4 Common Ways Trade Secrets can be Leaked by Employees

by | Jun 20, 2022 | Uncategorized

While high-profile leaks continue to dominate recent headlines, businesses are struggling to protect their own confidential information.

Information leaks have been all over the news in recent months. Unfortunately for private business owners, this trend is not confined inside the Beltway. Your employees are also susceptible to leaking confidential information and trade secrets to those outside of your organization, including competitors.

Here are four common ways in which these leaks take place:

PURPOSELY

Purposeful information leaks often happen out of malice when an employee or ex-employee wishes to inflict damage or revenge.

This occurred in 2015 when a fired Tesla employee hacked into his former boss’s email and published a customer complaint online paired with disparaging comments aimed at the automaker’s credibility. The indictment also charged him with stealing private employee evaluations and sharing them with former coworkers.

Malicious leaks of this nature can leave a long-lasting stain on a brand’s reputation. Employers must understand that humans are highly emotional beings, and some will go as far as to breach contracts or break the law to leak confidential information during a fit of rage.

RELUCTANTLY

LinkedIn and other online platforms have made it easy for competitors and recruiters to browse your staff and solicit individuals directly with job opportunities. When your employees accept interviews with competitors, it creates situations where they could be enticed, persuaded, or coerced into leaking confidential information or trade secrets.

Job interviews can be a stressful affair for the person being interviewed. Some take place one-on-one inside a small, closed office — not unlike a police interrogation. Some interviewees may willingly leak information like pricing, clients, and technologies during the interview for perceived personal gain — and the tense atmosphere combined with pressure from the interviewer may make others reluctantly reveal trade secrets out of discomfort.

You can put NDAs and other confidentiality agreements in place, but in the end, it is going to come down to the composure and integrity of the individuals you hire to protect your trade secrets in those situations.

ACCIDENTALLY

Accidents happen, and modern technology can amplify the magnitude of those mistakes. For example, this past July, Wells Fargo accidentally leaked confidential data on tens of thousands of the bank’s wealthiest clients.

A former Wells Fargo employee was suing the bank as part of a defamation lawsuit, and his lawyer requested documentation from the former employer. When the plaintiff’s lawyer opened his email, he was shocked to see he had received spreadsheets filled with customers’ names, social security numbers and other confidential information accidentally sent by Wells Fargo’s lawyer.

There are ever-growing ways in which employees can accidentally leak confidential information: Sending an email to the wrong person, sending a public post instead of a private message and responding to a text without realizing it is a group message are just a few common examples to be aware of.

CARELESSLY

Employees can be prone to carelessly leaking trade secrets when they let their guards down in public, such as when they go out for happy hour. In locations dominated by one industry, like Wall Street or Silicon Valley, your employees must be aware that, unbeknownst to them, a competitor could be eavesdropping from a few feet away.

The 2015 movie The Big Short, based on the best-selling book by Michael Lewis set during the 2008 housing collapse, depicts such a situation when Ryan Gosling’s character, Jared Vennett, first discovers the creation of credit default swaps at a bar packed with Wall Street professionals.

In a relaxed setting, employees can sometimes forget the value and sensitivity of the work topics they discuss, especially when alcohol is involved. They must understand that careless handling or discussion of confidential information could result in a leak to outside individuals or even competitors.

Organizational leaks can range from minor embarrassments to serious legal and financial disasters. Business owners can protect confidential information and trade secrets by creating dialogue with their employees about these risks, the consequences of a breach and their responsibilities in the situations outlined above.

Brian Hart, 2017, 4 Common Ways Your Employees Leak Trade Secrets (and How to Stop Them), August 16, 2017, <https://www.inc.com/brian-hart/your-employees-are-probably-leaking-trade-secrets-.html>