By Kuo-Ming Huang, CSO and Senior Partner of Formosan Brothers, Attorneys-at-Law.

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In trade secrets practices, when defendants are in court, most of them would claim, “My company never told me these are trade secrets!” “My supervisor told me to bring the materials home to work overtime. I never knew these materials are so important.” Setting aside the discussion on whether these claims are reasonable, one thing we can see from these claims is: Many businesses still have not grasped what a “reasonable” protection measure is (hence the employees may intuitively think: If protection measure is so lax, how could these materials be important?) In addition, one might find that some businesses are not sure what trade secrets they have inside their organization. (Hence, when you ask the employees where their trade secrets are, they do not know either.)

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How do businesses identify their trade secrets (and take it further to inform their employees of what their trade secrets are so their employees will be careful with the trade secrets)? This involves taking inventory of the trade secrets, and there are many complicated details and steps to it. Here, we will provide a brief introduction about some important and doable steps:

I. Confirm department organization and the number of departments: Trade secrets exist inside individual departments. To find all the trade secrets of a company without any omission, one needs to examine the company’s organization to distinguish individual departments and the number of departments.

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II. Interview department heads: Since someone not legally-trained does not know the legal implication of trade secrets, it is necessary to let department heads know what trade secrets are through interviews with each department head and ask them to provide a prospective inventory of trade secrets in their respective department. An important part of this step is: to understand the department head’s view of possible impact on the work efficiency of the respective department once the protection measures are established and how to strike a balance between taking the measures and work efficiency. (Details regarding this point are omitted for the sake of brevity.)

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III. Review inventory: After making an inventory of the largest scope of trade secrets, one needs to further examine if there are any omission or excessive coverage.

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After making an inventory of trade secrets, the next question is, how do we protect them (so that no employee will say, “I didn’t know this is a trade secret!”)? This step involves something that is difficult to define in practice, that is, “What is a ‘reasonable’ protection measure for trade secrets?” With respect to this, a court found, “Subjectively speaking, the owner of the trade secrets needs to be willing to protect the trade secrets, and, objectively speaking, he/she/it needs to take proactive actions to protect the trade secrets and make others understand that he/she/it is subjectively willing to treat such information or technology as secrets and protect and control such information or technology with measures that prevent unauthorized access.”

However, in a certain degree, it is still difficult to comprehend what measures are “reasonable” to protect trade secrets. As a result, when businesses search online for relevant information, they would find that there seem to be hundreds of protection measures. Do we need to do all of them? Do we need it to be so leak-proof? If we need to implement all the measures, it would be very hard to get work done!

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To answer the questions above, we need to go back to the above-mentioned court’s finding. That is, with respect to trade secrets that have been inventoried, a business must, through implementing each objective protection measure, let its employees know that the business subjectively desires to treat such information as trade secrets. In practice, we recommend structuring the protection measures into three stages:

I. Prior to employment: Consider how employment contracts, confidentiality agreements, and non-competition agreements can be amended or designed.

II. During employment: Consider whether to implement employee training and protection measures for physical and electronic trade secrets.

III. After termination: Consider how handover procedures, termination interviews, and termination affidavits can be implemented and versed.

The design of the above-mentioned three stages (including the different tasks in each stage) has an important goal: to “remind” the employees over and over again what trade secrets are and which the possible trade secrets are. If they are involved in leaking trade secrets, there will be severe consequences.

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The pandemic has become more and more severe. Most businesses have transitioned to working from home. The purpose of this article is to prevent businesses from having their trade secrets leaked or taken away on purpose when they already need to deal with changes brought by the pandemic. Moreover, we would also like to remind businesses, when they implement trade secrets protection measures, in addition to the aforementioned inventory, and the three stages of protection, one also needs to note that different industries require different degrees of protection; different companies in the same industry may have different organizational cultures. You do not need to complete everything in one go; you can take it step by step. At the same time, you also need to take into consideration your operational efficiency. Do not sacrifice your operational flexibility simply to fulfill a wish to implement a “complete” system.

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(This article was published in the Expert’s Commentary Column of the Commercial Times. https://view.ctee.com.tw/business/29647.html)