Theft of Trade Secrets: Can You Stop It?

One unhappy former employee could mean nightmares for your company. Learn how to protect your secrets.


There is an epidemic in the business community. Few see it, few recognize it, and even fewer know how to combat it. It is not deterred by many of the measures put in place by most security professionals, and it can significantly impact an organization's ability to conduct business. This epidemic is the theft of trade secrets. It happens on a regular basis, and it is on the rise due to the fact that nearly all of our business documents and communications are in electronic format.

It is extremely difficult to keep track of all versions of all files and to keep tabs on the activities of traveling employees when they work on their laptops while on the road. Many people have multiple e-mail accounts?both business and personal. It is a trivial matter for an individual to forward confidential and proprietary files to a personal e-mail account. This may be done without any malicious intent; many people work at home on a regular basis. As a speaker and a writer I have copies of everything I have created stored at home both on CDs and my home computer hard drive. If I were devious, it would not be difficult to do the same thing with confidential and proprietary documents and files. With a business downturn these same documents could be used as a bartering tool for someone seeking employment with a competitor.

We have worked many cases that exemplify the current problem with theft of trade secrets. One intriguing case involved the lead salesperson for an international company. He was upset because he thought his compensation was not at the appropriate level. He left his employer to work for a direct competitor. On the surface this does not look like a significant issue, but due to poor security measures on his previous employer's network this person had access to all of the proprietary research and development files along with all of the marketing and sales plans. Upon examination of his computer we discovered a deleted personal e-mail in which he promised the competition that he would provide them with as much proprietary information as possible if the competitor would hire him.

Another example involved the vice president of a division of a Fortune 500 company who decided to work as CEO of his division's direct competition. His compensation package was doubled and included a 50 percent signing bonus. Do you think he received this generous compensation package solely on his merits as a businessman? When examining his laptop we discovered duplicate copies of several documents: one copy on his previous employer's letterhead, the other on his new employer's letterhead. We even found a deleted memo that included a marketing plan in which the new CEO was tasked with reaching out to all of the clients of his previous employer to earn their business.

In a final example, a company announced a downsizing. The following day a corporate executive was seen copying a great deal of information to CDs. The day after that the executive left, along with about half a dozen other employees. It was soon discovered that that team of people was now working for the competition. Why was this a concern? The previous employer had developed a brand-new product line that would give it an edge over the competition. The competition now had all of the design plans and specifications for the new products, along with the engineers that designed them.

When an employee leaves his employer to work for the competition and brings trade secret information with him, he is providing the competition with an unfair business advantage. There are laws in place that are designed to protect trade secrets. One is the Uniform Trade Secrets Act, which is a federal law, but most states have adopted similar legislation and the Economic Espionage Act of 1996.

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