Head in the Cloud: The Insider Threat to a Company's Trade Secrets

After months of searching, a client finally hires its “dream candidate.” The client welcomes the new employee with open arms and wants to provide all the resources needed for the employee to succeed, entrusting the employee with access to its confidential information. Unbeknownst to the client, however, the new employee merely views the position as a stepping stone to something bigger. From day one on the job, he continues his job search, secretly reaching out to some of your client’s biggest competitors (who also view him as a “dream candidate” partly because of his position with your client). A few months later, the honeymoon comes to an abrupt end when the employee puts in his notice that he is leaving for a new position with a competitor. The real shock is yet to come: when your client learns that its trusted employee has uploaded some of its most highly confidential competitive information (e.g., customer lists, pricing information, customer requirements, diagrams, specifications, manufacturing processes and formulae) to a thumb drive, personal email or, even worse, the cloud.

This nightmare hypothetical is all too common across all industries, yet many companies remain woefully unprepared. Perhaps as the result of the exposure by the media to the cybersecurity threats posed by outsiders, companies often overlook (and, in many cases, completely ignore) the more immediate and substantial threats posed by insiders, namely their own employees. Recent surveys of companies and their employees and analyses of trade secret cases in federal and state courts reveal the following startling facts: (1) trade secret thefts are on the rise, with the number of cases involving trade secret theft doubling between the years 1988 and 1995, doubling again between the years 1995 to 2004, and, at the current rate, likely doubling again by the year 2017;¹ (2) more than 85 percent of all trade secret thefts are believed to be perpetrated by an employee or business partner;² and (3) more than half of employees recently surveyed have admitted to taking information from their former employer and approximately 40 percent of those same employees acknowledged that they intended to use that information on behalf of their new employer.³