given them from developing other ideas
and thus products. What has been seen
can never be unseen! However, what
happens if the licensee improves upon
your trade secret? It would be very de-
sirable, regardless of the presence or ab-
sence of a “residuals” exclusion clause,
to have a clause clarifying that any im-
provements using the trade secret are
the property of the licensor, regardless
of whether the trade secret itself should
lose its trade secret status during the li-
censing period. Conversely, what if the
licensee already possesses the trade se-
cret you disclose, independently discov-
ers it, or unrestrictedly obtains it from
another party, or the “trade secret” was
already publically known (i.e., not a
trade secret)? A clause excluding such
information may be desired by the li-
censee, if they are well represented.
The licensee typically will extend such a
clause to exclude the trade secret when
it becomes public from sources other
than the licensee, but, as described be-
low, you may want to keep the time
frame for receiving royalties to extend
beyond that point of time.
and thus was no longer a trade secret.
But the court ruled that the contract still
remained valid though the secret was discovered by the general public or a third
party, and that the formula provided a
“head start” to the licensee in the field
that was of “incalculable value” over the
years. You may notice Listerine is in fact
still occupying sizable shelf space in drug
and grocery stores 80+ years after the
formula was published. The take home
message: licensing agreements should be
based on the profits engendered from the
technology embodied in the trade secret
rather than the date secrecy may, unfortunately, be lost.
The real meat and potatoes value of
your intellectual property often is in
your trade secret rather than a patent
portfolio, and you should not forget that
in determining the licensing royalties.
Though your patents may cover related
materials, and must include the “best
mode” of practicing an invention as of
the date of filing the patent application
(i.e., a previously held trade secret = the
best mode), often after the patent application’s filing date new trade secrets
such as substantive refinements and
improvements or spin off technologies
are developed. These additional, nonpatented trade secrets often have the
most real world licensing value as part
of your trade secret portfolio. Further,
patents must disclose the best mode,
but not the worst mode (please do not
give the patent office any ideas, OK?).
Working know how of what not to do -
the technological dead ends - can be of
tremendous competitive edge value in
accelerating development of a technology by showing a licensee where not to
waste resources in bringing a product to
market. Trade secret licenses have the
additional advantage of being able to
obtain royalties on global use, while a
patent license is limited to the national
jurisdiction that the patent has issued,
the metes and bounds of the claims and
the patent’s limited lifespan.
In the best of worlds, if you do your
licensing agreement right, your trade secret license can make you money on a
potentially unending commercial future
of a technology. CW
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