VALUATION Corp. Provides Valuation of Know-How (Trade Secrets) in Moscow and Russian Regions
- Know-How as IP object in Russia
- Know-How Valuation Services
- Required Information for Valuation of Know-How
In modern Russian economy, closely held commercial or technical information capable of bringing economic benefits often represents an important and quite valuable asset. Such information is regarded as intellectual property and it can be a major element of a working business. Usually this type of information is referred as know-how, or trade secret.
According to Russian law, know-how (also known in Russia as “trade secret”) is any information about the results of scientific and/or technical researches or about the methods of organizing professional activities, information of technical, financial or administrative nature that brings or potentially can bring economic benefits because this information is confidential and available (known) only to a strictly limited group of people, and for all others it is kept in secret.
Know-how in Russia is considered to be an intellectual property, but unlike inventions, utility models or industrial designs, know–how is not patentable. Therefore the fundamental condition for classifying useful information (results of R&D, design, engineering and technological works, etc.) as know-how is compliance with the regime of strict confidentiality, i.e. the circle of persons having access to information constituting know-how should be strictly limited.
According to Russian civil law, the exclusive right to know-how has no limitations on duration, but when the information that constitutes know-how appears in the public domain, the exclusive right to this IP object ceases to exist simultaneously for all right holders.
In order to classify information as a know-how in Russia it is necessary to verify that the following conditions are met:
- the subject information is the result of scientific and/or technical research or an information about the ways of organizing professional activities.
- the subject information is capable of bringing economic benefits to its holder, provided that the information is closely held and not disclosed to a unnecessary wide circle of people.
- the subject information have not been previously published or otherwise widely disclosed.
- the subject information does not fall under the requirements of the laws of the Russian Federation on mandatory publication in the public domain.
- the subject information is not included in the list of information provided in Article 5 “Information that cannot constitute a commercial secret” of the Federal Law 98-FZ “On Commercial Secret”.
- the exclusive right holder took all reasonable measures to safeguard secrecy of the subject information.
Some examples of such safeguarding measures are:
- implementing a trade secret regime within organization in regard to the subject information;
- restricting access to the subject information by limiting the group of employees who have access to the subject information and establishing internal formalized procedure for handling the subject information within organization;
- employees who are authorized to have access to the subject information because of their job responsibilities must be informed that the subject information is a trade secret and they must sign relevant non-disclosure agreements.
Only with the simultaneous fulfillment of all the above conditions, the information can be classified as an intellectual property (know-how) and get legal protection from the state, similar to other non-patentable IP objects. But if the exclusive right holder does not take reasonable measures to keep his know-how closely confidential, then he may lose the exclusive right to his intellectual property (see definition of the exclusive right in Russia).
It should be mentioned that if non-exclusive right to use know-how is granted under license agreement, than the licensee must also take all reasonable measures to prevent accidental disclosure of the subject know-how.
As an object of intellectual property, know-how (trade secret) can be an essential element of business and occupy an important place in the structure of company’s assets. The rights to know-how are property rights and can be sold or otherwise transferred, including transferring of non–exclusive rights under a license.
Market value of know-how grossly depends on total economic benefits it can bring to the company (or to its competitors should they get hold of). Therefore, valuation of know-how (such as R&D results, technologies, technological improvements, industrial formulas, etc.) is mostly done with income approach to appraisal, taking into account actual or potential commercial profit expected to be generated by the asset.
Our firm has been providing professional services for independent valuation of know-how (trade secrets) and other objects of intellectual property in Russia for more than 20 years now.
We have experience in know-how valuation for the different purposes, including, but not limited to:
- making a non-monetary contribution to charter fund (shareholders’ capital) of Russian company;
- determination of the fair transaction price when buying/selling know-how;
- determination of initial book value of know-how as an intangible asset for accounting purposes;
- revaluation of the book value of intangible assets for accounting purposes;
- independent confirmation of the market value of a know-how for potential investors;
- determination of fair market amount of royalties for using know-how under license agreement;
- calculation of damages from unauthorized disclosure of confidential information constituting know-how.
For more information on our services and on valuation of know-how in Russia, please contact us.
- General description of the subject know-how.
- Nomenclature and characteristics of goods (services) produced using the subject know-how.
- Sources (both planned and existing) of income from the use of the subject know-how.
- Description of economic benefits from use of the subject know-how, for example:
- Increase in sales volume when using the subject know-how;
- Increase in price attributable to the product quality achieved from use the subject know-how;
- Savings in production costs attributable to the application of the subject know-how.
- Annual sales of products produced using the subject know-how for the last 3-5 years (if the subject know-how is used commercially).
- Business plan for the next 3-5 years with projected annual sales of products produced using the subject know-how (if the subject know-how is not in use yet).
- Internal corporate documents, confirming taking reasonable measures to protect confidentiality of information, constituting the subject know-how.
Depending on the purpose of valuation and other factors, the above list of information and documents may be reduced or expanded after our detailed review of the valuation assignment.
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