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"Reasonable steps" are required to protect trade secrets

In May 11, 2016, President Obama signed the Defend Trade Secrets Act into law, strengthening the authority of business owners to protect their trade secrets and enhancing punishment of those who misappropriate proprietary information. The DTSA supplements the directives established in the Uniform Trade Secrets Act, a law adopted in all states except Massachusetts and New York.

Both pieces of legislation enhance the defense of corporations if those corporations can prove that they took "reasonable steps" to protect their proprietary information. It is incumbent on businesses to implement security measures, record the procedures set in place and adjust policies in order to best protect intellectual property. Documentation is necessary to substantiate claims that the corporation took reasonable steps should the business seek to defend a trade secret in court.

Here are three ways in which corporations can enhance their security:

1. Develop procedures to enhance non-disclosure agreements.

A study published in the 2010 Gonzaga Law Review reported that in more than 85 percent of trade secret lawsuits brought to state or federal courts, the individual accused of stealing trade secrets was either a former employee or a business partner. This finding highlights the need of businesses to develop their defense against threats that may develop internally rather than externally. Confidentiality and non-disclosure agreements are seen as one way to do just that. These policies need to be recorded and amended as needs arise.

2. Limit access to confidential information

In addition to updating software and password protection policies, companies should restrict access to proprietary information recorded in hard copy format and software code. An information technology team could be assigned the duty of developing this data protection system. As with other procedures created to strengthen confidentiality, these policies need to be documented as well.

3. Create a task force to assess threats to assets

Companies need a central control unit to monitor and assess risks to intellectual property theft. This group of individuals would be responsible for reviewing company security policies, ensuring that the procedures are being followed and addressing issues when they arise. Those within this group need to determine a best course of action to follow should confidentiality become compromised. Upon locating weaknesses in protocol or business hierarchy, the task force would remove the flaw in security.

While both the DTSA and UTSA are designed to amplify the power of corporations in trade secret disputes, they are not the only line of defense a company should utilize. In order to best protect against misappropriation, corporations need to develop their own system to secure classified information and document actions taken to secure this information.

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Robert Kaufman has been selected as a 2013 Top Rated Lawyer in ‘Commercial Litigation’ as will be published in the May issue of The American Lawyer & Corporate Counsel magazine.Alex Kaufman has been selected as a 2013 Top Rated Lawyer in ‘Commercial Litigation’ as will be published in the December issue of The American Lawyer & Corporate Counsel magazine.

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