Ongoing Debate: Should companies keep a running list of Trade Secret Assets?

The month of September was filled with Trade Secret Conferences including the Sedona Conference Working Group 12 (Trade Secrets) and Trade Secret IP Protection & Litigation: Boston. Both events were educational and thought-provoking. One topic was constant: should companies identify and document their trade secrets?

On October 2, 2023, in response to these ongoing debates,James Pooley released an article on IP WatchDog titled, “Trade Secret Management and the Fear of Missing Something.” Here is the link to Pooley’s article: https://ipwatchdog.com/2023/10/02/trade-secret-management-fear-missing-something/id=167574/

I have a few thoughts of my own to keep the conversation going:

I am neither the corporate attorney nor the litigator Jim refers to but a career risk management professional who helps companies spot and prepare for emerging risks. Then we craft an insurance solution.

·      I totally agree that trying to identify every single innovation asset that may turn into a trade secret will never happen. We only need the #crownjewels” to be identified in order to insure them, and by all accounts a company should be able to identify those with some specificity - certainly if they are important enough to litigate over or to tell your investors and Board about.  Yes, the database will have to be updated regularly but that task can be done once a week/month/quarter depending on how many assets you have.  

·      You have to be able to ID these assets “with the specificity of a patent” early in litigation according to most (if not all) of the judges we’ve had on these panels; how are you going to do that going backwards without spending millions of dollars in discovery and hoping your “reasonable measures” were good enough?  

·      Jim points out that you only have to use “reasonable efforts” which vary depending on several factors.  True. But I would bet we are going to start seeing cyber security experts called as witnesses around what is reasonable.  The “insider threat” is alive and well in the cyber world (at one point privacy breaches were caused by insiders more than 50% of the time) and therefore companies (and regulators) have developed strong protocols and standards that are expected now in the handling of PII or PHI.  I would argue you should use AT LEAST as robust standards for your Crown Jewels as you do your PII. 

·      If a company gets in the habit of documenting the innovation assets, they create all along the way, this documentation could prove to stave off patent infringement litigation from third parties (assuming you can show a year of independent development or something very similar).  

·      Once you’ve identified your “crown jewels” you can put a value on them. Then we can #insure them against misappropriation for both enforcement/litigation and forensic expenses AND indemnify you for that value.  $100m or more of insurance for a small fraction in premium against the odds of not successfully winning in litigation. I’ll take the insurance. 

·      If the average costs to take a trade secret action to trial are $4.2m and it takes on average 2.7 years (much higher for bigger secrets) then wouldn’t your company want to consider insuring that?  Would investors even allow you to try to litigate if you’re VC or PE backed?

·      Once you identify, value, and insure an asset, you should absolutely be able to borrow against it!  It’s a whole new ballgame then.  

Shout out to Gregory Bombard and the Greenberg Traurig, LLP podcast which featured these topics following the #tradsecret conferences as well.  It’s a great discussion.  Here is the link to the Greenberg Traurig Trade Secret Podcast: https://podcasts.apple.com/us/podcast/episode-57-takeaways-from-trade-secret-ip-protection/id1469596739?i=1000629189820