Reed Smith Client Alerts

The COVID-19 pandemic has impacted companies and their workforces across the globe in ways that threaten critical trade secrets and other IP assets, and that require greater vigilance to protect them. The massive increase in the world’s remote workforce, as well as numerous terminations and furloughs, creates a heightened risk of theft or inadvertent disclosure of key company assets. And nefarious actors ranging from disgruntled employees to sophisticated hackers to foreign governmental entities will undoubtedly be looking to exploit systemic soft spots during the crisis.

As companies adjust to a new normal of indefinite duration, it is critical that they adapt, implement, and enforce their trade secret and IP protection policies to address the realities of the COVID-19 business environment. We address specific risks attendant to conducting business through remote workforces in this alert.

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The need for robust trade secret protection policies

Under U.S. state and federal law as well as the EU Trade Secrets Directive, a trade secret is generally defined as information that the owner has taken reasonable measures to keep secret, and that has economic value from not being generally known by others. Trade secret protection extends to a wide spectrum of information and technology, including research and development materials, technical know-how, source code, manufacturing processes and techniques, customer lists, marketing plans, business and financial information, and vendor information.

Unlike patents, trademarks and copyrights, which are formally registered with the government and thus presumed valid, trade secrets are not. Nonetheless, they often comprise a large portion of the value of a company’s IP assets – and sometimes secret technical formulae or processes represent the company’s “crown jewels.” But for IP assets protected under trade secret law, it is critical that companies take the necessary steps to keep them secret. Otherwise, companies risk not being able to enforce those rights in the event of theft.

Maintaining strict controls around company trade secrets is all the more important given the massive increase in IP theft in recent years, with increased security threats from new hacking technologies, competitors, supply chain vendors and contractors, and foreign state actors. A recent report to the U.S. Congress estimated total theft of U.S. trade secrets at anywhere between $180 billion to $540 billion per year.

Against this backdrop, having a robust trade secret protection program has become more important than ever, and the COVID-19 pandemic raises a variety of issues that companies should examine with an eye toward strengthening or adapting their internal controls and policies.