Page 4 - Asset Valuation

S4 | MONDAY, MAY 19, 2014 | Asset Valuation | NYLJ.COM

Valuation and Infringement Damages

secret can take many forms—for example, a ties from using the trade secret. Trade secret allow another party to “reverse engineer” or
BY CRAIG A. JACOBSON
formula, process, system, or tool. There is no law focuses instead on the means by which otherwise replicate the secret information.
Arestriction on what can be considered a trade the trade secret is obtained, rather than
s the assets of a typical company have secret; almost any subject matter can qualify.
on whether the trade secret was obtained. Reasons to Analyze Trade Secrets
become increasingly comprised of intan- A trade secret can be comprised of many Trade secret law does not offer protection
gible assets and intellectual property, different kinds of information. The most against discovery of the trade secret by fair There are several reasons to analyze
the importance of understanding the intel- famous trade secret is probably the formula and honest means. A trade secret can be trade secrets. When a company that holds
lectual property owned by a company has for Coca-Cola.
reverse engineered, independently invented, trade secrets is acquired, the value of the

increased. Intellectual property represents Trade secrets must contain the following and accidentally disclosed.
trade secrets can be estimated (along with
intangible assets that consist of human knowl- characteristics.
Trade secrets are covered exclusively by the other tangible and intangible assets of
edge and ideas.
• A trade secret must, in fact, actually be a state law. Most states have adopted some the company) to record the transaction for
Of the common types of intellectual prop- secret. It cannot be comprised of information form of the Uniform Trade Secret Act, while inancial reporting purposes. Trade secrets
erty (i.e., patents, copyrights, trade names/ that is generally known or readily accessible.
other states afford protection under separate are often analyzed in the context of litiga-
trademarks, and trade secrets), trade secrets • A trade secret must have economic statutes or common law.
tion. Such analysis might include estimating
have perhaps received the least attention from value that would be diminished if it were Unlike other forms of intellectual property, economic damages in the form of (1) estimat-
the valuation community. However, as secrets not a secret.
trade secrets are not entitled to government ing the diminution in the value of the trade
have become more dificult to maintain due • The trade secret owner must make rea- registration. Therefore, trade secrets do not secret and/or (2) estimating lost proits due

to technological changes, the importance sonable efforts to maintain secrecy. These have any statutory legal protection. The lack to trade secret infringement. It is important
of understanding valuation and damages efforts can include executing conidential- of statutory legal protection means that trade to note that trade secret value is not nec-
issues related to trade secrets has increased.
ity agreements and iling documentation in secrets do not have a deinite life, unlike cer- essarily equal to trade secret infringement
a secure, locked location.
tain other forms of intellectual property. If a damages. Damages can be lower, equal to,
Description of Trade Secrets
The information that can be considered to be trade secret has not been formally disclosed, or higher than trade secret value depend-
a trade secret is constantly changing, and can there is no limit to the length of its useful life, ing on the facts and circumstances of each
A trade secret is a knowledge that provides include typical business assets such as custom- and it can be protected indeinitely.
case.
a company with a competitive advantage that er lists, research plans, and marketing plans.
Certain trade secrets might represent intel-

is not known by the general public. A trade
lectual property assets that are subject to Analyzing Trade Secrets: Qualitative Factors
Legal Protection of Trade Secrets
other forms of intellectual property legal pro-
tection, such as patent protection. However, Certain qualitative factors can impact trade
CRAIG A. JACOBSON is a principal in the valuation Trade secrets are unique in that unlike the owner of the trade secret might decline to secret value and/or infringement damages.
and forensic services group at Citrin Cooperman & other forms of intellectual property, there ile a patent application because a patent is One of the key variables in any intellectual
Company.
is no general right that excludes third par-
public knowledge, and such disclosure might
property valuation and/or damages analysis