Most business owners would agree that the value of most or a significant amount of their company is derived from intellectual property. In some instances, intellectual property exceeds the value of the company’s tangible assets.

In fact, a typical asset purchase agreement for the acquisition of a business will include a description of the intellectual property assets that are being purchased.

A substantial amount of intellectual property’s value is made up of “trade secrets.” And within that asset description there will likely be a category for “trade secrets” and other intellectual property. Here is a sample excerpt from an asset purchase agreement describing the “trade secrets” that are being purchased:

“Intellectual Property Rights” shall mean … trade secrets and other confidential and proprietary business information, including, but not limited to, customer lists, marketing information, bid information, all designs, plans and drawings, technology, know-how and other proprietary rights, whether or not registered (“Trade Secrets”) …   

When it comes to buying or selling a business, trade secrets and other intangible intellectual property may be harder to measure and value than tangible assets. But if the business has failed to take the proper steps in creating and protecting trade secrets, then valuation is easy – zero.

For more information about creating and protecting trade secrets and other intellectual property contact Michigan attorney Jason Shinn. Mr. Shinn routinely represents buyers or sellers in business transactions to audit and value trade secrets and other intangible assets. And, if necessary, he is experienced in both federal and state courts litigating trade secret misappropriation claims.