Trade Secret Management
Intangible assets are now responsible for 80% of all business value, much of which is represented by registered Intellectual Property (IP) – patents, trademarks and copyrights. The most significant remaining assets are a firm’s proprietary know-how maintained as trade secrets.
Reductions in technology life cycles combined with the inherent uncertainties of patent prosecution have recently resulted in a greater emphasis on protecting innovation through secrecy. Indeed, the value and commercial impact of trade secrets can be seen in the growth in trade secret litigation and the size of published settlements and awards.
Ocean Tomo, LLC is an integrated Intellectual Capital Merchant Banc™ firm providing a holistic suite of financial products and services relating to all forms of IP. Our professionals lead the industry in IP centric expert testimony, strategy, investment analysis, risk management, transactional analysis, valuation and research. In recognition of the above and other recent business trends, we have enhanced our offering to now provide specialized trade secret management and monetization advisory services.
Ocean Tomo Trade Secret Advisory Services – An Integrated Approach
Ocean Tomo is a firm of experienced and dedicated professionals knowledgeable about all financial and operational issues concerning trade secrets. Our services provide clients with opportunities to uniquely realize and leverage the value of their trade secrets as business assets.
All IP disputes, and particularly those involving trade secrets, include complex economic issues that must be clearly communicated to judges and juries. Ocean Tomo professionals have extensive experience as expert witnesses in such matters, and that expertise synergistically benefits from our non-litigation advisory business. Our experts understand that trade secret remedies and their method of calculation can differ from other forms of IP and that the state-of-the-art in this regard continues to evolve based on case law which is often unique to a given State. Examples of such differences can include:
- Calculations of actual loss and unjust enrichment
- The appropriateness of incremental versus fully allocated cost determinations
- A reasonable royalty measure of damages based on, e.g., modified Georgia-Pacific factors
Ocean Tomo has been at the forefront of advancing the most accurate and complete trade secret damages determinations based on peer reviewed methods, either from known academics and professionals or of Ocean Tomo’s own development. Ocean Tomo’s track record includes some of the largest trade secret damages awards and the nation’s most sophisticated trade secret owners.
Ocean Tomo’s Strategy Business is built upon our unparalleled experience spanning nearly two decades across a comprehensive set of IP driven opportunities. Whether addressing a unique event or IP asset, or ongoing management of a company’s entire IP portfolio, we begin with an understanding of management’s overall concerns and objectives.
Ocean Tomo’s Startegy services as directed to trade secrets are focused on:
- Portfolio development – using a genus to species approach, we work with clients to identify and inventory their trade secrets, including related core technology and information, as well as next best options, to account for and compile the source and corresponding research and development data required to both protect and transact these IP assets.
- Maintenance – alongside best-of-breed third-party service providers, Ocean Tomo advises its clients on obtaining escrow/back-up services to ensure that their trade secrets are properly secured, stored and cannot be lost through a single act of theft, hacking or natural disaster.
IP-driven investment banking transactions are a frequent subject of news headlines. Key to such mergers and acquisitions is a thorough understanding of the trade secrets being acquired and the measures to protect them. Ocean Tomo professionals work with transaction principals as well as their counsel and bankers to identify and assure protection of such IP assets. Our firm is uniquely capable of adding value to such opportunities through our proprietary products and services as well as our industry leading holistic approach.
Ocean Tomo applies its expertise in understanding and valuing IP assets to minimize the possibility and impact of adverse events. Specific to trade secrets, Ocean Tomo and its partners offer risk management solutions addressing security, insurance, compliance and documentation of prior use.
Ocean Tomo brings access to trade secret related insurance protection through a multi-peril policy. A Multi-Peril Intellectual Property (MPIP) insurance policy provides first party coverage for a loss incurred in connection with an insured IP lawsuit. That policy, available as a rider, is for any entity with an IP risk covered under an abatement and/or defense policy. The MPIP policy responds after the final adjudication of a civil lawsuit that directly caused or established the loss of value.
Trade secrets are often licensed, either on a stand-alone basis or as part of a patent or broader IP license. In any such case, the trade secret licensor should consider periodic audits of licensee compliance with applicable obligations relating to, for example, royalties, maintaining secrecy, and accounting for new or improved developments. Given Ocean Tomo’s holistic trade secret products and services as well as our substantial auditing experience, we are uniquely suited to conduct compliance audits for trade secret owners. We also provide consulting advice when clients are being audited by third parties.
Recent legislative changes also have heightened the importance of trade secrets. In particular, the prior use defense under 35 U.S.C. § 273 provides that, as to any U.S. patent issued on or after September 16, 2011, an accused infringer may be able to assert, as a defense to infringement, its prior commercial use of the patented subject matter in the United States. Ocean Tomo professionals rely on their holistic approach and expertise to best assure that such protection is readily available to clients.
Ocean Tomo professionals have significant experience in valuing IP assets. Ocean Tomo’s trade secret appraisals account for unique value-related aspects of trade secrets, including investments in research and development, life cycle benefits and obsolescence, discount rates and corresponding cash flows.
Trade secrets tend to build value when one or more of the following characteristics exist:
- Specific revenue generation – trade secrets may provide a barrier to entry, a head start or both, each of which enables the trade secret owner to extract premium profits through commercial sales of products and/or services.
- Cost savings – as opposed to a top line revenue benefit, trade secrets may provide operating cost savings that increase operating margins.
- Risk reduction – proprietary know-how maintained as trade secrets often can reduce the risk associated with future cash values, thereby directly increasing net present value of a business or product.
- Time acceleration – utilization of trade secrets may generate cash flows faster than if the owner had to use alternative technology or information.
Trade secrets can be an integral component to a company’s operations and viability. Trade secrets are also increasingly becoming an alternative source of revenue and value recognition through license or a host of other transaction types. Ocean Tomo professionals have significant experience and unique expertise relating to the financial and other business terms of such transactions. In connection with any opportunity to leverage a firm’s proprietary know-how or trade secrets, our experience and expertise will help to further the benefits that an owner will realize.