Losing Valuable Trade Secrets to AI

AI and Trade Secret Misappropriation: West Technology Group v. Sundstrom Case

In the rapidly evolving landscape of technology and innovation, losing valuable trade secrets to AI has become increasingly important for businesses as more employees use AI. The recent case of West Technology Group LLC et al. v. Sundstrom, filed in the U.S. District Court for the District of Connecticut, highlights the importance of taking proactive steps to safeguard valuable intellectual property from misappropriation, even in the face of emerging technologies like artificial intelligence (AI).

The West Technology Group v. Sundstrom Case

In this recently filed case, a Nebraska-based technology company sued a former salesman for trade secret misappropriation based on the claim that a former employee, Karl Sundstrom, misappropriated trade secrets and confidential information when he used an AI program.  The company claimed that they lost valuable trade secrets to AI when Sunstrom used an AI program, Otter, to record and transcribe confidential meetings. The plaintiffs assert that the employee used the “unauthorized” AI program, to record confidential information without consent of all participants on the call. The plaintiffs also complained that because company confidential information was siphoned to Otter, the defendant continues to have access to that information even after their termination. The plaintiffs assert claims for Misappropriation of Trade Secrets under the Defend Trade Secrets Act (DTSA) (18 U.S.C. § 1836(b)(1)), and Breach of Contract for breaching various confidentiality obligations in employment agreements. The plaintiffs claim that Sundstrom used AI-powered tools to extract and analyze sensitive data, including customer lists, pricing information, and proprietary manufacturing processes, before leaving the company.

In another example, there were three reported instances of Samsung employees unintentionally leaking sensitive information to ChatGPT.  In one instance, an employee pasted confidential source code into the chat to check for errors. Another employee shared code with ChatGPT and “requested code optimization.” A third, shared a recording of a meeting to convert into notes for a presentation. That information is now on ChatGPT. Even though use of ChatGPT was intended for internal purposes only, such disclosure may rise to trade secret misappropriation claims.  Protecting Trade Secrets from AI is important because the confidential information can be used by tools such as Chat GPT can potentially become accessible to other users of the AI tool and lose its trade secret designation.

Key Lessons for prevent Losing Valuable Trade Secret to AI

1. Comprehensive Trade Secret Protection Policies: Businesses should implement robust trade secret protection policies in place to protect access to their trade secrets, implement strict access controls, and regularly train employees on the importance of safeguarding confidential trade secret information and not submit the secret information to AI based tools.
2. Proactive Monitoring and Auditing: Companies should actively monitor employee access to trade secret information, particularly around the time of termination or resignation, to detect any suspicious data access or transfer patterns. Regular review of relevant systems and employee access can help identify potential breaches.
3. Prevent Losing Valuable Trade Secrets to AI: Employees should be educated about the risks which use of AI software and informed not to disclose valuable trade secrets to an AI program.
4. Leveraging AI for Trade Secret Protection: While AI can be a powerful tool in the hands of trade secret thieves, businesses can also harness AI to enhance their own trade secret protection efforts. AI-powered monitoring and anomaly detection systems can help identify and flag unusual data access or transfer activities, enabling prompt intervention.
5. Prompt Legal Action and Remedies: When a trade secret breach is suspected, businesses should act swiftly to pursue legal action. The West Technology Group case demonstrates the availability of various legal remedies, including temporary restraining orders, preliminary injunctions, and damages, to protect against the misuse of trade secrets.
6. Collaboration with Law Enforcement: In cases involving the potential use of AI or other advanced technologies to misappropriate trade secrets, businesses should contact their trusted legal representatives to coordinate with relevant enforcement agencies to leverage their expertise and resources.

Conclusion

The case West Technology Group v. Sundstrom serves as another cautionary tale for businesses, highlighting the evolving risks and threats posed by AI-powered software which can result in the loss of valuable trade secrets to AI. Preventing the lose of valuable trade secrets to AI is another consideration which companies should account for in trade secret protection.  Employers should take reasonable steps to protect their confidential information, including limiting access, using password protect, making sure that the employees are informed about the confidential nature of the information through confidentiality agreements, trade secret agreements and various other materials, that using AI tools to transcribe, receive or record company confidential information without authorization is prohibited. Employees should be careful to only use AI tools in limited circumstances, and to not disclose company confidential information to such tools without express authorization. By implementing comprehensive trade secret protection strategies, leveraging AI-based monitoring and detection tools, and taking prompt legal action when necessary, companies can better safeguard their valuable intellectual property and maintain a competitive edge in the market.  Contact one of our trade secret attorneys if you have concerns about protecting your company’s valuable trade secrets.