A game of secrets
Trade secrets protection has become to resemble a strategic game, with each move requiring a legal team with the insights and boldness required to win the best outcome for their clients.
Coca-Cola’s recipe, the Big Mac’s sauce, Google’s algorithm: all have captured the public imagination as definitive, even iconic trade secrets, with safeguards posing insurmountable obstacles to anyone who might dare some foolhardy theft.
But the reality facing most trade secret owners is quite different. Increasingly, these intangible assets, especially in the fast-moving tech sectors, are becoming easier to access, infiltrate—and to steal.
A June 2021 report published by The Economist Intelligence Unit, “ Open secrets? Guarding value in the intangible economy”, showed that the cost of trade secrets theft had reached up to $1.7 trillion annually, and that corporate executives expect the risk of trade secret theft to rise further over the next five years.
Yet despite this risk, nearly half (45%) of senior corporate executives surveyed and located in China, France, Germany, Singapore, the UK and the US, had failed to implement strategic measures to protect their trade secrets.
Players and pawns
Sophie Eyre, co-head of Bird & Bird’s international dispute resolution group, is emphatic about the threats involved and warns that players are applying the “full gamut” of tactics when it comes to trade secrets theft.
“We are seeing a ‘mixed bag’ of risks ranging from covert external breaches and disgruntled employees determined to exact revenge to inventors or co-founders who genuinely believe that the trade secret is theirs to take,” she explains.
And many players in the trade secrets world are becoming more ingenious in their efforts—especially if they have an axe to grind.
“There are a lot of games being played, and a lot of lies being told as well. When emotions run high, the trade secret dispute can become akin to a hostile divorce in which data, like children, are used as pawns. In these scenarios, we even sometimes see the alleged thief threatening to release the information to the competition, and ruin an initial public offering (IPO),” observes Eyre.
Corporate espionage is also a constant, if rarer threat, than that posed by disgruntled, or simply naive, former employees.
For example, tech company Appian found that Pegasystems had collaborated with a contractor in a scheme, code-named ‘Project Crush’, whereby a spy infiltrated the company and stole confidential information.
In May, a Virginia court delivered a record $2 billion jury verdict in favour of Appian’s lawsuit centring on corporate espionage and trade secret misappropriation.
By presenting a wealth of evidence, Appian convinced a federal jury that the plot had cost it 201 customers over eight years, which led to software company Pegasystems being “unjustly enriched” by $479 million.
According to Carolyn Hoecker Luedtke, partner with Munger, Tolles & Olson, this landmark case underscores that the presence of sensational details in a case—underpinned by solid evidence—could lead to a draconian penalty.
“One lesson from the Appian verdict is that when a plaintiff is able to uncover these types of ‘sensational’ facts, it can lead a jury to want to punish the defendant, and the flexibility of trade secret remedies allows for some pretty staggering numbers to serve as punishment,” she explains.
Senior corporate executives who failed to implement strategic measures to protect their trade secrets
