Snatched Secrets: Reporting Trade Secrets Theft Modelling a firm’s decision to report a theft of trade secrets

A growing priority for firms and governments is the protection of trade secrets against theft. Trade secrets, often stored and protected in digital formats, represent key intangible assets for firms and strategic assets for economies. Recent years has seen the expansion of trade secrets protection in both US and EU law, as governments seek to adapt policy to the changing and expanding threat of cybercrime. Here, we build on US FBI policy to model the interaction between a firm and a government protection agency. We consider the decision by the firm to adopt high or low security measures to protect their trade secrets, the decision to report an incident of theft, and the government protection agency’s assignment of low or high priority to the case. We find that whether security breaches are made public or not can be the margin that determines whether firms will invest in high security. Our findings suggest that adjusting reporting requirements could be a policy measure to help address the growing threat of trade secret theft.