While traditionally healthcare businesses have tended to look to patent protection, it would behoove them to also think about trade secret protection to protect their valuable inventions. Given the financial strains on businesses from the COVID-19 pandemic, some businesses may find trade secret protection a cost-efficient alternative to the patent process. Trade secret enforcement also potentially can yield hundreds of millions, sometimes even over a billion, dollars for the trade secret holder.1Further, patent protection is not always available.2
Potential Trade Secrets In The Healthcare Industry
While the definition may vary somewhat across jurisdictions, a trade secret generally is information that derives independent economic value from not being known; and is subject to reasonable efforts to maintain its secrecy.
In the healthcare industry, potential trade secrets include formulas or techniques to develop pharmaceuticals, biosimilars, drugs, vaccines, or medical devices; code for a medical technology software; testing results; and patient analyses.
An important category of potential trade secrets particular to the healthcare industry is negative research (also known as negative "know-how"). Negative research is information about what does not work. In the healthcare industry, substantial resources are often devoted to producing negative research (e.g., testing, clinical trials). A competitor easily could love to get its hands on your negative research. Access to the negative research could save the competitor substantial expense by not going down the wrong path that you went down. In turn, the competitor could potentially attract your customers by having the ability to offer its end product at a much lower price than yours (because the competitor's R&D expenses were much less than yours).
Trade Secret Protection As A Potential Alternative To Patent Protection
The below chart highlights some of the key differences between patent and trade secret protection, and the potential significance to healthcare companies in opting between trade secret protection and patent protection.
PATENT | TAKEAWAY | |
Invention | Information | If it is not a patentable invention but is just valuable information, consider trade secret protection. Trade secret protection can protect information that patent protection cannot. Trade secrets can include subject matter typically covered by patents such as inventions, technologies and improved processes that may be patentable, but can also include other non-patentable information such as customer information, marketing, pricing/discount information, vendor contracts and other information. |
Disclosure required and tangible form of ownership | Secrecy required | If you can't keep the information secret (e.g., because it is subject to reverse engineering), consider patent protection. Also, consider that inventions that are on the cutting edge may evolve over time and initial disclosures in patent applications may capture nuances from which competitors can benefit. In addition, once a patent application publishes, other entities can piggyback and create blocking materials regarding the particular invention. |
Monopoly but limited duration (20 years) | No monopoly but no time limit | If the invention/information has the potential to be materially valuable beyond the monopoly period afforded by patent protection, consider trade secret protection. But, if the value is the ability to prevent your competitors from practicing the invention in the coming years, consider patent protection. |
Must be novel, non-obvious, and patentable subject matter (not an abstract idea, law of nature, or natural phenomenon). | Must derive economic value from being kept secret and the subject of reasonable efforts to maintain its secrecy | If the invention may not satisfy the patent-eligibility requirements, consider trade secret protection. Healthcare companies should consider trade secret protection for early stage research. Patent claims are limited to a written description in the initial patent application but the full import of a development may not be understood immediately. As a result, broad, early-development claims may be rejected as merely being laws of nature or unpatentable ideas. |
Healthcare companies must carefully consider how to protect their intellectual property. Trade secret protection often may be available and attractive.
Should healthcare companies elect to implement trade secret protection, they should consult with counsel and be proactive to protect the secrecy of their trade secrets before any misappropriation occurs, and to develop a detailed plan in place in the event of a breach. A few basic potential "best practices" for consideration include:
- Identify the company's trade secrets as well as who will have access to the trade secrets.
- Determine how the trade secrets are to be safeguarded by the company (e.g., confidentiality provisions in employment agreements, non-disclosure agreements for third parties, and other technical or network protection measures (i.e., computer passwords, encrypted e-mails, firewalls, etc.). Consider whether there are particular danger areas and how to address them.
- Implement and enforce the protection measures. Anyone who has access to the trade secrets should agree to hold them in trust for the company even after their relationship with the company ends.
- Develop an action plan should misappropriation be threatened or perceived. Time will be of the essence.
This article is not an unequivocal statement of the law, but instead offers some potential issues to consider with counsel. This alert is provided for information purposes only and does not constitute legal advice and is not intended to form an attorney client relationship. Please contact your
Footnotes
1 For example, in
2 See, e.g.,
Originally published
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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