Focus on Trade Secrets: In-House Counsel and California Prosecutors Talk Trade Secret Protection at Silicon Valley Symposium

While in-house counsel stressed the importance of proactive protection of trade secrets to try to fend off misappropriation and litigation, California state and federal prosecutors reminded attendees about criminal sanctions for trade secret theft which can serve as powerful deterrents to illegal conduct.
 
Intel Corp.’s General Counsel for intellectual property, John Schiffenhauer, stressed that while other forms of intellectual property (such as patents) are important, “[t]he focus is and should be on trade secrets.” His remarks to the audience focused on the efforts companies should take to avoid litigation over misappropriation of trade secrets. These efforts include:

• training employees on confidentiality;
• identifying trade secret information and then limiting employee access to that information; and
• making sure that companies’ trade secret protection policies stay current with changing technologies – such as cell phones and cloud-based file sharing platforms – which have the potential to make the misappropriation of trade secrets much easier than it ever has been.

Unfortunately, this excellent advice for preventing trade secret misappropriation is not failsafe, and no trade secret policy can guarantee that nefariously motivated individuals will be unable to access and steal a company’s “crown jewels.” We have previously written about the 2016 enactment of the Defend Trade Secrets Act (DTSA) and the creation of a federal civil cause of action for trade secret misappropriation. Both the DTSA, and pre-existing state laws based on the Uniform Trade Secrets Act, provide mechanisms for victims of trade secret misappropriation to seek and obtain injunctive relief and money damages. At last Friday’s symposium, California state and federal prosecutors reminded the audience that, in addition to the available civil remedies, victims of trade secret theft have the option to file criminal charges.
 
Santa Clara County sits in the heart of Silicon Valley, and is home to numerous well-known technology companies. Santa Clara District Attorney Jeff Rosen noted that since 1999, the county has only prosecuted nine criminal trade secret cases — despite the fact that barely a week goes by without the filing numerous civil trade secret cases in the local state and federal courts. He attributes the low number of trade secret theft prosecutions to a fear on the part of companies that if they report the criminal activity to law enforcement, they will lose control of the case and be the focus of adverse media attention. To allay those fears, a senior assistant U.S. attorney on the panel, Robert Morgester, reminded the audience that the DTSA allows companies to pursue civil litigation while the government is pursuing its own criminal case and that discovery can be shared between the cases. Both state and federal law enforcement agencies have established specialized units to deal with cases involving the alleged theft of trade secrets – Santa Clara County has set up a special task force designated to investigate and litigate charges, while at the U.S. Department of Justice the hacking and IP unit ordinarily is responsible for the prosecution of such cases. Companies’ counsel in civil litigation often works cooperatively with law enforcement as the cases proceed in parallel, which can result in greater efficiency and faster resolutions.
 
Arent Fox’s Trade Secret group incorporates a multi-disciplinary approach drawing upon the strengths of our Complex Litigation, Intellectual Property, Labor & Employment, White Collar & Investigations, Government Relations, and Privacy practices. We routinely counsel our clients regarding the drafting and updating of trade secret protection policies, and investigate and litigate trade secret misappropriation matters when the need arises.