Automated trade secret asset management (TSAM) is a newer tool that will drastically change the way businesses identify, classify, protect, and value their trade secrets. Most executives agree that trade secrets are essential to their businesses, but don’t know what to do in order to protect them. The answer as to why there is a disconnect between the recognition of the importance of trade secrets, and companies ineffectively managing their trade secret assets, lies in understanding the various stages of TSAM.
There are four stages of TSAM. These are: identification, classification, protection, and valuation. These four stages must be performed in the order they are listed. One cannot protect a trade secret asset without first identifying and classifying the asset. Most companies’ problem is that they start out in the third stage, protection. Companies fail here because one cannot properly protect something without first identifying what it is that needs protection. Thus, to protect trade secret assets effectively, businesses need to start at the first stage, identification.
The second stage, classification, involves scoring and ranking a business’ trade secrets. Even a small company can have hundreds, if not thousands, of trade secret assets. This makes it absolutely crucial that businesses perform the identification and classification steps before they move to the protection phase. Once the protection stage starts, everything comes together, and optimum security measures can be taken to protect the identified and classified trade secret asset.
So how does automated TSAM relate to all of this? Well, as one can imagine, manually identifying and classifying tens of thousands of trade secret assets can take a significant amount of time. Imagine being able to use technology to create a “card catalog” of your business’ trade secret assets. This is what an automated TSAM platform does. An automated TSAM platform can run on a standalone workstation, multiuser server, cloud-based server, or even an iPad or smartphone. The automated TSAM tool helps to validate and identify the existence of trade secret assets, and permits the inventory, analysis, tracking, and valuation of the assets. This can save a business hundreds of hours, and reduce the cost of having employees do many of these things manually.
The automated TSAM tool also helps classify trade secret assets. Each trade secret asset must be “scored,” the score being derived from the independent economic value of the secrecy of the information. Using an automated TSAM platform, employees can score and classify different potential trade secrets, and ultimately accept or reject the potential trade secret into the automated TSAM system, where the asset is protected. An employee should consider six different factors when classifying a potential trade secret asset. These are: (1) the extent to which the information is known outside the company; (2) the extent to which the information is known by employees and others involved in the company; (3) the extent of measures taken by the company to guard the secrecy of the information; (4) the value of the information to the company and its competitors; (5) the amount of time, effort, and money expended by the company in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. Employees can rank these factors, and the scores ultimately help in their decision to accept or reject the trade secret.
Once in the system, the automated TSAM platform also helps with valuing the trade secret asset. The automated TSAM helps collect metadata on the asset, and allows the trade secret owner to evaluate the three factors involved in calculating the value of their asset: (1) total amount of expected cash flow; (2) the discounted basis of that future cash flow as present value; and (3) the probability of the future cash flow occurring. Having the information in the automated TSAM in order to evaluate these factors saves a lot of time as opposed to collecting the information manually.
All of this information is extremely useful in properly managing, tracking and protecting trade secrets. It is also valuable if a business finds itself involved in trade secret litigation. If you are involved with a business that needs assistance in identifying, classifying, protecting and/or valuing its trade secrets, consider TSAM.
*By Attorney Tori Lynne Kluess, with credit to Law Clerk, Maxwell Krenke