Trade secrets play an important role in the business world, regardless of a business’s size. Whether it is a particular process, technology or even a recipe, trade secrets help to individualize the business and their products.
Therefore, business owners need to protect their trade secrets to preserve their business’s success and prevent complicated litigation. This could be more important in the coming years, as a new report speculates that litigation over trade secrets could spike.
WHAT IS THE CAUSE OF THIS POTENTIAL RISK?
COVID-19 has led many companies across the nation to close their doors, furlough employees or even cut down on staff permanently. In turn, this means that employee mobility has increased, and likely will continue to. As businesses furlough or lay-off employees, they begin to search for new jobs.
This is a natural cycle, but a report found that increased employee mobility can correlate with an increased risk of trade secret theft or misappropriation – which could lead to an increase in litigation. Employees might use knowledge from their previous employers in a new position or even to start their own business.
This has happened before in the economic crisis between the years of 2007 and 2009:
- During the crisis, there were roughly 770 to 1,100 lawsuits over trade secrets filed; and
- After the crisis, from 2013 to 2015, that number increased to between 7,000 to 9,000 cases.
This precedent could serve as a warning that the risk of litigation could indeed spike again.
BUSINESS OWNERS SHOULD ACT NOW TO PROTECT THEIR TRADE SECRETS
When it comes to trade secrets, business owners likely already have strict policies in place to protect them. However, with the potential risk businesses could face in the coming years, they must review these policies.
Business owners should:
- Properly label confidential information;
- Train employees how to handle trade secrets; and
- Reinforce cybersecurity measures.
If business owners do face trade secret litigation, they must still take action to protect their trade secrets. If a case goes to court, the California Uniform Trade Secrets Act requires business owners to reasonably identify their trade secrets before discovery. Of course, there are measures in place to protect trade secrets from the public record, but business owners must still be vigilant at every step.
