Current job layoffs may put trade secrets at risk of theft

18 August 2020

Current job layoffs may put trade secrets at risk of theft

With the pandemic now forcing businesses around the world to lay off many of their workers, their intellectual property assets may be at greater risk of theft.

“The risk of IP theft following a layoff is particularly prevalent and frequently occurs,” said Risti Wulansari, a partner at K&K Advocates in Jakarta.

One such asset vulnerable to theft under this situation are trade secrets. These include customer or vendor lists, pricing methods, knowledge, and secret formulas of any invention or process.

The fact that business operations, files, communications and others have now gone digital makes it even easier for perpetrators to commit the theft. It is also because of digitization that IP theft is taking place in almost every industry and sector.

“We do not see a prevalence of theft in any particular industry. Everything is digitized now – from emails to accounts to operations. The pandemic has accelerated the push to remote-working and greater digitalization,” said Daniel Lim, a director at Joyce A. Tan & Partners in Singapore.

One problem which helps perpetuate such practice is the absence or lack of adequate IP clauses in employer-employee agreements. A strong IP protection on paper could nip it in the bud, so to speak.

“In my experience with clients, global companies and a number of big local companies have their employee-employer contracts and agreements contain adequate IP policies to help prevent IP theft by the employees. But, a lot of companies are not or are insufficiently interested in such IPR issue, and accordingly neither care about the IPR protection nor include IP policies in these contracts or agreements,” said Nguyen Thi Hong Anh, head of IP and Technology at Indochine Counsel in Ho Chi Minh.

“In many cases we have handled, companies have not addressed proper policy with respect to their IP in their employment agreement. For such reason we always suggest to our clients to prioritize IP protection and incorporate clauses relating to their IP to significantly minimize the risk of IP theft,” said Wulansari.

Digital transformation was in full swing even before the novel coronavirus Covid-19 crisis struck. When it did in 2020, companies saw a more urgent need for digital migration. However, many of these companies were also compelled to let go of several employees to save on cash. These factors come with risks.

“The cold comfort is, every business is potentially at risk,” said Jeffrey Lim, also a director at Joyce A. Tan & Partners in Singapore.

“Taking steps to beef up your legal and your security safeguards is as essential today as it was before, but perhaps even more so now that so much is digital and can be stolen with the simple click of a mouse button. No one is carting off boxes of documents anymore,” he added, “a thumb-drive and micro SD card is all you need.”

There are various ways of beefing up IP protection measures, the lawyers say. One of these should have been taken care of at the start: the inclusion of strong IP policies in employment contracts and agreements. Companies, including startups and MSMEs should take heed.


Espie Angelica A. de Leon

Law firms

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