Business Power: Creating New Wealth from IP Assets

Chapter 7. Capturing the Value of Trade Secrets

R. MARK HALLIGAN, ESQ.

Trade secret assets are information assets from which companies derive economic value from the secrecy of such assets. Trade secret assets can be identified and monetized.

Key Points to Look For

• Trade secret protection is broader than patent protection and need not meet the patent requirements of being novel, useful, and nonobvious.

• Trade secrets must be inventoried and managed as business assets.

• Trade secret valuation requires sophistication, especially following a merger or acquisition, as SFAS 141 and 142 require annual review for impairment.

Trade Secrets

Trade secret protection applies to any information that is sufficiently valuable to provide the owner with an actual or potential competitive advantage in the marketplace. The scope of trade secret protection is thus broader than patent protection, as trade secrets need not meet the patent requirements of being novel, useful, and nonobvious. Also unlike patents, trade secrets need not be disclosed and do not revert to the public domain after a finite term.

Trade secrets that first come to mind for most companies are those that relate directly to the design and manufacture of the company’s products. Research, development, and engineering trade secrets may include the results of laboratory tests, the design of product and manufacturing equipment prototypes, and the ...