Secrets — Establishing a trade secret culture should not amount to an onerous and overblown management exercise. Some general counsels when confronted with the new realities of trade secrets announce that classifying and registering all of their company’s trade secrets would be too much work and isn’t realistic.
We agree this would unrealistic, which is why we don’t advocate it.
An overnight change from “no management of trade secrets” to “complete management of trade secrets” would be a management disaster for most companies. Moreover, such an approach ignores the opportunities for institutional learning, fine tuning, and tailoring such systems to each company’s unique culture and ways of operating.
For these reasons, the Hazel team recommends that companies move towards a trade secret culture via a series of reasoned steps with ample opportunities for institutional learnings and tailoring to each company’s culture.
First Steps in Establishing a Trade Secret Culture
A smarter approach for establishing a trade secret culture is to begin in one area, establish the practice, and then expand outward to other functions. There are several good options about where to start, and the selection depends on the needs of the company involved.
A company could start with a business unit, or a particular product line, or its R&D lab, or the marketing department, or its manufacturing function. If there is a section of the company that is believed to contain valuable trade secrets – trade secrets whose value is deigned to be on par with its patent portfolio – then the company can implement Hazel for that portion of the company.
Alternatively, a company could start with a particular class or category of trade secrets. For example, given the rise of open innovation, a company could start by enumerating the trade secrets that have been entrusted to third parties. These are often viewed as the most vulnerable trade secrets.
There are a number of ways to intelligently select a starting point. Some of the factors are company specific, of course.
Looking After the Crown Jewels
The Hazel Team has found that it’s not much trouble for a company to keep track of its trade secret information once the appropriate set of metadata has been enrolled.
Not looking after trade secrets can lead to disasters, for both companies and their legal professionals. We are aware of a well-known multinational company whose patent committee could take four decisions regarding an invention: patent, reject, publish, or keep as trade secret.
For many years, if the patent committee selected the “trade secret” option, then nothing happened. There were no additional process steps. This went on for years until the company’s general counsel stumbled into revealing this practice (or lack thereof) during a board meeting, and the board went nuts, much like the CEO in this story.
Our HazelGo service eases the burden during this initial trade secret enumeration process. Of course, it is still necessary to spend a bit of time interviewing various employees and reviewing the results with management.
A Structured Conversation about Trade Secrets
Hazel serves as a tool for focusing a company on its trade secrets, a focus that is often overlooked. Hazel also helps a company have a structured conversation about trade secrets that allows them to focus on the information that’s relevant to them.
Right now, most companies have no real way of keeping their trade secrets from walking out the door. The Hazel team once conducted a due diligence where four of the company’s primary trade secrets were available in white papers on the company’s website, which came as a surprise to most of the company’s senior executives.
Still worse, the Hazel team once conducted an intellectual property due diligence on a company whose initial valuation was around $1 billion USD. The company had existed for nearly 30 years. Everything of value had been placed in a theoretical trade secret vault and was never considered again. After nearly a week with the company, the team couldn’t find a single item that qualified as a valuable trade secret. Everything of value had been lost. Not surprisingly the company had other troubles, too. We understand that the company finally sold to another investor for about a tenth of the original valuation.
There’s really no excuse for not looking after any class of valuable corporate assets. Apart from the board examples mentioned above, there’s also the possibility of activist shareholders.
You probably don’t want to be the general counsel who says he decided not to look after the trade secrets because he’s probably going to be asked about trade secrets at a time when the company realizes that it has just lost an important one.
Hazel Helps Companies Identify Rank & Protect Their Trade Secrets
The Hazel Trade Secret Asset Management System helps you manage your trade secrets and trade secret processes. Hazel can keep track of corporate trade secrets and help you determine an appropriate level of protection for each trade secret recorded. Hazel can record who in an organization is responsible for a given trade secret, who is responsible for protecting the trade secret, and who has access to the trade secret, among other things. Hazel can also help with various corporate functions such as a tax and human resources. Contact the Hazel Team today to learn more.
First steps by Vincent Van Gogh.