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Board of Director Responsibility to Protect Trade Secrets




In 2017 the firm Baker McKenzie published a well-researched brochure entitled “The Board Ultimatum: Protect and Preserve –the Rising Importance of Safe Guarding Trade Secrets (the “Baker McKenzie Report”)[1]


This Baker McKenzie Report revealed, what was noted by its authors, as disturbing news, regarding the protection of an organizations “Trade Secrets”, noting that although nearly half of the 400 senior executives in the survey conducted by Baker McKenzie in preparing the Baker McKenzie Report said their trade secrets are more important than their patents and trademarks - less than one-third of companies have taken basic measures to protect their trade secrets despite the growing awareness of their importance; noting further that:

Unlike patents and other forms of intellectual property, it’s much more difficult, if not impossible, to put the genie back in the bottle once a trade secret has become public. That makes it even more crucial for board-level executives to better understand the threats and manage those risks by taking action.


WHY UNDERSTAND THE THREATS AND MANAGE THE RISK


The response to this question, by a conscientious director, seems obvious: to protect the organization and its various stakeholders a director, has undertaken the duty to represent (both morally and as defined by law). But consider also, that courts have considered “Trade Secrets” like any other corporate asset, as noted in the Baker McKenzie Report, in many cases representing a significant store of value for the organization, value that, if lost or destroyed through disclosure, mistaken or intentional, may result in:


not only substantial negative economic impact to the organization but potential “Personal Liability” of the Board of Directors, based upon legal theories where their actions are shown to fail the “business judgment rule” and constitute a breach of duties of care and/or loyalty.[2]


TRADE SECRET RISKS FOR COMPANY DIRECTORS