Trade secrets are some of the most valuable assets your company owns. Loose them and you risk losing your business. To see how big the stakes can be, look at the ongoing legal dispute between Waymo and Uber.
Waymo, the self-driving vehicle group of Google’s parent company, Alphabet, is seeking $2.6 billion from Uber in a dispute over one trade secret. That’s just one of several secrets that Waymo alleges Uber stole. The core of this case resides on allegations that a former Waymo employee, Andrew Levandowski, downloaded 14,000 confidential files before he left Waymo to start a self-driving truck company that Uber eventually acquired.
Regardless of the outcome, I refer to this case to illustrate the urgency of doing everything you can to protect your company’s trade secrets.
What Is A Trade Secret?
Trade secrets are information that are known only within a company by its employees, vendors and contractors.
They span a broad area, and can include manufacturing techniques; formulas and processes; inventions not under patent; research; custom software and hardware; hardware designs; meeting notes; even results from research that proved something did not work.
Internal documents also fall under the trade secret definition. These can include customer lists; sales forecasts; market analysis; competitive data; hiring plans; cost and pricing analysis, and more.
A trade secret must have an intrinsic value to a company, whether immediate, or in the future. It has to be something that a competitor would have to make a significant effort to copy.
But until a company says it’s a trade secret, it doesn’t necessarily mean that it is. A company must routinely communicate to employees, contractors and vendors that its internal information is confidential. Every reasonable effort should be applied to protections. Written policies and non-disclosure agreements signed by employees are a good first step to document these efforts.
Ohio Trade Secret Laws
Like many states, Ohio follows the Uniform Trade Secret Act (UTSA), which defines trade secret theft as misappropriation. This can include knowing, or having a reason to know, that there was some kind of improper means by which a trade secret was obtained. This can include outright theft, breach, bribery, or any form of inducement to break secrecy. It can also involve ex-employees who disclose information to a new employer without the consent of his former employer. In this case both the ex-employee and his employer would be involved in the misappropriation. There’s a three year statute of limitations on trade secret misappropriation. Once the misappropriation is known, a company has three years to begin legal action.
The Reason To Know Standard
This is where things get tricky. Ohio law prohibits a company from using a trade secret if it has reason to know that the information is a trade secret. The bottom line is, even though a company did not know that it’s in possession of a stolen trade secret, the courts can still prosecute as if it should have known.
Penalties For Disclosure and Theft
In Ohio, the courts issue injunctions to prevent trade secret disclosure. Punitive damages and financial compensation associated with unjust enrichment associated with loss of profits can also be applied.
In 1996, the Economic Espionage Act made the theft of a trade secret a federal crime. Fines can go up to $5 million along with prison sentences up to 15 years.
The Defend Trade Secrets Act (DTSA) was signed into law in 1996. It gives significant flexibility to law enforcement agencies, even allowing them to seize stolen trade secrets without advance warning.
DTSA is noteworthy. For the first time, private parties can pursue litigation in federal court if it involves international or interstate commerce. DTSA should result in more protection and enforcement for company trade secrets.
The Waymo Uber case brings two points into focus. Trade secrets can have immense financial value in the future. Second, mobile computing and the Cloud present a big challenge to keep trade secrets secure. And, Waymo and Uber know the stakes are huge, exemplifying the future value of a trade secret. The self-driving vehicle market is valued at billions of dollars.
There are important steps your company can take to ensure maximum protection of your trade secrets. Please contact me to discuss how I can assist you in this highly strategic area of your business.