological solutionsPatent
• Protects form of expressionCopyright
• Protects goodwill in brandTrademark
• Protects exterior appearance of productDesign
• Protects INFORMATIONTrade Secret9
What qualifies as a trade secret?
•Any information that is:• Secret (not generally known)
• Has competitive value
• Is protected by “reasonable steps”
• Skill and general knowledge are not covered
• Potentially permanent, but not exclusive
10
Examples of protectable secrets
Raw data, extracted analytics, AI algorithms
Strategic, marketing, & financial plans
Unannounced products
R&D, including failures and dead ends
Information about customers and suppliers
Information entrusted to you by your customers
11
AgendaThe increasing importance of trade secrets as IP
Understanding trade secrets
Managing trade secrets
12
The effect of the trade war: strategic and operational issues
Management of trade secret assets
“Three may keep a secret, if two of them are dead.”
-Benjamin Franklin
Strategic objectives of management
• Prevent loss of critical advantage
• Avoid contamination• Comply with emerging
standards• Demonstrate “reasonable
steps”
13
Three factors for “reasonable steps”Three factors for “reasonable steps”
14
Value of the information
• Focus on what is most important to keep from the competition
• Almost all secrets will eventually become known
• Many secrets, especially business data, degrade over time
Risk of loss or contamination
• What are the threat vectors?
• What is the likelihood that they will come to pass?
Consider mitigation measures
• What mitigation measures might reduce risk?
• What do they cost (money, administration and friction)?
1
2
3
Recruiting and on-boarding
• Recognize the recruiter’s dilemma: the best hire might be dangerous
• Review contracts that could constrain scope of work• Create good record of warnings not to bring information• Beware of groups: managers may have special
responsibilities
Risk area #1: people
Termination
• Lock down access to systems, consider forensics• Conduct a thorough exit interview
Training
• Employees are the most common source of leaks• Training is the cheapest form of prevention• Effective training is continuous and varied, with tests
15
• Clear policies around
protection of your
data and respect for
others’
• Reinforce through
management
response to any
incident
• Pay special attention
to social media
policies
Risk area #2: processes
PoliciesAccess
ControlsEndpoint controls
• Apply the need to
know principle
• Coordinate with HR:
as positions change,
access changes
• Keep record
classification systems
simple
• Map where data
travels and is stored:
who has access and
how
• Establish procedures
for use of employee-
owned devices
• Deploy robust tools
for intrusion detection
and response16
Risk area #3: management
• The ubiquitous NDA gets little attention & is sometimes hidden
• It’s not a form, but a contract; it deserves negotiation
• Most problems arise from lack of execution and follow-up
NDA Management
• Specify your expectations for security
• Get NDAs from individuals
• Carefully track ownership issues
• Trade secret litigation is costly in many ways
• Emotional issues require adult supervision17
• Provide for penalties, get U.S. jurisdiction if possible
• Exercise audit rights vigorously
International Supply Chain (esp. Asia)
Litigation Avoidance & Control
Creating a plan fit for purpose
• Just know the categories of data and threats faced
• Manage to the risk, not to the rules
“Audit” and “inventory” are
not required
• Business unit leaders perform initial assessments
• Central management must assure compliance and reviews
Central authority with distributed
responsibility
• Threat environments are dynamic; plans need adjustment
Regular reviews
18
AgendaThe increasing importance of trade secrets as IP
Understanding trade secrets
Managing trade secrets
19
The effect of the trade war: strategic and operational issues
Trusted Partners and Reliable Laws
Rethinking collaboration risk
20
• Trade wars impact collaborations and the feasibility of working with trusted partners
• Shifting trade patterns change the incentives for partners - Stable/growing markets:
interests are aligned- Unstable markets: partners
seek to protect themselves
• Laws vary by country
Consequences of supply chain disruption
21
Normal Network- Trusted partners with long
term relationships
- Secure supply chain links
- Manageable trade secret risk/
protection
Trade War Network- New and untested relationships
- Insecure supply chain links
- Increased likelihood of trade
secret leakage
- Difficult to protect trade secrets
along the chain
Modern Manufacturing: Long supply chains with many partners
Litigation exposure, including criminal prosecution
22
Civil Exposure
• DTSA (Defend Trade Secrets Act) extraterritorial reach: US federal law can be applied to actions that happen outside of the US
• Asian companies might face greater exposure to litigation due to this new US trade secret law
Criminal Exposure
• In the last year, the Trump administration has ramped up efforts to pursue criminal charges against Chinese companies
• Some consider this part of the trade war. Some do not.
