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Intangible property, intellectual asset management and information security are now critical flash points in the Sarbanes-Oxley Act of 2002 and a myriad of other federal and state statutes. At the heart of these developments are trade secrets that comprise the largest asset class of most U.S. corporations. Companies now have a fiduciary duty to identify and protect trade secret assets. These assets encompass any information that derives economic value, actual or potential, from the secrecy of such information. See Uniform Trade Secrets Act With 1985 Amendments Trade secrets no longer can be viewed as an amorphous intellectual property right. Trade secrets define an asset class. Asset valuations have shifted in the United States from physical property assets to intellectual property assets. Trade secrets are estimated to comprise 80% of the assets in New Economy companies. Ideas are now the core of value creation. Corporate growth is being driven by idea creations. The Financial Accounting Services Board (in FASB statements 141 and 142) and the Internal Revenue Service (in its � 482 regulations) are beginning to develop rules and procedures for capturing the economic value of this new asset class. Trade secret assets often are created and stored electronically. As a result, computers and the Internet have resulted in a merger of information security protocols and trade secret protection measures. Protection of trade secrets is now inextricably intertwined with the same security management practices and computer hardware, software and network security practices relating to the identification and protection of other types of information assets. Until Sarbanes-Oxley, intellectual asset management was not viewed as an oversight issue for the boards of directors of U.S. companies. Management was given carte blanche authority over intellectual property matters. The board of directors became involved, if at all, only when the company was engaged in a major intellectual property lawsuit. Duty to defend assets Sarbanes-Oxley has changed the rules of the game. It now is clear that the directors and top managers must become actively involved with intellectual asset management and information security, to avoid both civil and criminal liability under Sarbanes-Oxley and shareholder derivative suits for the breach of the fiduciary duty to adequately protect intellectual property assets. This represents a sea change in the law. In the past, most companies neglected trade secret assets, and many companies still lack adequate systems for the identification, protection and economic evaluation of their trade secrets. Tens of billions of dollars in trade secret assets are lost each year by U.S. companies due to the failure to take reasonable steps to protect them. See, for example, the 2004 Annual Report to Congress on Foreign Economic Collection and Industrial Espionage, at http://www.nacic.gov Sarbanes-Oxley imposes new duties of disclosure and corporate governance. Section 302 of the act requires the chief executive officer and chief financial officer of public companies to certify that their annual and quarterly reports contain no untrue or misleading statements of material fact or material omissions, and to certify that the financial information in the report fairly presents the financial condition of the company. Section 404 requires companies to document and certify the scope, adequacy and effectiveness of the internal control structure and procedures for financial reporting and controls. Section 906 imposes civil and criminal penalties for violations of the Sarbanes-Oxley Act. Since trade secrets are financial assets, Sarbanes-Oxley requires adequate internal controls over the procedures by which they are valued and their value reported publicly. At a minimum, U.S. companies must now have a trade secret asset-control committee or a specific corporate officer charged with the responsibility to identify, protect and valuate trade secret assets on a day-to-day basis. These functions will extend to third-party relationships and outsourcing in foreign countries. In addition, trade secrets sold or acquired in mergers and acquisitions will have to be tracked and monitored by the corporation.
INTELLECTUAL PROPERTY

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