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Secrets in the Life Sciences – Part 1

Photo: Courtesy of Lawrence Jones

Author

Alumnus-Jonathon Drew Bennett

 

Jack, Jill, and Steve are three employees at a start-up biotechnology company in California called BioBank Therapeutics, which specializes in developing small molecule treatments for patients suffering from cancer.  Jack has worked at the company from the very beginning and Jill recently came on board.  Importantly, Jack, with the assistance of Jill, built a small sequencing device that allows for the identification of unique cancer targets in patients, enabling R&D for small molecules that effectively block those targets.  BioBank Therapeutics was essentially founded upon the wealth of information this sequencing device provides, which gives them a competitive advantage in the identification of small molecule therapeutics.

Jack has visited many institutions and conferences and has not seen a sequencing device like the one he and Jill constructed.  Looking ahead, what is the best option for BioBank to maintain their competitive advantage in the market and protect this device and the information it provides?  Trade secrets and patents represent two of the most common methods of protecting intellectual property.  Thus, one option explored briefly here, is to keep the device in the company as a trade secret.

Life Science companies may easily overlook trade secrets as intellectual property assets, as their creation and continued existence depends upon secrecy.  In other words, it would be a poor strategic decision for BioBank Therapeutics to issue a press release describing the creation of the sequencing device.  Trade secret protection arises primarily under state common law and statutes.  Most states currently have enacted some form of the Uniform Trade Secrets Acts, which basically states that a trade secret is information that: (1) derives independent economic value, actual or potential, from not being generally known or readily ascertainable by proper means; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy (See Uniform Trade Secrets Acts §1(4), 14 U.L.A. 402-03 (1985 & Supp. 1990).

Unlike a patent, copyright or trademark, a trade secret is not publicly recognized or registered with the government.  In a nutshell, a trade secret must consist of information, must derive economic value (actual or potential) from the fact that it is a secret, cannot be generally known either by the public or by other persons in the industry, and the information must be treated as a secret (i.e., be the subject of reasonable efforts to maintain its secrecy).  Biobank could keep the sequencing device as a trade secret under such conditions.  However, is this the best strategic path for BioBank?  Can Jill leave BioBank and start another company based on a similar or improved device?  To be continued…

 

This article is presented for informational purposes only and it is not intended to be construed or used as general legal advice nor as a solicitation of any type. The names and company depicted in this article are fictitious. Any similarity to actual persons or real-life entities is entirely coincidental.

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