Corporate Trade Secret Management and Strategy …...2019/09/27 · Corporate Trade Secret...
Transcript of 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
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AgendaThe increasing importance of trade secrets as IP
Understanding trade secrets
Managing trade secrets
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The effect of the trade war: strategic and operational issues
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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
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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
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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
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History & Examples
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How Lawyers see Trade Secrets
“Real” IP
PATENTS
©
TM
Unfair Comp?
Trade Secrets?
Tort? Labor?
Departing employees
Non-competes
Contract?
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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
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Assets
Liabilities
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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
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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
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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
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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
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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”
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Three factors for “reasonable steps”Three factors for “reasonable steps”
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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
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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
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• 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
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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
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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
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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
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Trusted Partners and Reliable Laws
Rethinking collaboration risk
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• 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
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Consequences of supply chain disruption
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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
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Litigation exposure, including criminal prosecution
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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.