If one of your trade secrets is stolen, are you prepared to promptly respond? In particular, are you prepared to promptly (1) investigate the theft, (2) attempt to prevent the loss of the trade secret (through, e.g., unauthorized public disclosure), (3) attempt to mitigate or avoid other harm to your operations and (4) pursue appropriate legal action as a means to, among other things, achieve some or all of the goals of step nos. 2 and 3?
Each of the above four steps is undoubtedly important and warrants its own discussion. The focus here, however, is on being prepared to promptly pursue appropriate legal action.
Legal actions come in two basic flavors: (a) a civil lawsuit and (b) a criminal prosecution. A criminal prosecution based on trade secret theft is typically initiated after the trade secret owner enlists the assistance of law enforcement (e.g., the Federal Bureau of Investigation (FBI) or U.S. Attorney’s Office).
While there are certain, fundamental documents and information that a trade secret owner should have in hand before filing a civil complaint or seeking the assistance of the FBI or U.S. Attorney’s Office, one often overlooked and important item to have in hand can be the value of the stolen trade secret. You may be thinking that, in a legal action, the value of the trade secret is needed only when the company is preparing its damages case or the prosecution is seeking a certain penalty. In fact, the value of the stolen trade secret can be important information to have well before any action (civil or criminal) is even contemplated, and that is so for at least three reasons.
First, if the company properly has calculated the value of the trade secret before it is stolen, then the company wisely has put itself in a better position to implement appropriate protective measures, i.e., protective measures commensurate with the value of the trade secret. (In order for information to be a trade secret, it must be the subject of reasonable protective measures. Of course, reasonable protective measures may not prevent a determined thief from stealing the trade secret.)
Second, if the company properly has calculated the value of the trade secret before it is stolen, then the company will be better prepared to promptly and strategically assess and, if appropriate, pursue civil litigation subject to an appropriate budget.
Third, if the company properly has calculated the value of the trade secret before it is stolen, then the company will be better prepared to promptly approach the FBI or U.S. Attorney’s Office with a compelling case for swift action. In that regard, the U.S. Department of Justice (DOJ) has published a Checklist for Reporting an Intellectual Property Crime. Notably, for “Trade Secret Offenses,” the first substantive information that the DOJ’s Checklist seeks is a general description of the trade secret and “an estimated value of the trade secret using one or more of the methods listed below:”
(Reporting Intellectual Property Crime: A Guide for Victims of Copyright Infringement, Trademark Counterfeiting, and Trade Secret Theft (IP Victims’ Guide), pp. 21-22.)
Trade secret valuation can be part of effective trade secret management and, ultimately, effective risk management. Indeed, a trade secret owner who knows the value of its trade secret should be in a better position to more effectively protect its trade secret and, if appropriate, promptly and efficiently pursue legal action.
You can access the entire IP Victims’ Guide, as well as other Resources, on the Trade Secret section of our website.