Industrial espionage is something that has been happening for the longest time. Companies spying on other companies, States trying to obtain technology from companies in adversary countries, criminals attempting to obtain valuable information to send it to the highest bidder…

This scenario is becoming increasingly complicated by the growing number of players on an international stage that is becoming more politically unstable. Moreover, it is further affected by the lower cost of conducting espionage operations in cyberspace as a result of the industrialisation of techniques and tools, which ranges from a few hundred dollars for the simplest operations, which can attack most small businesses, to a few tens of thousands of dollars, to which most companies may be vulnerable, as disclosed by reports on the matter showing that the percentage of companies capable of dealing with these threats is decreasing.

Considering that around 51% of companies in the EU with more than 10 employees focus their budget and efforts on R&D&I activities, the evolution of this threat is undeniably important. Furthermore, technological advances have been accelerating at a faster rate for at least a decade now, thus becoming increasingly important both for their geopolitical and economic impact.

In this context, companies are immersed in an increasingly fierce race to maintain their competitiveness and the strategic advantages required to protect their market share. All activity sectors are affected, of course; however, the Bio and Pharma, energy, digital services and manufacturing sectors are especially vulnerable.

Anyone who still thinks that espionage only happens in James Bond films is at a serious disadvantage, in addition to taking potentially critical operational risks for their business. The trend of dematerialising company assets began 50 years ago, so that now more than 70% of the value of companies resides in intangible assets (they represented less than 20% 50 years ago).

One very significant part of the value of these intangible assets lies in intellectual and industrial property assets and trade secrets. Quantitatively, the significance of trade secrets as a form of “appropriation” of innovations by companies continues to grow.

A study by the European Union Intellectual Property Office (EUIPO) in 2017 showed that trade secrets are the type of protection used to protect more than 50% of innovations produced by EU companies (almost twenty points ahead of patents), where their importance in industries such as software is even greater (>70%). This trend is only becoming more established.

There are multiple reasons why trade secrets have been growing in importance, such as the nature of many assets, such as algorithms, datasets, compositions, processes, business intelligence, etc., which are often not subject to protection by other means; the acceleration of innovation cycles accompanied by aggressive go-to-market strategies; the low cost of trade secret protection; the legislative harmonisation effort at the international level (WTO international treaties, EU Trade Secrets Directive), which gives greater legal certainty to economic operators; and the tendency of courts to be increasingly likely to grant protection.

Moreover, before being able to patent, it is also essential to maintain control over the information and avoid its inadvertent disclosure: in this regard, trade secrets are a preliminary stage necessary for obtaining a patent.

To have trade secrets, however, intending to keep certain information secret is not enough; it is necessary to actively take measures aimed at maintaining the secret nature of the relevant information. Without this, trade secrets will not exist in the legal sense of the term and, therefore, the courts will not be able to provide us with protection in the event of infringement of our trade secrets.

Accordingly, the courts of different EU member states have been implementing the EU Trade Secrets Directive for more than five years and have provided important clues about what is meant by “reasonable measures” aimed at maintaining the secret nature of the information. These measures range from segmenting access, signing appropriate agreements with employees, third parties, etc., to implementing enhanced security measures regarding the rest of the company’s confidential information.

Therefore, companies that wish to protect their information assets through trade secrets must implement measures not only in the areas of cybersecurity and physical security, but also in the organisational and legal areas.

All of this must also be complemented by measures that allow evidence to be generated, which will have to be brought before the courts in order to obtain the desired legal protection in the event of litigation and without which a protection strategy can easily come undone.

Therefore, having specialists who help prepare appropriate protocols and who are involved in making decisions regarding protection is becoming increasingly non-negotiable.

Written by: Eric Maciá. Head of R&D Legal Consulting in the Technology Consulting Department at PONS IP.