Washington, D.C. Location
Licensing Trade Secrets
Licensing of trade secrets and know-how must be carefully implemented. The Uniform Trade Secrets Act defines a trade secret as:
Information, including a formula, pattern, compilation, program, device, method, technique or process, that:
(i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtained economic value from its disclosure or use, and
(ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Advantages of trade secret licensing include the ability to leverage business resources so that a licensor can enter markets that it otherwise would not have served. This is particularly true for a small firms and start-up companies who do not have sufficient personnel to utilize a trade secret nationwide, or more particularly worldwide markets. Upon granting others the right to market and distribute products which include the company’s trade secrets, it is possible to enter geographic or product markets otherwise unreachable.
Disadvantages of trade secrets licensing include the loss of exclusive control over the trade secret information. While confidentiality of the trade secret information is typically one of the conditions under which the trade secret information is passed to a licensee, if the trade secret information is not properly monitored, marked and otherwise kept secret by the licensee, there is a clear potential for loss of said trade secret information to third parties. Licensing of the trade secret information also can serve to establish a competitor with respect to commercialization of the trade secret information and can result in greater public recognition of the licensee as compared with the licensor.