Coatings World - January 2013

How Much Is That Trade Secret Worth?

by Steve McDaniel, JD, PhD Technology Litigators

The law imposes a “value” standard on trade secrets. A trade secret is valuable (in one rendition of such laws) and thus protectable if it gives its owner “an opportunity to obtain an advantage over competitors who do not know or use it.” It does not say how valuable, it just establishes that it is valuable if it meets this criterion. Certainly, courts appear very willing to deny protection to any alleged trade secret that is deemed to be “valueless.” “How much are our corporate trade secrets worth?” thus becomes a very important question under a variety of business and legal scenarios – restraining orders, injuctions, licenses, mergers, and overall company worth.

When is it the right time to determine
the worth of your trade secrets? That
is a little tougher, and it is
most certainly is a question to
be handled on a case by case
basis. For instance, it may be
that your customer lists are
undoubtedly valuable to you
and thereby qualify as a trade
secret. Were they to be stolen,
while it would take an edge
off your competitiveness, it
might not do so to an extent
that it would undermine your
whole operation. So, it might
be prudent to wait until you
must valuate these sorts of
trade secrets. On the other hand, your
latest and greatest formulation tweaks
that are about to be launched into your
newest resin system to boost your sales
over a competitor may be so valuable
that it would be hard to place a num-
ber on the trade secrets they embody. In
the latter case, it might be prudent to
arm yourself here and now with greater-
than-$$$,$$$,$$$ valuations in order to
be ready to respond rapidly to threats
of misappropriation or opportunities to
sell or license to third parties.

“If you are a successful plaintiff
in a trade secret lawsuit, you
will be required with reasonable
certaintly to prove the damage
caused by the defendant’s
misappropriation. “

the existence of our trade secrets. He is countered by the defendant’s expert who conversely swears that there was a vanishingly small impact of these trade secrets on plaintiff’s bottom line. The decision for the fact finder becomes one of determining which expert is lying the most (he assumes they are both lying). SCENARIO TWO – At inception of our trade secret introduction into our commercial product, we