What should a business do if it thinks its trade secret has been stolen?

If a business believes an employee or competitor has misappropriated its trade secret, it should document who had access to the trade secret and consult with counsel about an appropriate course of action.  Detecting theft of trade secrets requires careful analysis, and that analysis becomes more difficult with the passing of time.  Any suspected theft should be acted on quickly. 

Assess Disclosure:  The first step in addressing the suspected theft is documenting who had access to the trade secret and when.  Ideally, the business will have a physical or electronic log that has recorded access.  But even if it does not, it can employ a third-party to perform of forensic analysis of access.  The forensic analysis may uncover other relevant information as well, such as the use of “wiping” software or other measures to obscure unauthorized access.  Documenting such access will help the business identify who disclosed the trade secret and how. 

Monitor Rivals:  After documenting access, the business should monitor the actions of any potential misappropriator for signs that it is attempting to profit from the trade secret.  Did a rival hire the business’s former employee, introduce a new competitor product after a short development period, approach different customers, or publicly announce a change in plans?  Signs of misappropriation will vary depending on the trade secret.  But suspicious actions on the heels of an unauthorized disclosure are potential evidence that the rival has gained access to a stolen trade secret.  

Set a Plan:  When a business has identified who had access to its trade secrets and who might be using them, it should develop a plan of action with counsel.  Often, informal action such as a demand letter can avoid protracted disputes.  But rivals may respond to informal action by destroying evidence and transferring assets in an effort to thwart any future lawsuit.  Counsel can advise about the risk of such action and whether it weighs in favor of seeking early legal relief, such as an injunction or even seizure of property. 

Because trade secrets are by definition confidential, accumulating publicly available evidence of their misappropriation can require painstaking effort.  Experienced counsel can help a business identify signs of misappropriation, convert those signs into compelling evidence, and protect the business’s rights to profit from its trade secrets. 

A party that has had trade secrets stolen usually, understandably, feels angry and frustrated.  It is important not to act immediately on those emotions and take steps that might ultimately harm the party’s case against the perpetrators.  A thoughtful strategy developed with counsel will provide the best chance for success.  This may take time, but “revenge is a dish best served cold.” 

To learn more about trade secrets and related business disputes, go to www.mololamken.com and follow us on LinkedIn.  “Brilliant lawyers with courtroom savvy” — Benchmark Litigation.  Copyright MoloLamken LLP 2022.

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