value, a trade secret owner seeks to be
awarded all of the net profits made by
a misappropriator who wrongfully used
the trade secrets. It is possible to actually be awarded 100% of such ill-gotten
spoils. Yet another measure is estimating
royalties that would have to be paid in
a hypothetical license agreement where
the trade secret owner reluctantly grants
an interest in its secrets. To do this right,
one needs to examine the surrounding
circumstances for hints of how such give
and take might actually occur. So, you
might consider what effect will be caused
to the competitive posture between the
two parties to the negotiation, or what
the terms of similar licenses have been, or
the actual costs of development and protection of the trade secret you incurred,
or how many uses of and what value to
the new found knowledge may it give the
hypothetical licensee.
While we are on the topic of licensing, let’s not forget to address the age-old
“pig-in-a-poke” problem that plagues
trade secret licensing. This problem arises
when a prospective licensee starts asking
what is the true value of a trade secret it
is interested in licensing. It doesn’t want
to pay for something that is valueless, and
you are hesitant to fully divulge the selling price. If the licensor has historically
tracked the value of a trade secret in its
operations, it can set its price more reli-ably and verifiably, if needs be.
What are the take-home-lessons for us
in the P&C industry? Essentially they are
these. First, if we’ve done our business
properly, we have identified our trade secrets and have a fairly good idea of which
are critical to our operations using an audit or similar process. On those we have
deemed to be critical, we need to evaluate
the advisability of determining a baseline
value for them. Where it is likely that
these critical assets might be the subject
of litigation or an asset to be variously
assigned to another party via contract,
it will be prudent for us to have values
at the ready. And, there are well-known
methods to get these valuations.
It kinda boils down to this. If you’re
ahead of the game (you are the trade secret owner), stay ahead of the game (by
knowing exactly what your trade secrets
are and what they’re worth), or put another way . . . . “One and one is two, and
two and two is four, and five will get you
ten if you know how to work it!” . . . the
venerable Mae West. CW
