What to Consider When Protecting Trade Secrets

The video game industry thrives on secrets. Game reveals, licensing deals, budgets and more are closely guarded aspects of the business that are part of a company’s larger operational strategy.

Games, especially large blockbusters, are also made by teams of people. The more people that know a secret, the harder it is to keep. That’s why many companies build protections into their work agreements. Often, this is covered by a stand alone non-disclosure agreement or an invention assignment that includes an NDA.

A clause in an employment or contractor agreement can cover a wide range of things, including proprietary internal methods, workflows, systems, processes, monetization plans and practices, marketing techniques, public relations plans and more. In short, anything that the company does not disclose publicly and would want to protect may be considered a trade secret.

This is especially important since the Defend Trade Secrets Act (DTSA) was passed in 2016. Prior to this act’s passage, trade secret enforcement was mostly handled in state courts. The DTSA made this a federal matter in cases that include interstate or foreign commerce. Publication of trade secrets related to video games are often spread far and wide via the internet, almost certainly meeting this requirement. The DTSA is also written broadly, giving many employers an avenue to a federal suit.

The DTSA is appropriate in cases in which an individual has used or disclosed a secret that was obtained improperly and disclosed without permission. In some cases, this might apply to those that receive and disclose information from someone who was not authorized to reveal it. It’s worth noting, however, that it’s unlikely that journalists would be targeted by such a claim due to First Amendment protections reinforced by precedent in trade secret cases.

It’s also important to note that the DTSA applies when information would not otherwise be obtainable by someone outside the organization and the owner has taken necessary steps to protect that information. If the company, for instance, did not invest in digital security best practices, it may find itself vulnerable in a suit.

If a company believes an employee has violated its duties related to trade secrets, it can seek a range of remedies. Depending on the trade secret or the method by which it was obtained and communicated, a company can seek compensation for economic harm, punitive damages, and attorney’s fees. There could also be other common law claims, including fraud, civil conspiracy, statutory claims including DTSA or Computer Fraud and Abuse Act violations, and more. In some cases, criminal penalties (including fines and jail time) may be appropriate.

Proving economic harm can be tricky and often relies on the circumstances of each case. If the trade secret is one that is ordinarily licensed, economic harm might be shown by evidencing lost licensing fees. If the information’s entire value is derived from being secret, a company could show lost revenue once others have access. As for spoiling a video game reveal? That may be a little harder. If a company purchases advertising to coincide with a reveal, it may be argued that it will have a more muted impact after a trade secret leak. Damages questions are inherently individual and difficult to generalize.

For those under NDA, this language in an agreement should be taken to heart. Whether an employee or contractor, quality assurance tester or financial analyst, being mindful of trade secrets can save a major legal headache. A trade secret is a genie that is near-impossible to put back in the bottle, but a well-drafted NDA with trade secret provisions can help a company receive compensation and reinforce the seriousness of the situation.

Brandon J. Huffman

Brandon is the founder of Odin Law and Media. His law practice focuses on digital and interactive media, entertainment, internet related issues and crisis communication. He serves as general counsel to the International Game Developers Association and is an active member of many bar associations and community organizations. He can be reached at brandon at odin law dot com.

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