More on trade secret and company director liability

Donal O’Connell and I recently posted an article on trade secrets and director liability.   https://www.kidonip.com/news/company-directors-duties/

A great piece published by Columbia University Law School earlier this year http://clsbluesky.law.columbia.edu/2018/04/04/wachtell-lipton-discusses-risk-management-and-the-board-of-directors/  provides a good summary of the many issues related to risk management and the board of directors.

Another piece  https://pomerantzlawfirm.com/publications/2018/2/8/recent-derivative-actions-highlight-directors-obligation-to-monitor-and-prevent-employee-misconduct discusses a recent case In re Wells Fargo & Company Shareholder Derivative Litigation where the court refused to dismiss a shareholder derivative action against the board of directors holding that the numerous allegations of “red flags” of which the board was aware regarding the practices of the company bolstered the conclusion that the director defendants consciously disregarded their fiduciary duties to the company. http://www.wlrk.com/docs/InreWellFargoOrderonMotiontoDismissenteredMay42017.pdf

All in all, these pieces strongly reinforce the points Donal and I made regarding director risk.  On a more positive note, some of the recommendations regarding what company directors should ensure are in place that are made in these pieces are equally applicable with respect to trade secret asset management.  (Below modified to fit trade secrets).

  • identify the company’s “Crown Jewels” – i.e., the company’s mission-critical trade secrets and systems—and work with management to apply appropriate measures and systems to manage them;
  • ensure that a trade secret misappropriation incident response plan is in place that, among other things, identifies critical personnel and designates responsibilities;
  • includes procedure for containment, mitigation and continuity of operations in the event of trade secret misappropriation;
  • identify necessary notifications to be issued as part of a preexisting notification plan;
  • ensure that prior authorizations, systems and procedures are in place to permit effective monitoring of the controls related to company trade secrets;
  • ensure that the company’s legal counsel is conversant with with the company’s trade secret asset management protocols and systems