IP Valuation and Trade Secret Protection:
What are your customer lists and “special
sauces” really worth?
Presented by Daliah Saper
Introduction

About Saper Law:

Saper Law is an intellectual property and business law
firm with significant transactional and both federal and
state litigation experience. We primarily specialize in
the following areas of law:
Trademarks
Defamation
Copyrights
IP
Trade
Secrets
Corporate
Internet and Cyber Space
Entertainment
Licensing
Advertising
Media
Sponsorship and Advertising Agreements
Intellectual Property 101

Identify

Register

Maintain/Protect

Exploit
Step 1: Identify


Identify what intellectual property your business
possesses.
Types of Intellectual Property
 Copyright
 Patent
 Trademark/Servicemark
 Trade
Secret
Copyright


Applies to any work that is an original work of authorship fixed in a
tangible medium of expression.
Copyright owners enjoy the exclusive right to
 make copies of the work,
 distribute copies of the work to the public,
 prepare derivative works,
 perform the work publicly,
 and display the work publicly.
Copyright - Software

What is copyrightable in Software?
 Source
Code
 Look and feel of the interface
 Websites can be copyrighted too
You can not copyright FACTS, or LISTS OF GENERAL
INFORMATION, TRADEMARKS, IDEAS (Patents)
A note about Open Source


Don’t use Open Source software to create new
software or modify your current software without
reading the license.
You may find yourself in a situation where you can
not monetize your copyright….
Patent

You get a patent if you invent something that is a:
 New (no prior art)
 Useful (has a function or purpose) and
 Non-Obvious….(everyone didn’t already think of this)
Process or Program
 Machine
 Article of manufacture
 Composition of matter (biological patents)


If you get a patent you earned the exclusive right to prevent or
exclude others from making, using, selling, offering to sell or
importing the invention. Note, it’s a right to “exclude”—not a
right to use.
Trademark/Servicemark

A trademark is a source identifier. It can be a







Word
Name
Tagline
Symbol/logo
Domain Name
Even smell or sound!
When a trademark is used in relation to services rather than
products, it may sometimes be called a Service Mark.

To get a trademark, you need to USE IT in COMMERCE.

The law is primarily intended to protect the consumer from confusion.
Trade Secret

A trade secret is information that:




Is not generally known to the public;
Confers some sort of economic benefit on its holder
Is the subject of reasonable efforts to maintain its secrecy.
A trade secret is information that is valuable to the owner as a
secret, and therefore must be protected as such. If the owner’s
competitors generally know or could easily discover the secret
information, the owner could lose his competitive edge.
Trade Secrets - Importance

Why are they important?

More and more companies are relying on trade secrets
rather than other forms of IP.


Many trade secrets can be patented or copyrighted too, but
those IP forms require disclosure and only give rights for
limited durations.
Trade secrets endure as long as the secret is maintained.

Trade secret examples: Coca-Cola’s recipe; Google’s search
algorithm.
Trade Secrets - Why?

Why trade secret over other IP methods:
 Advantages:
 Protection
can endure indefinitely, so long as secrecy is
maintained and secret continues to provide a competitive
advantage.
 Do not have to share your knowledge with competitors.
 Disadvantages:
 Once
information becomes public, protection is lost
forever.
 Remedies are more limited than patent remedies.
 Requires continuous effort to maintain secrecy.
ACTION ITEM

Look at your business and IDENTIFY what ….
 Copyrights
 Patents
 Trademarks
and/or
 Trade Secrets
….your business owns.
Step 2: Register
Yay, I have IP! Now what?

Take Steps to REGISTER Your Work
 Copyright:
www.copyright.gov
 Patent: www.uspto.gov
 Trademark: www.uspto.gov
 No registration for trade secrets
 Note:
you may register your copywritten code as a trade
secret by redacting important portions of it.
Step 3: Maintain and Protect

Registration is not enough. You need to
Maintain and Protect your IP portfolio.
Maintain and Protect - Copyright


Once you register, you don’t have to worry about
renewal fees or loss by abandonment.
However, you need to make sure you took the
proper steps to own the copyright.
Maintain and Protect - Copyright



Copyright Work Made for Hire Contracts are
crucial
Make sure you license your rights—don’t assign
your rights away!
(We’ll discuss licensing and assignment in more
detail later.)
Maintain and Protect - Trademark


File periodic affidavits and fees
Ways to lose protection:
 Abandonment—ie,
make sure you keep USING your
trademark.
 Improper licensing or assignment (lack of adequate
quality control or supervision by TM owner)
 Genericide - prevent TM from becoming generic---ie
XEROX, or BAND-AID
Maintain and Protect - Patent

Before Patent is Issued:
 Don’t
disclose your invention or offer it for sale unless
you have taken measures to file at least a
provisional patent.
 Talk
to your patent attorney about Prior Art.
Maintain and Protect - Patent

After Patent is Issued:
 Pay
 Go
maintenance fees
after infringers asap---otherwise you may be
accused of “Laches”----or sitting on your rights for too
long. (That’s a defense!)
Trade Secret

A trade secret is information that:




Is not generally known to the public;
Confers some sort of economic benefit on its holder
Is the subject of reasonable efforts to maintain its secrecy.
A trade secret is information that is valuable to the owner as a
secret, and therefore must be protected as such. If the owner’s
competitors generally know or could easily discover the secret
information, the owner could lose his competitive edge.
Maintain and Protect - Trade Secret

Reasonable means to ensure trade secret protection
often includes:
Non-competition agreements
 Non-disclosure agreements
 Encryption of computer files
 Firewalls and network security
 Restricting physical access
 Providing notice that information is a trade secret
 Security guards
 Badges for employees and visitors

Example

Imagine a clever software developer who writes a program
that predicts the Stock Market with 99% accuracy.


If he patents his software, in 20 years, everyone can create, use,
and sell similar software. However, if he keeps the software a
trade secret, he can control the source code indefinitely and no
one will ever know how he achieved such accuracy.
It is essential that he takes sufficient steps to develop a Trade
Secret Protection Program for his software.

Reasonable means may include confidentially agreements,
ensuring limited access to source code, having password
protections, and limiting the number of people with access to
sensitive information
Maintain and Protect - Trade Secrets


Trade Secret owner has protection against
Misappropriation--acquisition of the secret information
by improper means.
Improper means includes:
Theft
 Bribery
 Misrepresentation
 Breach of a duty to maintain secrecy
 Espionage

Trade Secrets - Remedies

Remedies:

Injunction

For actual or threatened misappropriation
Court-ordered actions to protect the trade secret
 Damages

Actual loss
 Unjust enrichment


Exemplary damages

If court finds malicious or willful misappropriation, damages may
be doubled.
Trade Secrets - Loss of Protection

Secret is disclosed
 Even
if it was an accident. e.g., describe a trade
secret to another over drinks.

Reverse engineering of a product destroys
protection.
 Unless
there is an End-User Licensing Agreement
(EULA) expressly prohibiting reverse engineering.
Trade Secrets - Loss of Protection

After a misappropriation:
 Delay
in seeking relief
 Must
act within 5 years of learning of the
misappropriation.
 If
the secret becomes well-known as a result of the
misappropriation
 i.e.,
the owner did not contain the disclosure.
Trade Secrets - Loss of Protection

Using the trade secret for illegal purposes
e.g., violating anti-trust laws.
 The trade secret enters the public domain and there is no
protection.


Parallel research: Another person independently
creates or discovers the same secret.

Not a full loss of rights; instead they have shared rights.
Both people have trade secret protection.
 Both people have to protect the secret as well.


Failure to maintain secrecy by either will destroy protection for
both.
General Protection/Enforcement
Strategy for all IP

Determine an Appropriate Protection and Enforcement
Strategy

Protection = Prevention:


Strong Contracts, Licensing Agreements, Trade Secret Policies
and solid Employment/Work-For-Hire Contracts.
Enforcement:
Hire Monitoring or Watch Services
 Send Cease and Desist or Demand Letters
 Litigation

Final Step: Exploit

The term “Exploit” in the IP world is a GOOD
word:
 To
utilize, esp. for profit; turn to practical account. to
exploit a business opportunity.

The key to exploiting (MAKE $$$) off of your IP is
to structure your business deals properly by
understanding your ownership rights.
Ways to bring your IP to market:







Exploit your IP independently?
License it?
Joint Venture?
New Entity?
Sell your IP all together?
Each of these have different Intellectual Property ramifications.
There are also different nuances when the type of IP at issue is
a copyright, vs a patent, vs a trademark.
Quick run down of key terms:
LICENSE
vs
ASSIGNMENT
Licensing 101

Define Licensing
 A licensing agreement is a partnership between an
intellectual property rights owner (licensor) and another who
is authorized to use such rights (licensee).

The licensor still owns the intellectual property and therefore
maintains control.

The agreement will often require the licensee to pay a
royalty or fee for the permission to use the intellectual
property. It will include a whole slew of other business terms.
Assignment 101

Define Assignment
 An
assignment is the selling or transferring of IP rights
to another person.
 Once
you assign your IP rights, you can no longer
control the registered IP; the assignee will have this
control.
Implied Licenses



If you hire a freelancer but don’t get him/her to
sign a work for hire agreement, you don’t own the
commissioned work.
At best, you will only have an Implied License to use
the commissioned work.
The extent of what was “implied” often becomes the
basis for lengthy and costly litigation.
Implied Licenses, continued.

Avoiding the Headaches of Implied Licenses
 Agreements
A
should be put in writing and contain:
statement identifying who owns the copyright, or if it’s a
license, what the license will allow
 The full scope of work to be performed
 A warranting and indemnification provision stating that the
licensor has the authority and ability to license his/its work
to you.
Co-Ownership/General Partnership

If you start a business without clearing defining
the terms of the partnership you may fight about:
 IP
Ownership: does the Business own it? One partner?
or possibly worse……
 You
may be Co-Owners in which case you will have
to SHARE the IP even after the dissolution of your
business.
Co-Ownership/ General Partnership
In the copyright context:



In the U.S. copyright co-owners (or “joint-authors”) are
TENANTS IN COMMON.
Each owner holds an undivided share in the copyright.
There is no right of survivorship. That means that if one coowner dies, the other co-owner doesn’t automatically get
the remaining interest. The dead guy’s heirs get it.
Co-Owners

Rights and Responsibilities as a Co-owner
 Each
owner has the right to license the work or sell his
proportional interest in the copyright without the
permission of the others. However, you are required to
account to the others for profits earned from licensing.
 You
may not unilateral take steps to effectively destroy
the value of a copyright. But it is not clear what
“destroy the value of a copyright” means.
Organize your venture


Watch out for the legal implications of choosing a
Sole Proprietorship or General Partnership structure.
To be shielded from personal liability, you need to
form an actual entity (LLC,Corp,etc.)
Engaging an IP/Licensing Attorney

A good IP attorney can help you:
1.
2.
3.
4.
Help you conduct an IP “Audit”
Register your marks
Assist you with protection and enforcement strategies.
Create the proper business structure and
appropriate contracts so that you don’t find yourself
without any rights.
Questions?

Contact Info: www.saperlaw.com