Dealing With Trade Secret Thieves: Strategies for Cost-Effective Settlement

25 July 2016 Labor & Employment Law Perspectives Blog

Trade secret thieves are almost always an employee or business associate. They are known, generally held the trust of the business, and are perceived as traitors. The urge for retribution against such trade secret thieves can be hard to resist.

Retribution often takes the form of aggressive litigation. But if a business brings such litigation without any consideration of an advantageous settlement, its interests may needlessly suffer. Accordingly, business should consider responsive strategies to trade secret theft rationally, not emotionally, because like it or not, trade secret theft is almost bound to happen to any business of sufficient size or longevity.

Because trade secret theft litigation is typically quite expensive, if a dispute is susceptible to settlement on reasonable terms, a business can save much time, energy, and money by settling. The trick is to settle quickly on reasonable terms. The following are some strategies for doing just that.

Acceptable Terms
A successful settlement begins with a decision on what acceptable terms might look like, because they will serve as a compass for all that follows. These terms need to be primarily based on what is attainable in the absence of a settlement.

It is important to be realistic about terms. Seeking terms more favorable than what a business might realistically attain without a settlement probably will not work and could be counterproductive. Similarly, pursuing terms which do little or nothing to benefit the business, such as demanding an apology, simply is not worth it.

Decision-makers should clearly distinguish between “would like” and “must have” terms. Knowing the bottom line from the beginning better allows for negotiations, which will logically conclude with acceptable terms. Negotiations may bring some unexpected twists, but if the terms are well conceived, such twists are not likely to alter the bottom line to any great extent.

Pre-suit Settlement
When a trade secret theft occurs, it can create a lot of anxiety. Usually the business suffering such theft knows some of the pertinent facts, but most often does not know many more. There is a fear of the unknown, particularly the damage that may be happening with each passing moment. Something seemingly must be done right away and, by default, that is often litigation.

Litigation can be effective if sufficient proof is in hand to obtain an injunction or a seizure under the recently passed Defend Trade Secrets Act. But seeking an injunction or seizure and misfiring can have serious adverse consequences, particularly because it is not unusual to lack significant evidence when a theft is first realized. A business can could file suit without seeking an injunction or seizure to gather evidence; but it could be a while, if ever, before it gathers enough evidence to get that injunction or seizure. An alternative is attempting to engage the putative thief in settlement talks.

To do so, it will obviously be necessary to reach out to the suspected thief, or their counsel, to solicit an agreement to meet and discuss settlement. Counsel or the business should make this overture in writing, with a serious, but civil, tone. If the tone is too hostile, the other side may get the impression that it is pointless to meet because it will not be treated fairly.

The writing should specify the particulars of what is being proposed, such as whether there would be a mediator (and if so, how the mediator would be paid), when and where the meeting would take place, and what information to exchange in advance. The more information exchanged the better because a lack of information is often an impediment to settlement. Offering to pay for any mediator and to meet at a non-threatening convenient location might help induce agreement. Likewise, advising of the other side of the incriminating information known to the business, and actions which the business will take if the other side refuses to meet, may be persuasive.

Post-suit Settlement
Litigation regularly has junctures where settlement opportunities tend to arise. Some of those are before depositions of important witnesses, such as the parties and experts; after those same depositions; before a major hearing; and after a significant ruling.

A business pursuing a litigation plan should devise its strategy with these opportunities in mind, perhaps specifically phased to create them. Throughout the pendency of the litigation, legal counsel must be sensitive to these opportunities and communicate with the client their assessment of them. If counsel maintains a cordial relationship with opposing counsel, there is a greater chance that they will be alerted to opportunities.

There is no substitute for leverage. A business might prudently bypass one opportunity for settlement if another is approaching, during which the business will have greater leverage to apply.

Settlement Counsel
Engaging counsel for the sole purpose of settling a dispute has some merit, pre-suit or post-suit. When all the client asks such counsel to do is assist with settling a dispute, there is much less potential confusion about counsel’s mission and how the client will measure their performance. Their prospects for future work will hinge on how well counsel execute, and they will know it.

Similarly, if the business engages settlement counsel, future litigation counsel would likely not have to deal with whatever inner conflict might exist, subliminal or not, that a settlement will put them out of a job. Furthermore, there are instances when counsel is so consumed with handling the litigation that settlement is just not top of mind. Of course, litigation counsel would have to provide support to settlement counsel in a cooperative fashion.

By resisting the urge for retribution, and including the possibility of an advantageous settlement among your responsive strategies, a cost-effective resolution to a trade secret theft can be realized. However, a critical key to such an outcome is to plan for it from the beginning as part of the overall strategy.

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