Trade Secret classification helps to protect your information, but what helps to protect your trade secrets?
That may sound like a little double-talk, but there is significant meaning in it.
The Economic Espionage Act of 1996, as amended by the Defend Trade Secrets Act, provides for federal criminal penalties for certain types of trade secret misappropriation. If your information does not meet the standard of “trade secret”, then it may not be considered private at all and might just become public.
According to Title 18 U.S.C. § 1839(3) the term “trade secret” means:
- All forms and types of financial, business, scientific, technical, economic, or engineering information… whether tangible or intangible… if:
- (A) the owner thereof has taken reasonable measures to keep such information secret; and
- (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information
Key points being that the information is not ascertainable through “proper” means, and that reasonable security measures must be taken to keep such information secret.
Usually one thinks or this as applying to information stored in documents or electronic media, and it does, but what about the information discussed in meetings? What about board meetings, senior management meetings, legal team, corporate development, and so many other meetings, discussions, and conversations? They need protection too. Otherwise any information overheard or leaked may no longer be protected as a trade secret and could become public.
This is one of the roles of TSCM, Technical Surveillance Countermeasures. By conducting regular inspections of meeting rooms, board rooms, and any areas where confidential information is discussed, you can establish the needed criteria to be able to claim trade secret protection.
WIPO, the World Intellectual Property Organization created the following video that helps to explain trade secret concerns.
What could happen if trade secret status is not effectively established?
A recent reversal of a $2 Billion Trade Secret verdict has created a bit of a trade secret stir.
It seems that in 2022, a unanimous jury found that software company Pegasystems misappropriated trade secrets belonging to Appian Corporation, awarding Appian a judgement over $2 billion.
A developer who worked in Appian software was accused of spying on the company from 2012 through 2014, sharing trade secrets with Pegasystems under an operation dubbed “Project Crush,” according to Appian.
Appian claimed Pegasystems hired the developer to divulge details about its software and provide videos of the development environment. The project was outed by a former Pegasystems employee, leading Appian to sue and win the largest payout in the history of Virginia’s court system.
Appian’s website explains, “In 2012 Pega hired a spy to infiltrate Appian. Most people wouldn’t use a staffing agency to hire a spy, but Pega did. Pega’s job request required that the candidate “have access to Appian” software and wanted “to make sure they aren’t loyal to Appian” so it would not get “back to Appian.”
The staffing agency found and hired an Appian insider to divulge Appian trade secrets. For years this person was referred to inside Pega as “our spy.” He conducted many competitive briefings with his identity concealed.”
Recently, Pegasystems asked the Virginia Court of Appeals to reverse the jury verdict and enter judgment for Pega, citing insufficient evidence that it misappropriated any trade secrets. On July 30, Judge Frank K. Friedman found the trial court “committed a series of errors that require us to reverse the judgment as to Appian’s trade secret claims.”
In the court opinion it states:
Pega argues that Appian’s alleged trade secrets lost legal protection because they were “generally known,” “readily ascertainable,” and no reasonable efforts were taken to maintain their secrecy.
The full legal document on this case is extensive. You can find all 61 pages of the judge’s opinion here.
The legal repercussions of trade secret theft can be huge. Take the steps necessary to protect your information, that should include regular TSCM inspections.
Additional articles on this case can be found here:
Techtarget.com
Lexology.com
Appian.com
The National Law Review
COURT OF APPEALS OF VIRGINIA Judge’s Opinion