Can Trade Secrets Be Sold?

Trade secrets are a crucial part of many successful businesses–in fact, many companies owe most or even all of their success to their trade secrets. That said, if you’re a business owner who, for example, no longer wishes to own or operate your business, you may wonder if trade secrets can be sold to prospective buyers. Continue reading and reach out to a seasoned New Orleans, Louisiana trade secret lawyer from Lemler IP to learn more. Here are some of the questions you may have:

What Is a Trade Secret?

Before discussing whether trade secrets can be sold, it’s important to clarify what they are. Trade secrets are any confidential information that gives a business a competitive advantage. This could include formulas, processes, designs, and more. Unlike patents or trademarks, trade secrets are not registered with any government agency; they are protected by maintaining their confidentiality through nondisclosure agreements (NDAs), restricted access, and other security measures.

In Louisiana, trade secrets are governed by the Louisiana Uniform Trade Secrets Act (LUTSA), which defines them as information that derives economic value from not being generally known and is subject to reasonable efforts to maintain secrecy. Because of this, trade secrets can be incredibly valuable assets. Their sale, however, requires particular attention to detail.

How Can Trade Secrets Be Sold or Transferred?

Selling or transferring trade secrets is not like selling a tangible object or even a registered intellectual property asset like a trademark. It involves the exchange of both the information itself and the legal obligation to maintain its secrecy. Some key steps involved in the process of selling a trade secret are as follows:

• Valuation of the Trade Secret: A trade secret’s worth depends on factors such as its uniqueness, the competitive advantage it offers, and the costs of maintaining its confidentiality. Professional appraisers or attorneys experienced in intellectual property can help assess its value.
• Drafting a Confidentiality Agreement: When transferring trade secrets, confidentiality must remain intact. The agreement you create should outline the buyer’s obligations to protect the secrecy of the information and restrict its use to specific purposes.
• Creating a Purchase Agreement: This document formalizes the transfer of the trade secret. It should specify the scope of the information being sold, the purchase price, and the responsibilities of both parties.

Selling trade secrets may also involve licensing them instead of transferring full ownership. This allows the owner to retain certain rights while granting others the ability to use the information under specified terms.

If you wish to speak with a seasoned intellectual property lawyer about potentially selling or protecting your trade secret, simply contact Lemler IP today.