Three steps business leaders must take to protect valuable information.

• Author: Durham, Joshua B.
• Position: LAW JOURNAL 2073

Trade secrets are being stolen from U.S. companies at an astonishing rate, and the greatest threat is coming from corporate insiders. According to a survey released by Mountain View, Calif.-based Symantec Corp., a national leader in the data-protection business, more than 50% of departing employees carry their employers' business information with them when they leave. That's a remarkable rate, and a statement issued earlier this year by the Obama administration reports that the pace of these thefts is increasing. The administration also correctly points out that such theft "threatens American businesses, undermines national security and places the security of the U.S. economy in jeopardy."

Unfortunately in North Carolina, where manufacturing plants, technology companies, medical centers and research institutes help power the national economy, many businesses are not doing enough to protect their valuable information. Corporate officers and directors must change that. They have a fiduciary responsibility to act in their companies' best interests. This includes ensuring that business information is protected from corporate insiders who could use it to gain an unfair advantage over competitors.

What is a trade secret?

The first step toward better protecting trade secrets requires that business leaders understand what a trade secret is. Trade secrets are the "secret sauce" that distinguishes one company from another, and any business that believes it has an advantage over its competitors most likely owns information that is a trade secret. The U.S. Commerce Department affirmed this last year when it stated, "Innovation has a positive pervasive effect on the entire economy, and its benefits flow both upstream and downstream to every sector of the U.S. economy. Intellectual property is not just the final product of workers and companies--every job, in some way, produces, supplies, consumes or relies on innovation, creativity and commercial distinctiveness."

Trade secrets can include, but are not limited to, manufacturing processes, formulas, marketing and business strategies, customer lists, training programs, search algorithms and recipes. The information can be a trade secret as long as it is of a business or technical nature and derives value from not being generally known. North Carolina, like most jurisdictions, also requires that the information cannot be readily ascertainable by independent development or reverse engineering. Finally, the...