ChIPs Global although this time Summit Report 2: The DTSA and a system breach by hackers - what does it mean for your trade secrets?

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The DTSA panel shares best
practice to reasonably protect
your trade secrets

Although there is great reliance on patents, because software is becoming increasingly important in the context of whole system solutions, know-how is becoming incredibly valuable. Trade secret protection is therefore important.
Companies have to establish a whole system of policies. Because you are operating in a company where your engineers want to collaborate with numerous people across the globe, it is not always easy to physically control the flow of information between tens of thousands of people and products. There is no way to track them all, so we have to exercise control with policies.
Internal alerts are important so that you are notified when employees start downloading numerous files or any other activity that is not keeping with that user's profile.
Keeping logs is crucial. If you do not have detailed logs, you have no evidence.
Auditing is incredibly important. If you are being reasonable in your IT system protection, you should not legally lose your trade secret protection just because someone is more clever. But whatever system you have put in place, you need to check it periodically to make sure it is being implemented. You therefore need to establish internal audit processes to check the physical security (camera, swipe card access) and electronic access (to make sure people are following policies).

All of these considerations and measures will help to show, under the DTSA (like under state law) that you have taken "reasonable efforts" to maintain secrecy. Of course this will always be a grey area because reasonability will depend on the particular facts of a case. However, it was suggested that looking to the body of Federal Trade Commission law is a helpful starting point. Lily explained that a lot of companies are facing privacy issues and have to deal with obligations that the FTC is actively enforcing. If you are an IP counsel and you are looking into trade secrets issues, you should look into FTC enforcement actions as that area of law will give you a lot of information as to what is the bare minimum for what may constitute reasonable security measures from a consumer perspective. The FTC is not pushing forward a "gold standard" ideal, but the case law does provide you with an indication as to the "floor" of security measures.

The panel also cautioned about the security risk of laptop cameras. Just because you have a secure R&D room with swipe card access, physical monitoring with cameras and assurances that your engineers in the R&D room follow the letter of your trade secrets policy, this does not mean you are safe. For example, even if your engineers follow your instructions to disable the camera features on their laptops, this, we have realized, is not enough. This may still not be construed as a reasonable effort to secure your trade secrets, because their laptop cameras can be hacked into remotely without anyone noticing. The FTC has recently issued guidance on this.

The panel also agreed that having a trade secrets protection/security policy was better in showing that you were mindful of protecting trade secrets, than having no policy at all. However, the biggest vulnerability for plaintiffs is evidence that you have a policy but that you have not followed it. If you have hired a consultant who has developed a very sophisticated policy for your trade secrets protection, that you initially followed but then neglected, then that is going to be prima facie evidence that you thought protection was necessary but were then reckless with your own trade secrets. This is an easier route in for the defence in order to dismember your complaint than focusing on the reasonableness of the policy itself.

The panel closed by debating how the pleading requirements may change under the DTSA. For example, in California there are discovery rules that require a plaintiff to disclose trade secrets first. When plaintiffs do not have to disclose this information and the defendant is first forced to explain what it is that they are doing, it follows that the plaintiff immediately says that everything the defendant has done is trade secret misuse. What will happen under the DTSA? Well, the panel concluded, we need a case first.....