The rising awareness of the importance of trade secrets is significant, but it’s only the initial stage of the process. The tricky issue with trade secrets is they are only protected as long as they are kept secret. The moment the information becomes public, anyone can use it, unlike patents and other types of intellectual property that can be recovered and enforced through injunctions.
“Increasing people’s understanding of the importance of trade secrets and their protection is an essential step in creating the right protections,” says David Lashway, co-chair of Baker McKenzie’s Global Cybersecurity Practice. “You cannot risk manage something you don’t know is at risk.”
One of the reasons companies often don’t put the appropriate level of time, energy and resources into managing the risk to trade secrets is because of their intangible, varied characteristics. How, for example, do you determine the value of a proprietary search algorithm?
“Most companies understand the need to protect their trade secrets but the big difference is identifying which of their trade secrets are of most value, and that varies from company to company,” says Kevin O’Brien, chair of Baker McKenzie’s North America Intellectual Property Practice.
This question of valuation still perplexes the IP industry, to the extent that there is no universally accepted model. Consor Intellectual Asset Management, a US-based consulting firm, argues that the most appropriate valuation model for trade secrets is the net present value of future cash flows, a method used to value companies, investments and corporate assets.
Nearly half of the corporate executives in our survey said their trade secrets are more important than their patents and trademarks. Even more (69%) said they foresee trade secret protection becoming more critical than safeguarding other types of intellectual property given the rapid pace of tech innovation.