Intellectual Property Theft: How to Stay Out of the Penalty Box

An acrimonious court case between two athletic gear companies provides strategies for discouraging intellectual property theft

3. Don't redeploy too quickly. You don't want to eliminate the scene of the crime, either. Lange says viable trade secret cases are rendered moot when a suspect's machine has its drive wiped clean and is redeployed for a new hire. Especially for computers of high-risk employees, IT's inventory efficiency must take a back seat to preserving evidence. "The security officer needs to guard that computer and disk image like Fort Knox," Lange says.

4. Add arriving employee protocols. As part of accepting a job, have employees arriving from a competitor sign a statement affirming they've brought no sensitive documents with them, making sure to include a laundry list of the types of documents and form factors that are verboten. (Work with counsel on this.) Warrior tried to add something like this to Ghassemi's employment offer after Easton contacted them. Too late. Had it been part of the agreement from the beginning, the company would have had an easier time making the argument it eventually did to the judge. The judge noted that while the defendants essentially conceded that Ghassemi's actions support an inference of bad faith, they argued that "the conduct...was not solicited by them and should not expose them to sanctions." But the judge didn't buy their argument. His ruling against Warrior in the motion: "At least negligence."

5. Add departing employee protocols. Likewise, when an employee announces he's leaving for a competitor, have a piece of paper ready that shows him what he can and can't take off his computer. Include a statement that images of hard drives are taken as standard operating procedure. If necessary, have a security staffer sit with the person as he collects his personal files, such as pictures of the kids. This will help protect against one of the most common defenses offered by the accused: "I didn't know it was a trade secret." Chaperoning, or at least providing a list, specifies what is a trade secret.

6. Prepare an incident instruction memo. For a company like Warrior on the receiving end of a trade secrets misappropriation accusation, a quick response is crucial to protect itself from ending up dealing with spoliation motions. CSOs should prepare a form letter or e-mail that's sent to relevant employees immediately upon accusation. The message of the letter is: You have an obligation to preserve evidence, no matter how bad you may think it makes you or us look. Legal precedent establishes that manipulation of evidence is far worse (see "You Can't Fool the Ref"). Don't destroy anything. Specifically, instruct the employee with the following: Do not delete any files from your work computer. Do not transfer any files off your work computer to other computers or devices. Do not throw away or destroy storage media such as CDs or USB keys. Do not install or use hard drive wiping products like Evidence Eliminator. Do not delete personal e-mail accounts or anything in them. It is crucial to expressly mention third-party sources such as Yahoo accounts and home computers as requiring preservation, says Phil Gordon.