We are bound by the secrets we share

In our second blog on trade secrets, we highlighted the importance of maintaining and enforcing an internal trade secret policy in order to prevent IP leakage via employee carelessness. But equally as important is the necessity for an external trade secret policy, particularly when embarking on partnerships and joint ventures (“JV”) – or even attending conferences and exhibitions, as we found out whilst attending the Offshore Europe conference this fall. Walking around the mammoth venue, we couldn’t help but overhear eager attendees and vendors sharing potentially valuable information with one another with little regard to how it might affect their company’s bottom line. Start-ups and SMEs are particularly prone to this type of behaviour, simply because they are developing and licensing technology to multiple parties and/or looking for third party collaboration, during which they might divulge some key aspects of their technology or innovation.

But a joint venture can be a great vehicle for business expansion, development of new products or moving into a foreign market, all while sharing the costs, operating risks and profits. Your business might have strong potential for growth and key intellectual property assets ripe for commercialisation, and joint ventures or partnerships could provide you with increased resources, greater capacity, increased technical expertise or access to established markets and distribution channels.

Nonetheless, joint ventures pose a tremendous challenge in relation to trade secret protection. Parties frequently enter into a joint venture because they have complementary technologies and operate in different market sectors, leading parties to (sometimes incorrectly) assume that information disclosed within the contours of the joint venture will not be used in direct competition. In practice, however, the majority of “strategic” partners present a particularly high risk factor to the loss of trade secret information. While your company may have a strong internal trade secret policy that is continuously assessed and enforced amongst its employees, entering into a partnership means that you are now reliant on the other company’s knowledge and protection of IP – both theirs and your own.

In practice, it may be your partner that unknowingly leaks a key trade secret at a conference as they enthusiastically narrate details of a developing project to a large corporate or investor – which, it should be noted, could undermine any future patent applications your company may plan to make. Or perhaps they will utilise that key know-how which underpins your company’s competitive advantage in subsequent research and development partnerships with other third parties. Whatever the particular situation may be, it is crucial that your trade secret policy extends to external concerns and goes further than just the legal stipulations contained in your confidentiality agreement.

The first step in maximising efforts to prevent loss of trade secrets is much the same as we wrote about in our previous blog, but it bears repeating. Identifying trade secret information is crucial, and less obvious than you might assume. It is a methodical process which involves mapping all of your company’s IP and classifying which of those recognised IP assets would qualify as a trade secret – we’ve learned from personal experience that companies often fail to realise that they have more IP than they think they do, and that some of the information they freely share, both internally and externally, are critical trade secrets which underpin their competitive advantage.

Marking this confidential information, and making sure that this process is repeatedly enforced, is also a critical step. Not only do identification and marking help you identify who may have access to that critical information and how it is shared, but it can also help prevent your collaborator from claiming that they discovered your trade secret independently or contributed to the conception of your trade secret. Stressing the importance of marking confidential information to your partner – and insisting that neither one of you veer away from these requirements as the project continues –as well as including a provision for the protection of trade secret information even where it is not properly marked will help instill that same culture of trade secret awareness and protection in both companies.

While there are inevitably steps you can take to make sure your partner understands the importance of maintaining trade secret confidentiality, you would nonetheless be wise to operate on the assumption that your joint venture partner will eventually discover the gaps in your security measures. No matter how long the relationship continues, treat your strategic partner like any other third party who may be seeking to discover your trade secret information – limit and record access to your trade secrets and provide information only on a “need to know” basis, amongst other things. And much like you would do with a departing employee, be prepared to take the same measures with a former joint venture partner upon the termination of relationship. This can include asking the relevant party to sign a certification stating that confidential information and property received in the course of the project has been returned and/or the acknowledgement of their ongoing confidentiality and non-disclosure obligations. As we stated in our previous blog, it is not enough to merely have a policy – emphasising the importance of the policy, until it becomes a natural part of your company’s culture, is the most effective means of protecting your trade secrets.

Remember, “three may keep a secret… if two of them are dead.”

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