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How to protect your most important corporate trade secrets amidst rampant economic espionage

Kingstone tours the country touting the dangers of trade secret theft — particularly the threat posed by the Chinese. Former FBI agent James Laflin, another participant in Kingstone’s presentations, says that the PRC is “the country responsible for more than 80 percent of all counterfeiting and the likely culprit for most of the trade secret theft in this country.” 

“It ‘feels’ as if there is more enforcement going on, and I think the FBI is doing its job, but in terms of actually putting these people in jail, we are falling short,” Kingstone says. “We need to be locking up these Chinese business executives whose companies regularly pirate American products. We should arrest them at trade shows in the United States and start parading them in handcuffs on TV, and trust me, they will get the message that the cost of stealing American intellectual property exceeds the benefits. Right now, they still have everything to gain and about nothing to lose by stealing our technology.”

Trade Secrets Defined
What is a trade secret, exactly? According to the law, a trade secret is information with independent economic value — like blueprints, chemical formulas, research and development, marketing strategies, and manufacturing processes — that the owner has taken reasonable steps to keep confidential.

In 1996, Congress passed the Economic Espionage Act to protect trade secrets from criminals and foreign governments in order to preserve the health and competitiveness of the U.S. economy.

The Theft of Trade Secrets Clarification Act of 2012 amends the Economic Espionage Act to apply the prohibition against the theft of trade secrets intended to be used in interstate commerce. Prior to this amendment, a trade secret was narrowly defined as “related to or included in a product that is produced for or placed in interstate or foreign commerce.”

“Economic espionage robs our businesses and inventors of hard-earned, protected research, and is particularly harmful when the theft of these ideas is meant to benefit a foreign government,” Assistant Attorney General Lanny A. Breuer of the FBI’s Criminal Division said in a statement regarding the General Motors theft case above. “The protection of trade secrets and all intellectual property is vital to the economic success of our country, and our leadership in innovation.”

What can American companies do to prevent this sort of theft? Ray Mislock Jr., former FBI special agent and DuPont CSO turned private consultant, recently outlined strategies to mitigate the risk at an ASIS Intl. educational session.

Mislock warned that, while a majority of cases involve the Chinese, trade secret theft is by no means localized to American multi-national companies. “This is not just about China — Russia and other countries are also involved,” said Mislock, head of Pamir Consulting LLC. “We are only just beginning to feel the first tremors when it comes to trade secret theft. The major earthquake hasn’t hit yet.”

How to Protect Your Trade Secrets
The first goal of creating an organizational policy for protecting trade secret should be to “find and protect the ‘crown jewels’ in an organization,” Mislock explained. The crown jewels can take many forms: it may be a business trade secret, such as a strategic business and marketing plan; it may be a technical trade secret, such as the hybrid car technology mentioned above; however, “not every trade secret is of equal value,” Mislock added.

Thus, the most important information — the most sensitive assets of your organization — must be protected first. To protect trade secrets, an organization needs both a tactical and strategic response, Mislock said. The tactical side comes down to your organization’s internal response to incidents and thefts — this response must include a full investigation, with subsequent litigation and referral to law enforcement. Part of this process involves organizational “due diligence” — that is, performing detailed background checks on partners, contractors, and of course, employees.

“I think we are all knowledgeable and capable of hardening our firewalls and protecting against hackers who are trying to steal customer lists or blueprints off the internet,” Kingstone says. “Obviously, we are all putting locks on our doors — some with keypads, some with swipe cards, some with biometrics — but the thing you really need to protect, the Achilles’ heel of all businesses, is the insider threat.