Coca-Cola 's recipe is one of the
best kept secrets in the world. Developed by a pharmacist, it has been closely
guarded and known to only a few privileged employees for more than 100 years.
Coca-Cola built a successful global brand on it, and competitors have fiercely
hunted it. Similarly Col. Sanders' secret recipe of 11 herbs and spices for KFC
and the formula for WD-40 are also both closely kept secrets that
have helped to build their companies' flagship products.
Unfortunately many executives don't even
know what trade secrets are, much less how to protect them and, as a result,
use them. It's a term that's often thrown around in legal meetings, but the
truth is trade secrets are complex and can have an extraordinary impact on a
company's bottom line. They are extraordinarily valuable information for a
company, yet often company employees, including officers, do not understand how
best to keep them, well, secret.
If a trade secret is poorly managed a
company can quickly lose its competitive advantage: What would happen
to Coca-Cola if someone figured out a way to replicate its secret
recipe and posted the formula on the Internet? So then, what can you do to
effectively monitor your trade secrets? How do you ensure your company's
secrets are kept safe?
First you need to understand what a
trade secret is, since you can't protect something you don't know you have. For
the C-suite, trade secrets include any privileged information that can provide
your company with an advantage in the market. That may encompass customer
identities and pricing information, current research projects and even failed
projects. In the case of WD-40 , the product's name comes from the
40th try by scientists in 1953 to come up with a "water displacement"
formula for a rust-prevention solvent and degreaser for the aerospace industry.
Not only is that formula a trade secret, but so are the formulas and work that
went into the preceding 39 attempts. If a competitor learned about those failed
attempts alone, it might still save a lot of research and development time.
Next the C-suite needs to understand who
has access to its trade secrets, particularly the difference between corporate
insiders and outsiders.
Corporate insiders are people and
organizations with a legal obligation to the company. Of course employees are
legally obligated to hold a company's proprietary information in confidence and
not to copy, disclose or use the information for their own benefit or the
benefit of others. But insiders also include third parties such as contract
employees, consultants, suppliers and customers.
Outsiders are everyone else. They have
no legal obligation to hold a company's proprietary information in confidence.
They are strangers who include the general public and also more sophisticated
parties like competitive intelligence professionals, hackers, reporters and
competitors.
Companies go to great lengths to protect
their prized secrets. KFC recently built a brand new, high-tech home for the
colonel's handwritten Original Recipe from 1940. The new FireKing digital safe
weighs more than 770 pounds and is encased in two feet of concrete with a
24-hour video and motion-detection surveillance system. That kind of security
wouldn't be needed if people didn't try to steal the recipe.
To be able to protect your secrets, you
need to understand how people can get at them. Imagine a fence built around
your office. The fence represents the company's security measures, and within
it is where proprietary information is developed, used and stored. Insiders move
freely in and out of the office, while outsider entry and exit is carefully
controlled. It is easy to see how in such a situation insiders and outsiders
alike can gain access to trade secrets. When insiders move in and out of the
company, proprietary information moves with them--in their minds, in portable
computers and in media such as drawings, CD-ROMs and USB flash drives. Outbound
mail, courier and parcel shipments can also allow proprietary information to
leave the office. Outsiders are often let in, usually with badge systems and
escorts, and they may gain access to proprietary information while they're
inside the company.
It would be easy to keep your information
secure if you eliminated all avenues of information transfer, such as your
Internet connection and mail services, and prohibited outsiders to visit the
company. You wouldn't have security problems then, but you would destroy your
ability to conduct business. Besides, you'd still have to let your employees go
home at night, and they carry proprietary information in their heads.
Not every company can lock its trade
secrets in a vault, as with WD-40 and KFC. There is no silver bullet for trade
secret protection, no hardware widget or software program or canned process
that you can buy to make you safe. But the basic solution is simple: You must
use your employees to protect your secrets. And since you already pay them,
that incurs no additional out-of-pocket cost. Employees are the foundation of
an effective trade secret protection program.
A successful strategy requires that all
employees participate and that management unambiguously and explicitly expound
a trade secret culture. You can't just name a few employees as a trade secret
protection group, or install some new security product, while the rest of your
employees continue business as usual. You must enlist the support of every
company employee to work toward a culture of full trade secret awareness.
Cultural awareness is much more effective
than mere employee training, especially new-employee training, for a single
learning experience fades from memory over time while a healthy trade secret
culture reinforces itself. But if the C-Suite often doesn't understand trade
secrets, employees are even more confused. For a trade secret culture to be
effective, management must very effectively convey its goals to employees. This
requires much more than "Here is the new proprietary information
policy--read it, sign here and return it."
Senior managers need to work to make sure
employees understand what the company's trade secrets are and what their
responsibilities for them are. They need to know that risks to the company's
secret information are risks to its revenues, earnings and share price, and
ultimately to their own jobs. Management's efforts to protect the company's
trade secrets are efforts to protect the employees' jobs, their stock options
and their pensions. The employees have to know that.
They also need to be reminded that any
type of company information can be a trade secret, including supplier
identities, upcoming price changes, R&D activities and corporate
policies--anything that can help a competitor compete against the company. In
this era of high technology, employees also need to understand that any
unsecured e-mails may be intercepted, any conversation may be overheard and any
computer screen in a public place may be read. Diligence and common sense must
be part of the trade secret culture. Once a secret is divulged, no matter the
reason, it is lost forever.
If employees understand their part in an
unambiguous and committed trade secret culture, company information security
policies will more likely be accepted and followed. Without that understanding
all the company policy manuals and policy communications in the world will be
worthless. Embodiment of the culture at every level of management will help
employees understand your expectations. Not every CEO needs to ride into Times
Square on the back of a horse in a suit of armor with his trade secret formula
safely in hand--as did Garry Ridge, president and CEO of WD-40, on his
company's 50th birthday. But it sure doesn't hurt.
R. Mark Halligan, a partner with the law
firm Nixon Peabody, has developed an extensive practice as an intellectual
property litigator focused on protecting and enforcing trade secrets. David
Haas is a senior managing director in FTI Consulting's forensic and litigation
consulting segment and is based in Chicago. The views expressed in this
article are those of the authors and not of FTI Consulting.
Source:https://www.forbes.com/2010/02/19/protecting-trade-secrets-leadership-managing-halligan-haas.html#1d93e78f1372
