Trade secrets are often a key component of technology license agreements and trade secret damages and misappropriation is a frequent component of employment litigation and disputes. The Defend Trade Secrets Act (DTSA) now allows employers to file a civil suit and seek damages through federal court for theft of trade secrets. However, identification of trade secret assets, determining if claimed secrets are valuable, and quantifying the economic impact from the misuse of trade secrets all pose some unique analytical challenges.
The identification of trade secrets and the quantification of trade secret damages calculations vary from one case to another. To arrive at a calculation of fair and reasonable trade secret damages, IP valuation experts must analyze the industry and marketplace in which the trade secrets were used, review how the trade secret asset was created and protected, and evaluate how the trade secrets impact financial performance.
Trade secret evaluations and trade secret damages calculations need to identify the economic impact of the trade secret asset. Trade secrets can generate economic value via:
- Revenue generation (allows owner to extract abnormal profits);
- Cost savings (manufacturing or distribution processes);
- Risk reduction (processes to get things done faster); and
- Time acceleration (ability to get to market faster).
In situations involving trade secret assets, Nevium professionals have performed:
- Lost profit damages calculations, quantifying the impact of the alleged misappropriation on the claimant’s business activities;
- Unjust enrichment damages calculations, quantifying the impact of the alleged misappropriation on the defendant’s business activities and financial performance;
- Valuation of trade secret assets to support financings and asset transfers;
- Reasonable royalty and licensing analysis involving trade secret and proprietary technology assets; and
- Profit apportionment analyses, identifying the portion of economic profits and cash flows contributed by trade secret assets.