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Trade Secret Theft Accounts For Up To 3 Percent of GDP

By Jenny Tsay, Esq. on March 06, 2014 | Last updated on March 21, 2019

A recent study by PricewaterhouseCoopers US and CREATe.org found that the theft of trade secrets amount to one to three percent of the United States GDP.

According to the study, malicious insiders are the number one source of exposing trade secrets. The loss from occupational fraud amounts to about $3.5 trillion worldwide. With the significant economic impact of trade secret theft, what can a company do to better protect its trade secrets?

Malicious Insiders

Malicious insiders are often current and former employees that have insider access to your company's information. Third parties that are privy to business information, like outside counsel, consultants and suppliers can also pose a threat, according to the study. Insiders are likely to be persuaded by outside actors who promise money, gifts, or ideological motivation.

The good news is that courts are willing to take action against these trade secret thieves, but having a solid workplace policy in place is needed.

How To Protect Your Trade Secrets

Although 18 U.S.C. §1832 punishes people who steal trade secrets, the best way to protect your proprietary information on the front lines is to mitigate potential threats. The PwC and CREATe.org study recommends these five steps:

  1. Identify trade secrets. Key stakeholders and executives should be charged with determining what constitutes a trade secret in your company and then find, document, and inventory those assets.
  2. Conduct a threat and vulnerability assessment. Fully understand the markets your business operates in, especially if it's a global operation. Employees from different areas may have various motivations for stealing trade secrets, so it's important to understand the goals of potential threats. Then be honest about the efficiency of your current protection system and make changes if necessary.
  3. Rank your trade secrets. The trade secrets that if revealed will have a devastating impact on the company should be managed with the utmost caution. This means that only the key players should be privy to it.
  4. Analyze potential loss. Potential loss can be both monetary and reputational. By having an idea of what the potential loss is, companies can implement a worst-case-scenario plan in the event that there's a breach.
  5. Secure trade secret portfolio. Sometimes NDAs aren't enough, so make sure that the company's IT system is constantly updated and equipped with the latest security technology. Proprietary projects can be broken up into segments, so no employee has complete access to the final product.

Bottom line: Trade secret theft has a serious impact on the GDP and your company, so it's a good idea to revamp your company's proprietary information policy to address potential threats.

Editor's Note, March 1, 2016: This post was first published in February 2014. It has since been updated.

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