THE MAGAZINE

License to Steal

By Megan Gates

Many large companies prohibit employees from taking any device with company data into China or other high-risk countries. They will instead provide the traveling employee with a “dumb” phone or a smartphone from which all data has been wiped. Shrewd security executives advise employees to assume that their laptops, tablets, and smartphones will be compromised whenever they are out of sight in places like China. Some companies even discard the devices upon return, assuming that they have been planted with spyware or other types of malware.

Martinez recommends that companies have their security teams make sure that any computer equipment travelers do take with them is protected and discuss how to connect to networks back home, safely, if they need to while they’re abroad. “All of your most valuable trade secrets may not be at Fort Knox, or back in your well-guarded corporate headquarters in the United States,” he explains. “They could be with your employee on that laptop. So security managers really have to take extraordinary care in the systems they put in place to protect those trade secrets."

Legal Protections

The United States has a strong set of legal protections in place to enforce trade secret laws, but many other countries lack the same legal protections, according to Halligan. The United States, like Australia, Canada, and the United Kingdom, operates under a common law jurisdiction. This means that they have the right to discovery.

“So I can file a lawsuit in the United States, even before the misappropriation [of a trade secret] occurs,” Halligan says. In the United States, a business or individual can file a lawsuit if there has been a threat of a misappropriation of a trade secret. “And then I can serve documents…I can take depositions, I can build a record, and I can present to the court evidence that there has either been an actual misappropriation of trade secrets, or there’s a threat of misappropriation of trade secrets.”

This differs from other countries that operate under civil law, such as China, Germany, and Italy, where there is no right of discovery. “Unless you’ve got an open and shut case, almost approaching a criminal violation, you can file an action for trade secret misappropriation or file an action to protect trade secrets, but because you have no right of discovery, it’s very difficult to prove your case,” according to Halligan. “There’s no way to actually enforce your rights and get effective relief because time is of the essence in a trade secrets case. A trade secret once lost is lost forever.”

The difference in these two processes can be frustrating for American companies, so Halligan suggests that when a business engages in a partnership with an overseas firm, it puts all common law protections into their contracts. “In other words, you create, in essence, an American style within your contract in China, or elsewhere, where you define in the contract what a trade secret is, you define what constitutes a misappropriation, you define the penalties for each offense,” along with interim relief that can be awarded by the arbitration body of your choice, according to Halligan. “That way you don’t have to go into the Chinese courts; you can actually protect the trade secrets based on contractual rights you have.”
 

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