How do you protect trade secrets against departing employees?

While trade secrets can be a very useful and understated tool, one must also understand that maintaining their secrecy is subject to multiple external factors across all areas of the business. These range from physical barriers and encryptions to hired employees and internal procedures. Companies must ensure all the necessary steps are taken to protect their trade secrets and understand the inherent necessity of mitigating the risk of their transfer or unrightful exploitation by others.

The American Bar Association Conference recently indicted a former Google software engineer who was charged with stealing AI trade secrets to transfer to two companies based in China on 6 March 2024. The Defendant allegedly misappropriated over 500 confidential files from Google containing AI trade secrets thereby providing the affiliated companies with an unfair competitive advantage.

The indictment alleges that the employee’s conduct violated the employment agreement as well as a separate code of conduct that the employee signed when becoming a Google employee. In addition, the employee had allegedly taken measures to conceal the transfer of confidential information by bypassing internal data loss prevention systems.

The consequence of this breach of confidentiality is overwhelming. In this particular instance, the misappropriation of the trade secret in question can have enormous economic and national security consequences, notwithstanding creating an illegitimate competitive advantage.

This very recent dispute clearly proves the importance of vigorously safeguarding trade secrets, as forward-thinking and innovative companies are at risk of being targeted by individuals with an ulterior agenda. Further, even when appropriate measures are in place, these must be continually reviewed and improved upon to avoid circumvention thereof.

What steps can you take to protect your trade secrets from exploitation by departing employees?

While there are many ways to mitigate the risk of employees exploiting trade secrets, here are some of the actions you can put in place:

• Review which employees have a legitimate need to have access to the information.
• Keep a running log of who has access to the information, who accessed the information, and any and all loans, downloads, etc. of the information and follow up internally.
• Password protect and/or encrypt digital files containing any sensitive information containing trade secrets.
• Review internal procedures regularly and thoroughly.
• Conduct exit interviews and require exiting employees to return any and all trade secrets and materials and delete any access to emails, accounts, etc.
• Consider implementing legal restrictions, i.e. contractual protections, however, must be used with caution and in compliance with any relevant employment law regulations.

Potter Clarkson has produced SafeGuard - a very simple fixed price/fixed outcome audit tool designed to audit, assess, and protect your trade secrets. Please don’t hesitate to get in touch with us if you want to learn more.