Protecting trade secrets: guidance in the competitive thicket

Change the oil every 3,000 miles, file your tax receipts neatly, stick to your budget - these are things people are constantly advised to do, yet often don't carry out.

Such is the nature of Robert Spanner's stump speech to Silicon Valley entrepreneurs: Protect your trade secrets, too, he warns; they are the life of your business.

Yet the middle managers who leave their old companies to form new ones rarely consider the idea, says this lawyer from Palo Alto, Calif. ''They are technical professionals - they don't know about this stuff.''

Spanner, a partner in Beckford, Spanner & Kelley, has just written a book, ''Who Owns Innovation?'' In a recent swing through Boston, he explained why this question is not so easy to answer and why now is the time managers should be asking it.

America is transforming itself from an industry-based economy to an information-based one, ''where trade secrets are more numerous,'' he says. As competition in general heats up, a company's tricks of the trade - whether they be customer lists, marketing strategies, or technical formulas - become more valuable to them and competitors.

Yet Spanner is frustrated by the fact that while trade-secret protection is becoming more important, the interpretation of trade-secret law is inconsistent.

Such fuzzy questions as whether an employee has stolen a company secret or is just relying on stored-up knowledge gained from a professional career are settled differently from judge to judge, he says.

Unlike securities law and antitrust law, the outcome of trade-secret cases is determined by case decisions made in the past, not according to some unchanging statute.

Thus, he writes, ''it is not uncommon for two courts to apply the same legal principles to similar facts and arrive at precisely the opposite conclusions.''

This makes planning to avoid litigation tough, but not impossible. A litigation ''on the cheap'' costs at least $100,000, and ''companies just starting out don't have $100,000,'' according to Spanner.

It also costs in terms of company reputation, diversion of executive effort, and difficulty in raising capital. Yet for the companies that fear losing secrets, and those that fear getting socked with a suit, there are inexpensive steps that can be taken.

Like most ideas that are going to get anywhere in a company, the idea of security starts with top management support, Spanner says. He recommends that companies do regular information audits, determining what information is valuable to competitors, and then decide what's possible to protect.

This effort is ''an eternal vigilance,'' he says, and should be someone's direct responsibility, though it doesn't have to be a full-time job. That person would keep an eye on all places where information could leak.

At the same time, there should be frequent communication with employees - not in a policy guide but face to face, making sure it's understood. He says employee stock ownership is a real incentive that helps keep confidential information under wraps.

On the other end, companies that could easily wind up accused of stealing trade secrets can cover their bases.

First, says Spanner, a company should keep the job-search process aboveboard.

''You don't want the search to look like an effort to hire Frank at your principal competitor, as opposed to hiring any employee in the general market,'' Mr. Spanner says.

New employees should get a letter stating that the company expects them to honor confidentialities of previous employers and the new one. The new people should be told not to bring anything to the new company from the old without written permission from the previous employer.

Finally, he says, if there are obvious areas of research the employee's old and new company are working on, that work should be given to others.

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