Theft of Trade Secrets: Compliance Programs

by ParkmanLaw on March 27, 2013

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Because the Federal Economic Espionage Act applies to the presence of unauthorized data within a business, firms must be vigilant not only in guarding their own trade secrets but in protecting against “inward leakage,” that is, the flow of sensitive data into a business enterprise via employees, consultants, or even vendor sales personnel. The most effective way a company can achieve both of these objectives is by creating and implementing a compliance program. Often, the mere existence of such a program can help to avoid prosecution.

Who should create a compliance program?

The need for a compliance program is a function of the organization’s exposure. A high visibility company in a competitive market faces a higher chance of rivals reporting perceived violations. A company with a focus on technology and information is also more vulnerable, both to inward and outward leakage. A company experiencing rapid growth through hiring exposes itself to potentially infectious information, as does a company with heavy reliance on consultants and temporary workers. Other high-risk activities include joint ventures, outsourcing, and foreign operations.

What are the objectives of a good compliance program?

The first objective of any good compliance program is to prevent the introduction of unwanted sensitive information. This is the program’s most important aspect, and if achieved, can prevent any successful litigation by rivals in the area of trade secret theft. The second objective is to protect the company’s own valuable secrets. A third goal is to increase the likelihood of early discovery and reporting of problems. Fourth, the program should be aimed at protecting against criminal exposure. Finally, the plan should aim toward avoiding liability in civil litigation.

What are the elements of a good compliance program?

First, the program should have a custom design. There is no “one-size-fits-all” solution; instead, a factors like company size, business risks, past history, and industry standards must be considered. Second, the program should include standards of conduct and discipline. By establishing procedures for employees to follow, a company can not only create a list of prohibited activities, but proscribe what is expected in the event a problem is discovered. Third, high-level personnel should be involved in defining and enforcing the plan. A program run by low-level employees will not often impress a judge or prosecutor. Finally, the plan must be effectively communicated, implemented, and monitored.


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