The $452 Million Wake-Up Call
On December 2024, medical device manufacturer Insulet Corporation was awarded over $452 million against South Korean competitor EOFlow for trade secret misappropriation. This staggering figure exemplifies why it is necessary to protect intellectual property, and the catastrophic consequences businesses face when intellectual property protection is inadequate or poorly documented.
Yet despite such high-profile cases, a surprising reality persists across the business landscape. While intellectual property now accounts for over 40% of the average company’s value and IP-intensive industries contribute 41% of U.S. domestic economic output according to the U.S. Patent and Trademark Office, most businesses still lack comprehensive, integrated policies to protect their most valuable assets. The disconnect between IP’s importance and the level of protection afforded to it represents one of the most significant vulnerabilities in modern business operations.
Beyond Contracts: The Strategic Value of Institutional Policies
Institutional policies serve a fundamentally different purpose than standard business contracts. While contracts are typically drafted to establish the details of specific business transactions, policies provide something far more valuable: they construct a narrative about what matters to your organization, establish your company’s values, and create standard procedures that guide consistent action across your entire workforce.
Policies, particularly when codified in employee handbooks, become part of the employment contract itself. As the Puerto Rico Supreme Court established in Santiago v. Kodak Caribbean, Ltd., 129 D.P.R. 763, 775–76 (1992), employee handbooks form an integral part of the employment relationship and can create enforceable obligations. This legal principle, recognized across numerous jurisdictions, transforms your IP policy from a mere suggestion into a binding framework that protects your business while setting clear expectations for your team.
The distinction matters enormously in litigation. Judges and juries examining IP disputes don’t just want to see a contract clause buried in page 47 of an employment agreement. They want evidence of a cohesive strategy, documented procedures, regular training, and institutional commitment to protecting proprietary information. A well-crafted policy demonstrates all of these elements while serving as powerful evidence that your business took reasonable measures to protect its trade secrets—a critical requirement under the Defend Trade Secrets Act and state trade secret laws.
The Fragmented Approach Problem
Visit most businesses today and ask to see their intellectual property policies. What you’ll likely receive is a confusing assortment of documents: a trademark use policy here, a patent assignment clause buried in employment contracts there, perhaps a confidentiality agreement, and maybe a separate technology transfer policy if you’re dealing with a research institution. Each document may be perfectly adequate in isolation, yet together they create what can only be described as a bureaucratic labyrinth that serves neither the business nor its employees effectively.
This fragmentation creates several critical vulnerabilities. First, it results in inconsistent protection across different types of IP. Your trademark policy might be robust while your trade secret protection is practically nonexistent. Second, employees become confused about their obligations and rights, leading to inadvertent violations that can prove costly. Third, gaps inevitably emerge where certain IP assets fall through the cracks entirely because no policy explicitly addresses them.
Consider the sobering statistics: according to the National Science Foundation, 76.2% of U.S. businesses that performed research and development in 2018 considered trade secrets very or somewhat important, making them the most valued form of IP protection. Yet 67% of U.S. companies own technological assets that they fail to exploit and that are potentially eligible for intellectual property protections—assets valued at up to $1 trillion collectively.
This paradox—simultaneously valuing IP while failing to protect and exploit it—often stems directly from fragmented, incomplete, or nonexistent policies that leave employees uncertain about what constitutes protected information and how to handle it properly.
The Trade Secret Crisis: A Case Study in Policy Failure
The current surge in trade secret litigation illustrates the consequences of inadequate IP policies with painful clarity. Trade secret cases now represent a boom area in intellectual property law, driven by increased workforce mobility, the ease of electronic data transfer, and the emergence of sophisticated actors engaging in information theft. According to Stout’s 2024 Trends in Trade Secret Litigation Report, plaintiffs prevail in 84% of federal trade secret cases that reach verdict, with juries awarding monetary damages in 78% of cases.
The monetary stakes have reached astronomical levels. Beyond the Insulet case, recent years have seen a California jury award Propel Fuels $604.9 million against Phillips 66, with the plaintiff subsequently seeking an additional $1.2 billion in exemplary damages. Walmart faced a $222 million verdict in favor of Zest Labs for misappropriation of food tracking technology. Computer Sciences Corporation secured $210 million against Tata Consultancy Services for theft of insurance software source code. Even cases that are later reduced on appeal often result in huge settlements—SK Innovation paid LG Chem $1.8 billion to avoid an ITC exclusion order after losing a trade secret case.
What connects these cases is that Plaintiffs had robust institutional policies protecting their IP. When policies are fragmented or nonexistent, businesses struggle to demonstrate that they took reasonable measures to protect their trade secrets—a fundamental requirement for legal protection. Employees lack clear guidance on handling proprietary information. Documentation is inconsistent. And when disputes arise, the absence of a comprehensive policy becomes a vulnerability that sophisticated opponents exploit.
The Holistic Solution: Integrated IP Policies
There is no compelling reason why intellectual property protection should be scattered across multiple disconnected documents. A well-designed institutional policy can address patents, trademarks, copyrights, trade secrets, works-for-hire, employee inventions, and confidential information in a single, coherent framework that is manageable for businesses of any size.
Such an integrated approach offers multiple advantages. It ensures consistent protection standards across all IP categories. It provides employees with a single, accessible reference for understanding their obligations and rights. It demonstrates to courts and juries that your organization takes IP protection seriously and has implemented a thoughtful, comprehensive strategy. Most importantly, it closes the gaps that fragmented policies may create.
Essential Elements of an Effective IP Policy
An effective comprehensive IP policy should address several critical components that work together to create robust protection while respecting employee rights and fostering innovation.
The policy must begin with clear, expansive definitions of intellectual property that encompass inventions, discoveries, improvements, ideas, copyrightable materials, trademarks, trade secrets, confidential information, and know-how. Broad definitions ensure that novel forms of IP—such as AI-generated works, which are becoming increasingly important—fall within the policy’s protective umbrella.
Ownership provisions form the policy’s foundation. The policy should clearly articulate who owns what under different circumstances. Work created within the scope of employment typically belongs to the employer under work-for-hire principles. But what about inventions developed partially on personal time? Creations using company resources?
Trade secret protection deserves special emphasis given its importance and vulnerability. The policy should establish protocols for identifying and marking confidential information.
Practical Implementation: From Policy to Practice
Creating a comprehensive IP policy represents only the first step. Effective implementation can also save the company from misappropriation claims. Some organizations have found success in requiring new employees to certify that they possess no confidential information from former employers—a practice that proved crucial in the Apple v. Rivos case, where Rivos’s explicit policies against accepting trade secrets from former employers helped defeat Apple’s $2 billion misappropriation claim despite hiring nearly 50 former Apple engineers.
Regular training reinforces the policy’s importance and keeps its provisions fresh in employees’ minds. Annual refresher sessions, specialized training for employees handling sensitive information, updates when policies change or new IP is developed, and scenario-based exercises that help employees recognize and respond to potential IP issues all contribute to creating a culture of IP awareness and protection.
Policies should extend beyond direct employees to contractors, consultants, and business partners. Independent contractors, unlike employees, usually own the IP they create unless assignment agreements transfer those rights. Institutional policies can be attached as a required exhibit to a professional services contract, as long as such policy does not result in a misclassification between employees and contractors.
The Emerging Frontier: Generative AI Policies
A new category of institutional policy is rapidly emerging that every business will soon need: Generative Artificial Intelligence Usage Policies. As AI tools become ubiquitous in business operations, they create novel IP challenges that existing policies may not adequately address.
Who owns IP created with AI assistance? Recent guidance from the U.S. Patent and Trademark Office requires that a human being must have made a “significant contribution” to an invention for patent protection. The U.S. Copyright Office similarly provides that works where AI determines expressive elements are not products of human authorship and thus cannot receive copyright protection. Yet trade secret protection, notably, has no inventorship or authorship requirement—making it increasingly important for AI-related innovations.
AI also poses unprecedented risks to existing trade secrets. Sophisticated AI systems can potentially reverse-engineer protected information that humans could never easily replicate. Employees might inadvertently disclose trade secrets by entering them into public AI systems like ChatGPT. Competitors could train AI models on scraped data that includes your confidential information.
Forward-thinking companies are developing AI usage policies that integrate with their broader IP frameworks. These policies define acceptable AI tool usage, prohibit entering trade secrets or confidential information into public AI systems, establish ownership protocols for AI-assisted creations, require disclosure of AI involvement in inventions and creative works, and create security measures to prevent AI-related IP leakage.
Conclusion: The Policy Imperative
In an economy where intangible assets increasingly drive value creation, intellectual property policies have evolved from administrative niceties to strategic necessities. The question is no longer whether your business needs a comprehensive IP policy, but rather how quickly you can implement one before a costly dispute, employee departure, or competitive challenge exposes your vulnerabilities.
The encouraging reality is that creating an integrated IP policy need not be extraordinarily complex or burdensome. What it requires is thoughtful consideration of your business’s unique IP assets and risks, clear articulation of ownership and protection principles, and consistent implementation supported by training and documentation.
Whether you’re a startup protecting your founding team’s innovations, a medium-sized business expanding into new markets, or an established company with decades of accumulated IP, the time to develop or update your comprehensive institutional policy is now. The alternative—scattered, inconsistent protection that leaves gaps for exploitation—grows less tenable with each passing year as IP values rise, workforce mobility increases, and litigation costs skyrocket.
Your intellectual property represents your business’s most valuable assets and its competitive future. Protecting those assets with the same level of strategic thought and comprehensive planning you devote to other critical business functions isn’t merely prudent—it’s essential.
For guidance on developing a comprehensive intellectual property policy tailored to your business needs, or to discuss specific IP protection challenges your organization faces, schedule a consultation with Víctor M. Rodríguez-Reyes, Esq. As a Senior Member of Ferraiuoli with extensive experience in intellectual property law and emerging technology issues, Víctor can help craft policies that protect your innovations while supporting your business objectives.
