Tag Archives: data theft

Law Professors Oppose Federal Trade Secrets Acts, Ignore Their Benefits

August 26, 2014 By in Customer Lists, Trade secrets, Trade Secrets In the News Tags: , , , , , , , , 2 Comments

I’ve written about the Defend Trade Secrets Act and the Trade Secrets Protection Act previously. I’ve expressed enthusiastic support for these laws, which have bipartisan and widespread corporate backing. Today, 31 law professors issued a letter opposing these proposed statutes. Their harsh critique ignores clear benefits and overstates the statutes’ risks.

These professors’ thesis is explained at the end of the letter: “[T]he Acts are dangerous because the many downsides explained above have no—not one—corresponding upside.”

This statement and attitude ruins the letter’s credibility. These statutes have real, concrete benefits. They provide for federal jurisdiction, allowing for federal magistrates—experts in e-discovery—to oversee the complicated e-discovery issues often attendant to trade-secrets-misappropriation cases. They would allow for a uniform national trade-secret-misappropriation standard, thereby providing companies with greater certainty regarding enforcement. And the provision creating the most controversy, the ex parte seizure provision, will reduce the real risk of deliberate evidence destruction.

If these professors are not able to acknowledge that these proposed statutes offer benefits to companies facing the threat of misappropriation, I find it hard to take their critique seriously. But let’s look at their five reasons to reject these statutes:

1. Effective and uniform state law already exists. True, most states have adopted the Uniform Trade Secrets Act, with slight variations. But the state-by-state patchwork of statutory interpretation is not uniform. For example, different states apply different standards to determine whether a customer list is a trade secret. And state courts are often overburdened. I have personally experienced difficulty getting expedited hearing dates for emergency temporary injunction motions in state courts. Federal courts are better equipped to hear these types of motions expeditiously.

2. The Acts will damage trade secret law and jurisprudence by weakening uniformity while simultaneously creating parallel, redundant and/or damaging law. Despite this heading, the professors do not explain how applying a uniform federal standard will weaken uniformity. Instead, the professors argue that the Acts do not preempt state law, but only apply to trade secrets used in interstate or foreign commerce. Apparently, they believe that giving companies a choice between filing a misappropriation action in federal or state court is a bad thing. If companies want to litigate in state court, based on state law, these Acts permit them to do so. But these statutes would provide a second option. Given the tremendous corporate support for these statutes, companies themselves seem to want this new option.

The professors also criticize the interstate commerce provision, calling it “unclear and unsettled.” But like all statutes, this provision will become settled once tested in the courts. And the concept of interstate commerce is certainly not a new one, since federal courts routinely apply this standard to many federal statutes.

The professors also criticize the ex parte seizure provisions. Of all their critiques, this one has the most merit. I responded to this issue here. Keep in mind that evidence destruction is a real threat. I believe that it occurs routinely, particularly in misappropriation cases. In the end, I have faith that the federal judiciary will limit these orders to those cases where they are justified.

3. The Acts are imbalanced and could be used for anti-competitive purposes. The professors next argue that the Acts do not explicitly limit the length of injunctive relief. But the proper length of an injunction can vary widely based on the circumstances of a case. The judge hearing the supporting evidence is in a much better position than Congress to determine its length.

The professors are also concerned that parties will misuse the ex parte seizure provisions for anticompetitive purposes. This ignores the fact that (1) the moving party will have to convince a federal judge that the ex parte seizure order is necessary, and (2) the defendant will have the opportunity to challenge the order very soon after its entry. Again, I believe that the benefits of this provision outweigh its risks, given the built-in protections.

4. The Acts increase the risk of accidental disclosure of trade secrets.  Here, the professors argue that because of possible jurisdictional challenges based on the interstate commerce provision, plaintiffs will face motions to dismiss for lack of subject-matter jurisdiction that will “require the plaintiff to identify and disclose its trade secrets early in the litigation.” It’s hard to reconcile the professors’ concern for anticompetitive uses of the Act (number 3 above) with their concern that plaintiffs will have to identify the trade secrets at issue. Regardless, in reality, defendants already seek more detailed information about the trade secrets at issue at the case’s outset as a matter of routine, either through a motion to dismiss/for more definite statement, or through discovery requests. This new statute will have a marginal effect, if any at all, on the timing for identifying the trade secrets at issue.

5. The Acts have potential ancillary negative impacts on access to information, collaboration among businesses and mobility of labor. The letter discusses how companies are able to label information as a trade secret to prevent public and regulatory access to important information. (Again, this is inconsistent with point 4, where the professors wanted to enable companies to delay disclosure of the trade secrets at issue.) But the professors don’t explain how the Acts would increase this practice, other than to mention the ex parte seizure provision. Yet any company (and its attorneys) that obtains an ex parte seizure order in bad faith will have to face the ire of a federal judge who they manipulated into entering the order. I think the risk is overblown.

Look, neither of the Acts are perfect. But the threat of misappropriation is real. Companies need stronger weapons in their arsenal to protect their proprietary information. These Acts accomplish that, with limited real—as opposed to academic—downside.

 

Congressmen Explain Why You Need to Be Proactive About Trade-Secret Theft

August 25, 2014 By in Advice, Trade secrets, Trade Secrets In the News Tags: , , , , , , , , 2 Comments

In today’s partisan political climate, it’s rare to see an issue that unites members of both parties. But trade-secrets theft has become such a significant threat to our economy that there is now a bipartisan effort to pass federal trade-secret legislation.

Last week, Congressmen Hakeem Jeffries (D-NY), Howard Coble (R-NC), John Conyers Jr. (D-MI), Steve Chabot (R-OH), Jerrold Nadler (D-NY), and George Holding (R-NC), all members of the House Judiciary Committee, published an article explaining why they introduced the “Trade Secrets Protection Act of 2014.”

The Congressmen’s article does a great job detailing the threat that companies face.

They start off with a sobering statistic: “The devastating reality is that theft of trade secrets costs the American economy billions of dollars per year.” They cite to a 2013 study by the Executive Office of the President that found that “the pace of economic espionage and trade secret theft against U.S. corporations is accelerating.” That study gave examples of large-scale trade-secret theft, including stolen trade secrets from Dupont and Goldman Sachs valued at $400 million and $500 million, respectively.

They close by making the point that the current scheme, under which each state has its own trade-secret-misappropriation laws, is inadequate to confront the threat:

The current patchwork is simply not enough to combat organized trade secret theft. All other forms of intellectual property – patents, copyrights, and trademarks – are afforded a civil cause of action in federal law. It is time we confer trade secrets with a similar level of protection to substantially mitigate the billions of dollars lost annually through theft of our intellectual property.

Hopefully, either this or the similar Defend Trade Secrets Act (discussed here and here) will pass. But regardless, companies must be proactive about protecting their trade secrets. State and federal laws creating causes of action for trade-secret theft are great, but litigation is never ideal. You should consult with an attorney with expertise in this area to make sure you are taking all reasonable steps to protect your proprietary information. Doing so will help you avoid the need for expensive and time-consuming litigation.

The “George Costanza Defense” to Trade-Secrets Theft

July 29, 2014 By in Trade secrets, Trade Secrets In the News Tags: , , , , , Leave a comment

Costanza

Seinfeld fans will remember the episode where George Costanza’s boss caught him sleeping with a cleaning lady on his desk, leading to this memorable exchange:

Mr. Lippman: It’s come to my attention that you and the cleaning woman have engaged in sexual intercourse on the desk in your office. Is that correct?

George Costanza: Who said that?

Mr. Lippman: She did.

George Costanza: [pause] Was that wrong? Should I not have done that? I tell you, I gotta plead ignorance on this thing, because if anyone had said anything to me at all when I first started here that that sort of thing is frowned upon… you know, cause I’ve worked in a lot of offices, and I tell you, people do that all the time.

Mr. Lippman: You’re fired!

Funny stuff. Now, a former Ford employee is using a similar excuse to explain alleged trade-secrets theft.

According to this Detroit News article, the FBI is investigating a former Ford engineer who admitted planting listening devices in Ford’s meeting rooms. These devices recorded meetings, including ones not involving the engineer.

The engineer’s lawyer is quoted in the article. He essentially gives the Costanza defense, saying that his client used the devices to help her take notes. He’s pleading ignorance on his client’s behalf. She apparently did not know that it was improper to plant hidden recording devices in meeting rooms and leave them there to record meetings she did not attend.

We have no idea whether she is telling the truth. But just like George’s boss, the FBI seems skeptical.

There’s a lesson here. You need to let new employees know their obligations when it comes to protecting your confidential information. A written trade-secrets policy, as either a supplement to or part of an employee handbook, is a great start. The policy should prohibit recording meetings or other conversations without management’s approval.

Can Mark Cuban’s Cyber Dust Help Protect Proprietary Information?

July 24, 2014 By in Advice, General, Trade secrets, Trade Secrets In the News Tags: , , , , , , , Leave a comment

Cyber Dust is an app that lets users send text messages without leaving a digital fingerprint. All texts “self destruct” within 30 seconds, after which they are not stored anywhere — including on Cyber Dust’s servers. Also, Cyber Dust notifies you if someone takes a screenshot of one of your Cyber Dust texts.

Mark Cuban is behind Cyber Dust. In a recent Forbes article, he explained that the idea came from his own experience of having the SEC use his text messages in its insider-trading action against him: “That the phone companies and your text recipients own your texts and even the most innocent text can take on a whole new context. I wanted to have a means of communication that is analogous to face to face – where you can speak openly and honestly. That is why we created Cyber Dust.”

Similar technology is being developed for emails. For example, The Atlantic recently wrote about Pluto Mail, which includes features that allow the sender to set an email to expire after a set time. After that, the recipient can no longer view the email.

As Cuban notes, emails and texts create a digital record that can last forever. When your employees (or others, like consultants or vendors) send emails and text messages that contain your proprietary information, there is a risk of disclosure. As more companies use bring-your-own-device policies, those companies lose even more control of information sent via text and email.

I’ve been thinking of how to use this technology to minimize unwanted disclosure. For example, a company could require that all work-related text messages be sent via Cyber Dust. Emails are a bit more complicated, since there is often a need to preserve emails for later use. But a company could require that all emails containing proprietary information, or attaching certain proprietary documents, be sent with a scheduled expiration date.

In the end,  these policies would only be effective if there’s a way to monitor compliance. Otherwise, it’s not worth the effort. Also, these policies likely would not deter someone who is sending the information with malicious intent, such as an employee who knows he will be leaving to work for a competitor. UPDATE: In fact, such a person could use this technology to cover his tracks.

But it’s worth exploring how to use new technology like Cyber Dust to help bolster efforts to protect proprietary information.

In Defense of the Defend Trade Secrets Act

May 21, 2014 By in General, Trade secrets, Trade Secrets In the News Tags: , , , , , , , , , , , 6 Comments

In my last post, I discussed the recently proposed, bipartisan Defend Trade Secrets Act that would create a federal cause of action for trade-secret misappropriation. I wrote favorably about the statute’s mechanism allowing a judge to enter an ex parte order to preserve evidence. Since then, I’ve discussed this provision with several people who have concerns about it. This post responds to these criticisms.

To start, I want to explain why this provision is so important. Trade-secret theft is overwhelmingly accomplished by electronic means, such as through email, downloading to portable media, or via remote access to IT systems. Companies suspecting trade-secret theft can often determine where and how the information was stolen. For example, forensic techniques can identify that certain documents were saved to a flash drive on a specific date.

The Defend Trade Secrets Act permits the company, armed with this information, to seek an order requiring seizure or preservation of the media/computer/etc to which the information was downloaded. As a result, critical evidence that could otherwise easily be destroyed would be preserved. Without a statutory provision specifically authorizing this remedy, most litigants find it very difficult to convince a judge to enter this type of order.

I’ve heard concerns about the risk that judges will improvidently grant ex parte seizure orders brought in bad faith by unscrupulous litigants, potentially causing significant unjustified damage to defendants. This risk, while real, is present any time a judge hears an ex parte motion for temporary restraining order. The overwhelming majority of judges are reluctant to enter an ex parte injunction unless absolutely necessary. And this statute contains requirements that make it materially more difficult to get a seizure order as compared to a TRO.

In particular, the Defend Trade Secrets Act borrows from the Trademark Act’s procedure for seizing goods containing counterfeit trademarks. These requirements go beyond the typical TRO prerequisites. For example, the movant must show evidence that the item to be seized will be in a certain location. The court must also take measures to protect the defendant from publicity regarding the seizure. Further, the order directing seizure remains sealed until the defendant has an opportunity to contest it at a hearing that must occur within 15 days of entering the ex parte order. And as a final example, the statute provides for damages, including punitive damages, if the defendant is damaged by the wrongful entry of a seizure order.

These protections go a long way to minimize the likelihood that orders are improperly entered. In the end, the benefit of avoiding destruction of evidence—which happens all too frequently—outweighs the risk of unwarranted orders, particularly given the statute’s protections.

Thoughts About the Defend Trade Secrets Act

May 8, 2014 By in Trade secrets Tags: , , , , , , 3 Comments

Last week, Senators Hatch and Coons introduced bipartisan legislation, called the Defend Trade Secrets Act, that would create a federal private right of action for trade-secrets theft. This act adds to the Economic Espionage Act, which was passed in 1996 and made trade-secret theft a crime. Copies of the Defend Trade Secrets Act and the Economic Espionage Act are linked below.

While I’m still thinking through some of these issues, my first reaction to this law is a strongly positive one. Companies would benefit from having a national standard for trade-secret misappropriation. Today, while most states have adopted the Uniform Trade Secret Act (UTSA), there are state-by-state variations in the statutory text and interpretation. Also, this law would allow companies to litigate in federal court, where cases often proceed more quickly than in state court.

The act also acknowledges the e-discovery issues that frequently arise in trade-secret litigation by allowing for the ex parte entry of an order to preserve evidence, specifically allowing an order compelling “a copy of an electronic storage medium that contains the trade secret.” Today, it can be difficult to obtain such an order, with plaintiffs forced to resort to conventional injunction proceedings in front of state-court judges, who may not be as familiar with e-discovery issues.

The Defend Trade Secrets Act has a five-year statute of limitations, as opposed to the three years in the UTSA. Given that misappropriation is commonly done through surreptitious means, five years is more reasonable.

This proposed law is not perfect—for example, I would like to see a broader definition of “improper means” instead of just adopting the UTSA’s definition—but overall, this law would be a step forward for companies trying to protect their trade secrets. Hopefully, this bipartisan effort will have more success than other recent attempts to create a federal civil action for trade-secrets misappropriation.

Economic Espionage Act

Defend Trade Secrets Act

Novel Legal Strategy Deflates Employer’s Trade-Secrets Case

April 24, 2014 By in Case Summary, Noncompete, Trade secrets Tags: , , , , , , , , , , , , , Leave a comment

Recently, in Putters v. Rmax Operating, LLC, 2014 WL 1466902 (N.D. Ga. April 15, 2014) (opinion linked below), the court dismissed a counterclaim for trade-secrets misappropriation, brought in response to a declaratory judgment action filed by the defendant’s former employee. When I first read this opinion, I thought that the defendant did not move fast enough, thereby allowing the plaintiff to select the forum. When I dug further, however, I found out I was wrong.

In this case, the defendant is a Texas company that manufacturers insulation materials. The plaintiff worked for the defendant for 26 years in Georgia as a sales manager, and had access to the defendant’s confidential information. After the plaintiff left the defendant to work for a competitor, the defendant discovered that the plaintiff “had downloaded documents containing proprietary and confidential information to an external hard drive.”

While not clear from this opinion, the complaint gives the back story. A copy is linked below. The defendant originally filed suit in Texas state court and obtained an ex parte temporary restraining order prohibiting the plaintiff from working for his new employer.

After that, the plaintiff made an interesting legal maneuver. He filed this lawsuit in Georgia state court, seeking a declaration that he is permitted to continue working for his new employer, and an injunction prohibiting the defendant from prosecuting the Texas action, since Texas courts did not have personal jurisdiction over him.

This maneuver worked. The case (after being removed to federal court) is proceeding in Georgia federal court, where the court dismissed the defendant’s counterclaim and denied the defendant’s request for a TRO.

Normally, when a defendant believes that there is no personal jurisdiction over him, he will simply litigate that issue in front of the court where the plaintiff filed the lawsuit. Here, the employee took an entirely different course and successfully redirected the litigation to a different forum. And he was able to get the case in front of a judge with much more favorable views of his case.

Takeaway: Companies should be wary of personal-jurisdiction issues when filing trade-secrets lawsuits. The last thing you want is to be bogged down in a personal jurisdiction fight before the court will even hear a temporary injunction motion. Or, even worse, you could end up like the employer in this case, who spent time and money getting a TRO, only to be whisked away to a Georgia court with a very different view of the employer’s arguments.

Also, had this company simply had its employees sign restrictive covenants (including a venue and jurisdiction clause), they would be in a far better legal position.

Order

Complaint

Trade-Secrets Interview: Pamela Passman of CREATe.org (Part 2)

March 19, 2014 By in Trade secrets Tags: , , , , , , Leave a comment

Last week, I published part 1 of my interview with Pamela Passman, CEO of CREATE.org regarding its recent trade-secrets report. Here’s part 2:

PamelaPassman CREATe org sm (3)Protecting Trade Secrets: You have done an excellent job setting forth a framework for companies to protect their trade secrets. But I have two issues with your approach. First, I am concerned that this process will result in the creation of documents that, if produced in litigation, will undermine misappropriation claims. This concern can be mitigated if an attorney is involved in creating and maintaining these documents, keeping them as attorney work product.

Pamela Passman: For most companies, lawyers will be involved in implementing the framework we propose and actively engaged in developing the documentation.  However, for many companies in emerging markets, there are small legal teams inside companies and outside lawyers are not generally engaged other than for disputes.  That should not limit a company’s focus on prioritizing, documenting and securing trade secrets, as in most cases, the ability to demonstrate that you have secured your trade secrets is critical to seeking redress if they are misappropriated.

PTS: Second, your approach may be difficult for small and midsize businesses, who have limited resources and in-house capabilities, to implement. 

PP: For many small and mid-size companies, trade secrets are at the core of their value and ability to compete and innovate. While many can’t implement a full comprehensive program, they should consider scaling the recommended steps in a way that is appropriate to the company.  For example, at CREATe.org, we are working with private equity firms that want to ensure that their portfolio companies are aware of leading practices and have the ability to implement business processes to protect IP and prevent corruption. Although the firms are small in size, they scale accordingly by prioritizing areas for improvement.

PTS: Turning to the report’s views of the future, you talk about “the emergence of walled gardens or the creation of IT networks that are separated from the wider Internet.” Can you elaborate more on what the “walled gardens” will look like? How would this differ from company intranets and smartphone apps that exist today?

PP: The walled garden scenarios stemmed out of recent moves that could point towards countries (or sectors or groups of entities) segmenting internet traffic. For example:

  • German telecom giant Deutsche Telekom, in which the government still owns a minority share, has publicly discussed the potential for German companies to place some information and activities on a separate, national internet system. Deutsche Telekom’s proposal is unlikely to be adopted at this point and would require major regulatory, technical and policy changes in Germany and the European Union. However, its announcement confirms that some of the world’s most advanced countries and companies are thinking about walled gardens as an option going forward.
  • Brazil’s government is also considering how it might segment or wall off parts of its internet traffic and emails. Sao Paolo is reacting to the recent US Government contractor who claims that US intelligence agencies were snooping on a large target set.

PTS: Finally, what are your next steps now that the report has been issued?

PP: There is tremendous interest in the topic of trade secret protection. As you know, several months ago the European Commission published draft rules to thwart the theft of trade secrets. This initiative, along with companies facing increased threats, have prompted invitations for CREATe.org to present our report findings to business organizations around the world.  We will be in France,  Germany and China in March, and Mexico in April meeting with companies and business organizations interested in comprehensive ways to advance IP protection, and in particular, mitigating trade secret theft. We are also presenting at conferences and via webinars in the U.S. and elsewhere.

Additionally, CREATe.org continues to work with companies around the world to help them put systems in place to better protect IP, and to work with their supply chain and other business partners. We do this with our three-step service, CREATe Leading Practices for IP Protection, which offers an assessment, benchmarking and tools and resources designed to improve systems for IP protection. It is currently available in English, Brazilian Portuguese, Chinese and Spanish.

Trade-Secrets Interview: Pamela Passman of CREATe.org

March 10, 2014 By in Trade secrets, Trade Secrets In the News, Trade-Secrets Interview Tags: , , , , , , , , , , , 1 Comment

Protecting Trade Secrets is launching a new regular feature, where we will interview people of interest in the trade-secrets world. Starting with Pamela Passman, President and CEO of CREATe.org. “The Center for Responsible Enterprise And Trade (CREATe.org) is a non-profit organization dedicated to helping companies and their suppliers and business partners reduce corruption and IP theft in the forms of counterfeiting, piracy and trade secret theft.”

Recently, I published a blog post discussing a new trade-secrets report published by CREATe.org. I asked Ms. Passman questions about CREATe.org and the report. I’ll be running the interview in two parts. Check back later this week for part 2.

PamelaPassman CREATe org sm (3)Protecting Trade Secrets: Let’s start with some background on CREATe.org. When was it created? By whom? Why? What are its primary activities?

Pamela Passman: While at Microsoft, as Corporate Vice President and Deputy General Counsel for Global Corporate and Regulatory Affairs, I led  regulatory compliance work on a range of issues in more than 100 countries. For nearly six years I also headed Legal and Corporate Affairs in Asia, based in Tokyo, with a focus on Japan, Korea and the People’s Republic of China.

My collective experience—in compliance, corporate leadership, public policy and emerging markets—led me to consider a new approach to two critical issues for companies around the world: intellectual property (IP) protection and anti-corruption.

The genesis for the idea of CREATe.org was based in recognizing that companies such as Microsoft, GE, P&G and many others have spent years developing robust management systems and best practices to appropriately manage and use IP and to prevent corruption. Equally important, was a belief that the private sector can play a powerful role in driving responsible business practices and bridging regulatory gaps where adequate laws do not exist or enforcement is weak.

From these perspectives, CREATe.org was founded in October 2011. As a non-profit organization, CREATe.org works across industries and geographies with a mission to bring leading practices in IP protection and anti-corruption to all companies. The organization works to provide cost-effective and practical assessments, benchmarking, tools and step-by-step guidance for companies, particularly those that lack a track record of developing and implementing compliance programs.

PTS: Does CREATe.org have any policy objectives (e.g., lobbying for legislation, regulations)?

PP: CREATe.org is focused on ways the private sector can more effectively address the issues of IP protection and anti-corruption. We do this by helping companies around the world improve practices and put systems in place to mitigate the risks of IP theft and corruption. CREATe.org is not a lobbying organization.

PTS: What precipitated the “Economic Impact of Trade Secret Theft” report?

PP: In the organization’s first two years, our team gathered insights from companies around the world, gave countless presentations and partnered with think tanks, academics and experts on IP protection and anti-corruption. The challenge of trade-secret theft was a topic that surfaced throughout these exchanges. Companies are finding it increasingly difficult to protect trade secrets, both within companies and among third-parties.

PTS: Let’s turn to some of the details of the report. Your framework to safeguard trade secrets involves bringing key stakeholders into the process. Often, senior executives can be reluctant to participate in such a process. Any suggestions for building enthusiasm among senior executives?

PP: Most senior executives appreciate that trade secrets are key to the company’s value, ability to innovate and compete. For many, the question is where to start? Our intent was to break down a comprehensive approach into steps and provide tools for making the process practical. Providing a clear path and the benefits of safeguarding trade secrets can be helpful for building support internally.

PTS: Similarly, your report acknowledges that protecting trade secrets can require actions that may cut against other company priorities, such as maximizing productivity. For example, increased security measures may result in it taking longer for employees to access documents they need to perform their jobs. Any suggestions for building a corporate culture that values protecting trade secrets on par with other financial priorities?

PP: Each company must determine the correct level of actions appropriate for their corporate culture and then invest in training and awareness campaigns to help educate employees on the importance of protecting company trade secrets. In our work in Asia, for example, we see companies with increasing focus on building awareness within their employee base and key third parties – including  IP protection campaigns that use a variety of media to promote good practices, from posters in the company cafeteria to e-learning and screen savers for desktop computers.

_______________________________

Later this week, Ms. Passman responds to my two critiques of the report and discusses CREATe.org’s next steps.

Sporting Goods Spy Game

March 1, 2014 By in Trade secrets, Trade Secrets In the News Tags: , , , , , 1 Comment

So this is a new one. According to a lawsuit filed by national sporting-goods retailer Dick’s Sporting Goods, Inc.. Mitch Modell, the high-profile CEO of rival company Modell’s Sporting Goods, posed as a Dick’s executive when visiting a Dick’s store. Modell’s is a leading sporting-goods retailer in the Northeast, from which I bought plenty of sports equipment when growing up in New York.

By allegedly pretending to be a Dick’s Vice President, Modell gained access to private areas of the Dick’s store. Supposedly, Modell wanted information about Dick’s e-commerce initiatives, including Dick’s “ship from store” program that uses local stores to fulfill online orders.

This is remarkable. Modell is a visible figure, particularly in the sporting-goods industry. For example, he starred in an episode of Undercover Boss. That he would (allegedly) attempt such a scheme is crazy, and is a vivid illustration of the corporate-espionage risk that companies face.

This case shows that companies need to have a clear policy restricting access to nonpublic areas, and all employees need to be trained about the policy. For example, all nonpublic areas should be locked, with video surveillance where possible. All visitors given access to these areas should sign a log. And a company could issue all employees photo IDs, and require that employees call headquarters to confirm any unannounced employee/corporate visit before allowing access to nonpublic areas.

I’m very curious to hear Modell’s defense.

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