5 Steps Every Company Should Take to Avoid Data Theft Risk

It's never been easier for employees to download company data and take it with them to their next gig.

Bradford K. Newman, Principal, Litigation / Chair of North America Trade Secrets Practice

November 12, 2020

4 Min Read

The accelerated shift to remote workforces resulting from the COVID-19 pandemic has exasperated the challenge of protecting corporate data and intellectual capital.

It has never been easier for employees to compromise their employers' systems. Absent protocols designed for remote workforces, many companies are scrambling to keep tabs on the whereabouts of their property and IP.

The cookie-cutter protections that are typically in place don't safeguard against data theft nearly as much as companies think they do. As a result, employees are departing one employer for another with intellectual capital and trade secrets in tow and undetected. 

Free and open-source network file transfer apps have made it easy for sophisticated engineers to compromise their employers' systems. Consider the widespread use of PuTTY, a program that establishes an encrypted secured shell (SSH) tunnel from a work computer that can export its entire contents to any device of choice. All done without leaving a traditional forensic trace.

But it's not just potential IP theft that should alarm companies. Significant legal exposure exists when onboarding new employees who may bring IP with them. Even if a new employer is unaware of a transgression, it could prove costly. Juries and judges of trade secret cases consistently yield some of the highest verdict awards imaginable. 

How can companies better protect themselves? Here are the five steps to take right now.

Hiring Process Review
Set the expectation from the start that the company takes confidential information seriously. In all cases, but especially when recruiting talent from competitors, be able to demonstrate a process of reasonable steps taken to protect against litigation. This begins in the interview phase, ensuring that interactions prevent any third-party confidential information from being solicited or divulged. During the on-boarding process, new employees should certify they searched for and returned all third-party data and that they did not store such information in personal accounts, cell phones, or other devices. To ensure there has been no inadvertent or intentional porting of third-party data onto the their servers, and to rebut any allegations to the contrary, companies should also do a forensic check of their systems within the first 45 days of a start date.

Update Acceptable Use Policy
With the work-from-home trend in full swing, companies need clear and enforceable policies around cloud and USB usage, as well as usage policies for personal devices and hardware. Employee certifications and disclosure of off-server data storage and transmission should become standard practice. Shared use policies should also address the realities of a work from home environment and define the expectations. For example, prohibiting access to confidential data, sending to personal or partner accounts to print, and the handling and storage of hard copy documents must be clearly articulated.  

Turn on Full Logging for All Devices
You can't protect what you can't track, so companies must account for new hardware and software. It's no small task given today's geographically diverse and remote work environment, but it is critical. While full logging does take up a lot of storage, turning on VPN logs, server access, document/code repositories and other databases are the only ways to track what's happening with company property. Some companies are deploying data loss prevention (DLP), and cloud solutions may alleviate some of the storage burden.

Implement Home Security Policies
Bad actors prefer targeting unsecured home environments because people are generally lackadaisical about their personal devices. Leaving computers turned on 24 hours a day is an open invitation to hackers, and home Wi-Fi networks with weak passwords and no encryption offer other easy entry points. Companies need to provide clear instruction and require employees to take steps to strengthen their remote work environment. That includes mandating computers being powered off each evening, and activating and updating Wi-Fi encryption to WPA2 and more secured passwords. Employees need training to recognize and report data theft danger signs such as extreme functional slowdown, which may indicate intruder access. 

Institute High-Risk Departure Programs
Companies need to be well-prepared for the inevitability of high-risk remote workers leaving for a competitor. This means HR, IT and legal should develop protocols for the exit process. Exit protocols should include appropriate procedures for automatic hardware shut-offs, putting employees on paid leave, preserving hard drives, and the immediate accounting for data, including the forensic remediation and review for evidence of data theft. Additionally, companies should not be too quick to reissue that hardware, as forensic preservation is key so if a problem arises it can be analyzed at a later date. Lastly, exit certification is a must for getting on record the exiting employee's testimony of compliance. It is also an opportunity to be very clear about an employee's continuing obligations to the organization after they are gone. 

The mitigation of data theft risk is a team effort. It requires a multi-pronged approach that includes IT security, HR, site security, protocols for handling data internally, and protections from external intrusions. And it all begins with a sober assessment of an organization's current state of vulnerability during these extraordinary times.

About the Author(s)

Bradford K. Newman

Principal, Litigation / Chair of North America Trade Secrets Practice

Bradford Newman is a Palo Alto-based attorney who specializes in matters related to trade secrets and artificial intelligence. He serves as Chair of Baker McKenzie's North America Trade Secret Practice as well as Chair of the American Bar Association's Artificial Intelligence subcommittee. Bradford has developed AI oversight and corporate governance best practices designed to ensure algorithmic fairness. He regularly serves as lead trial counsel in cases with potential eight and nine-figure liability, and has successfully litigated (prosecuting and defending) a broad spectrum of trade secrets cases in state and federal courts throughout the country. Bradford routinely advises and represents the world's leading technology, banking, professional service, manufacturing and commerce companies in connection with their most significant data protection and trade secret matters. 

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