Transcript Keeping Confidence: Putting in Place a Trade Secret Protection Program in an R&D Lab and in a Manufacturing Business By Dr Shantanu De Ranbaxy Disclaimer:

Keeping Confidence: Putting in Place a Trade Secret
Protection Program in an R&D Lab and in a
Manufacturing Business
By Dr Shantanu De
Ranbaxy
Disclaimer: The views & comments expressed in this presentation are solely of the speaker and in no way
reflects or represents the opinion of Ranbaxy on the said subject.
Index
1. What is Trade secret ?
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What constitutes Trade secret?
Importance of Trade secret
Trade secret vs patent
2. Trade secret protection program
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TRIPS provision, Paris convention, Indian scenario
Protection program
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In general
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In R&D
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In Manufacturing
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Test data
3. Relevance of Trade secrets in Biotech industry and
protection.
4. References & Acknowledgements
Trade secret (TS)
• It is “information which, if disclosed to a competitor, would
be liable to cause real or significant harm to the owner of
the secret. It must be information used in trade or business,
and …..the owner must limit the dissemination of it or at
least not encourage or permit widespread publication”
Lansing Linde Ltd v Kerr (1991) 1 All ER 418
• According to Chambers 21st Century Dictionary,(Reprint on
2000,page1491) the term TS means –an ingredient,
technique, etc. that a particular company or individual will
not divulge because they see it as giving them an
advantage over their rivals.
• Again, according to Oxford advanced learners Dictionary
the term TS means a piece of information, for example,
about how a particular product is made, that is known only
to the company that makes it.
Trade secret
Uniform trade secrets Act (UTSA) TS is a formula, process, device, or other business
information that is kept confidential to maintain an
advantage over competitors. It is an information-including a
formula, pattern, compilation, program, device, method,
technique, or process that1) derives independent economic value, actual or
potential, from not being generally known or readily
ascertainable by others who can obtain economic value
from its disclosure or use, and
2) is the subject of reasonable efforts, under the
circumstances, to maintain its secrecy.
What constitutes trade secret?
• Both the “content” as well as “expression” remains secret.
• TS per se is broader in scope than patents, trademarks or
copyrights
• It is a vital part of intangible asset, others being goodwill,
branding, patents, trademarks & copyrights.
• TS`s are different from others as their protection requires
an establishment and maintenance.
• Necessity of good faith, honesty and fair play are thus
critical.
• It is a form of IP whose associated rights and duties have
not been documented much by means of any legislation.
• TS does not require any conformity to the definition of
patentable matter, nor does it need to be novel or non
obvious
What constitutes trade secret?
• US courts have held that “the extent of a property right in a
trade secret is determined by the extent to which the owner
of the secret protects his secret from disclosure”
- Ruckhelhaus v Monsanto 476 US 986 (1984)
• TS is a Confidential Information that is clear &
specific/certain and thus not speculative.
• Boundaries of TS has to be laid down, it includes
Confidential information (CI) that is not trivial in nature,
immoral, vague & in public domain
• It allows for a number of people to know about a secret
without the information being considered to be a part of the
public domain.
What constitutes trade secret?
What can form part of TS :
(I) Technical and Scientific information
(ii) Commercial information
(iii) Financial information and
(iv) Negative information
• Technical and scientific information may include a formula, pattern,
program, device, technical composition of a product (e.g. paint,
chemicals etc.), manufacturing methods (process), know-how to
produce a product, designs, drawing, Laboratory confidential data,
computer codes ,architectural plans, blueprints and maps; Algorithms
and processes that are implemented in computer programs, and the
programs themselves; Instructional methods, repair processes,
techniques and knowhow; Document tracking processes; Data
compilations, including certain databases; Personnel records;
Schedules; Manuals; Ingredients; Information about research and
development activities.
What constitutes trade secret?
Commercial information may include any business strategy or plan, lists of
suppliers and name of clients, customer’s requirements and
preferences etc. Data compilations (the more information a list contains,
the more likely it is to qualify for trade secret protection)
Financial information includes- internal cost structure, employee’s
agreements, salary and compensation plans etc. Business strategies/
plans, marketing plans, blueprints, and stock-picking formulae, pricing
information, non-public financial data and even information such as
overhead rates and profit margins that help define a price may be found
to be a trade secret even if the price itself is known.
Again, negative information includes- causes of failure and subsequent
effort to rectify and solve any problem at the time of manufacturing of
certain product, unsuccessful efforts to attract customers in purchasing
A TS may be made up of a combination of characteristics and
components, each of which by itself is in the public domain, but where
the unified process, design and operation of such characteristics or
components, in combination, provides a competitive advantage.
Importance of Trade secret
• Even after the grant of a patent, the associated knowledge may be
protected as a TS.
• TS can virtually be any kind of business information. These are
important to industry and the economy because they protect and
encourage innovation. It has the advantage of patent, a copyright, or
the law on industrial designs. Getting protecting information that
possibly could not be protected by a patent for a product requires that it
be innovative, copyright only applies to an original work. But, an
innovation in case of patent and originality in case of copyright is not
required in case of TS protection. Like other Intellectual Property
Instruments, no fixed time limit of validity is necessary for TS. An
inventor need not disclose a TS for its registration like patent. So long
as the TS remains undisclosed, protection is available for an indefinite
period of time.
Importance of Trade secret
There is no compulsion of disclosure of TS. All R&D data,
including those relating to better modes, developed after
patent filing, whether or not invention, can also be protected
by trade secret. TS protection operates very quickly without
delay, virtually all inventions are protected by TS.
Trade secrets are generally protected by a mix of state
statutory and judicial provisions
TS can be enforced as valuable property rights by the courts.
TS is an internal instrument with minimum procedural
complications
Keeping Trade secret or patent it?
• That will depend on the specific facts and circumstances of
the invention. For example, how long does one expect it will
be commercially viable? If it you think the secret can remain
secret for a long time and are confident that no one will be
able to figure it out on their own, you may prefer to keep it
as a trade secret. The formula for Coca-Cola was
developed over 100 years ago, and it is still a trade secret.
As patents have a limited duration, and are made public
when they are issued if the inventor of Coca Cola had
patented it, the patent protection would have run out long
ago. Today anyone would be able to use the formula. Very
often lawyers assist inventors in making choices between
seeking to protect an invention with a patent or by relying
on trade secret law.
Keeping Trade secret or patent it?
• Patents are mainly appropriate in the field of technology
and are not suitable to protect business secrets.
• Patents are for a definite period whereas TS are as long as
it can be kept as a secret.
• Patents require full and complete disclosure of protected
subject matter whereas there is no such requirement in
case of TS.
• Dilemma: If the competitor acquires the secret by lawful and
proper means or by the process of reverse engineering the
holder would have no right, while in case of patents even
though the protection offered is for a limited period of 20
years no person can duplicate the patented product (in
case of a product patent) or use the same method (in case
of a process patent) till the protection period expires
Pros & cons of having a Trade Secret
Benefits
Disadvantages
(1) Knowledge of the system is not public
and so is not available to competitors
(1) Someone else could have same idea
and exploit it.
(2) There is no time limit on the available
protection.
(2) Some countries may not recognize the
protection of confidential information.
(3) Trade secrets involve no registration
costs (though there may be high costs
related to keeping the information
confidential).
(3) In house procedures need to be
elaborate, time consuming and tedious.
(4) Does not require compliance with
formalities such as disclosure of the
information to a Government authority
(4) The enforcement of confidentiality
procedure can be problematic. The level of
protection granted to trade secrets varies
significantly from country to country, but is
generally considered weak, particularly
when compared with the protection
granted by a patent
(5) Have immediate effect
Protection program
Protection program
Legal protection of trade secrets can be derived from many
diverse sources of law such as contract law, tort law, unfair
competition law, criminal law, and the laws governing
employee/employer relations and fiduciary obligations
Protection under TRIPS
Article 39
1. In the course of ensuring effective protection against unfair competition
as provided in Article 10bis of the Paris Convention (1967), Members
shall protect undisclosed information in accordance with paragraph 2
and data submitted to governments or governmental agencies in
accordance with paragraph 3.
2. Natural and legal persons shall have the possibility of preventing
information lawfully within their control from being disclosed to, acquired
by, or used by others without their consent in a manner contrary to
honest commercial practices so long as such information:
(a) is secret in the sense that it is not, as a body or in the precise
configuration and assembly of its components, generally known among
or readily accessible to persons within the circles that normally deal
with the kind of information in question;
(b) has commercial value because it is secret; and
(c) has been subject to reasonable steps under the circumstances, by
the person lawfully in control of the information, to keep it secret.
Protection under TRIPS
3. Members, when requiring, as a condition of approving the marketing of
pharmaceutical or of agricultural chemical products which utilize new
chemical entities, the submission of undisclosed test or other data, the
origination of which involves a considerable effort, shall protect such
data against unfair commercial use. In addition, Members shall protect
such data against disclosure, except where necessary to protect the
public, or unless steps are taken to ensure that the data are protected
against unfair commercial use.
Paris Convention
Article 10bis of the Paris convention:
(1) The countries of the Union are bound to assure to nationals of such
countries effective protection against unfair competition.
(2) Any act of competition contrary to honest practices in industrial or
commercial matters constitutes an act of unfair competition.
(3) The following in particular shall be prohibited:
(i) all acts of such a nature as to create confusion by any means whatever with the
establishment, the goods, or the industrial or commercial activities, of a competitor;
(ii) false allegations in the course of trade of such a nature as to discredit the
establishment, the goods, or the industrial or commercial activities, of a competitor;
(iii) indications or allegations the use of which in the course of trade is liable to mislead
the public as to the nature, the manufacturing process, the characteristics, the suitability
for their purpose, or the quantity, of the goods.
In Article 10 bis(3) the protection of industrial and business-secrets is
implied by the general obligation under Article 10 bis(1) and (2)
Trade Secrets Protection in India
• Trade secrets are protected in India either through contract law or
through the equitable doctrine of breach of confidentiality. It is common
to insert clauses of confidential nature in a technology transfer or other
license agreement to maintain the confidential nature of the subject
matter, not only during the employment period of the employees and
contractors but also after its termination, though for a fixed period of
time. The skill, knowledge and experience of a particular profession can
also be protected in certain circumstances from misuse through
contractual obligations.
• In India protection of trade secrets is Common Law based. However,
section 27 of the Indian Contract Act provides some sort of limited
remedy, it bars any person from disclosing any information which he
acquires as a result of a contract.
• Draft National Innovation Bill 2008 by DST; subject to debate at present
Section on “Confidentiality and CI and remedies and offences”
Trade Secrets Protection in India
• No criminal action can be brought about for revealing CI;
only civil remedy.
• Here restrictive covenants and Non disclosure agreements
are means of protecting TS.
• Most cases of TS & CI are considered along with Copyright
Act.
Trade Secrets Protection
To determine whether particular information is a trade secret
or not courts generally look into the following points 1. The extent to which the information is known to the outside world,
2. The extent to which the information is known to the employees,
3. What measures are taken by the company to protect the secret,
4. The value of the information to the business and to the competitors,
5. The amount of time and money spent in developing the information,
and
6. The ease or difficulty with which the information can be acquired and
duplicated by others.
The above list however is not exhaustive and it would in the end
depend on the facts of the case
Protection program – In general
One should be clear about their trade secrets (identifying & categorizing)
and their importance & relevance to business.
• Having laid down proper guidelines in the form of SOP clearly defining
what is IP and its various forms.
• Putting Information security policy in place/ having written policy.
• Specific directives to the functional departments, each in regard to their
area of practice, to educate them on the proper use of IP. This is to
prevent improper handling of IP in the course of operation or business
in general. (awareness/ familiarization)
• Risk assessment/ analysis
• Restrict public access to sensitive areas where trade-secreted
information is kept or handled/ Intrusion detection mechanism/ CCTV
(Physical controls & safeguards)
• Lock gates and cabinets, and use passwords to restrict access to
sensitive information in databases
Protection program – In general
• Security devices/ Encryption technology (Technical
controls)
• Label trade secret documents, discs, and digital information
as such by the use of a "confidential information" stamp or
digital notice.
• Enter into confidentiality agreements with any third party
that may come across the trade secrets of the organization.
• Screen speeches, publications, and presentations by
employees to check for any inadvertent disclosure of trade
secrets
• Ensure that procedures are taken to install firewalls for
cyber security purposes.
Protection program – In general
• Monitor the Web, or install programs for cyber surveillance,
to collect information on the use of the organization's IP.
This should include spotting the use of the trademark, or
confusingly similar marks, as domain names and cyber
squatting incidents.
• Install programs for digital management to indicate
infringement of the organization's IP, and collect evidence
of such infringements.
• Monitor the Web site records to spot any attempts to deep
link or divert Internet traffic from the organization's Web
site, which may constitute anticompetitive practices
Research and development
• Having clear IP & TS policy in place. Making awareness
about them by having regular communication/ training to all.
• Flow of information on “Need to know” basis.
• While dealing with 3rd parties ensure that flow of information
is carried out only between authorized persons.
• Wherever applicable & necessary following the path of
sharing confidential Information with 3rd parties through
Attorneys & Counsel.
• Having effective and enforceable Confidential and Non
Disclosure agreements in place especially having sections/
clause on IP and on Information/ strategy sharing.
Research and Development
• In case of TS keeping written communication to the
minimum.
• Wherever appropriate and necessary qualify such
information as “privilege” by keeping Attorney in loop.
• Laid down Document retention policies
• Minimum printing & Secure printing
• Requirement of multiple layer check & authorization while
dealing with disposal of certain records
• Simply marking laboratory notebooks and research plans
such as grant proposals "CONFIDENTIAL".
Research and development
• Restrictions on accessing privilege documents.
• Fingerprinting confidential documents; deliberate
“markings”
• Password protection of all confidential documents
• Installing validated e-security systems.
• Restricted sharing of Confidential information even within a
core group.
• Keeping positive & even negative information such as
research options that have been explored and found
worthless under protection.
• Tactical filing and withdrawal of patent applications.
Research and development
• Have employees sign confidentiality agreements as part of
their employment agreements.
• Conduct entry interviews with incoming employees to guard
against the inadvertent use of trade secrets of competition's
former employees, if any.
• Provide incoming employees with a copy, as well as other
details, of the trade secret policy.
• Conduct exit interviews with departing employees to ensure
that they have not taken any trade secrets with them, and
prepare statements to be signed by them to that effect.
• Dispatch a letter to the new prospective employer with
notice that the departing employee possesses trade
secrets. This is of particular importance when key former
employees are joining the competition.
Research and development
• Having contractual obligation including penalty related
clauses in employment contract, in licensing agreement, in
commissioning agreement, in contract of works, in joint
venture, in partnership, in joint collaborative research
between parties
• Maintain clear and corroborated lab notes to establish the
dates of conception and reduction to practice of each
invention.
• Maintain "clean" procedures for copyrights by denying
access by the development team to competing software
programs, to defend against copyright infringement.
Manufacturing
• Restrict entry to only authorized plant personnel.
• Keeping MPR`s & BPR`s under limited authorized access.
• Control access to products under production to protect
ideas and concepts that are not the subject of patent
application or protection. Such ideas and concepts are
protectable as trade secrets, and hence should be identified
and marketed accordingly, as well as protected by
reasonable security measures.
• Identify production processes along the same lines and
inform the human resources department of key personnel
that are in possession of such trade-secreted processes.
Protection program – some concepts practiced across the globe
• “Garden leave” – to keep the employee in the rooster till the
CI he has is of relevance to any competitor.
• Restrictive covenants – which specifies that the employee
will not work in the same industry for a specified period
after termination.
Remedies
• Injunctive relief as primary remedy. (US follows doctrine of
Inevitable disclosure which must be backed up by sufficient
evidence of a probable loss or injury)
• Damages (assessed in terms of “market value” of the CI)
• “Springboard doctrine” – developed by English court. It
aims to ensure that a person who breaches a duty of
confidence is not able to benefit from the breach.
Test data
• TRIPS agreement also requires protection for test data
(related to the quality, safety and efficacy as well as information on the
composition and physical and chemical characteristics of the product)
that may be submitted by pharma companies to regulatory
authorities.
• Later applicants can rely on bioequivalence tests to apply
for grant of marketing authorization.
• Art 39 only requires protection of such data from unfair
competition.
Biotechnology
TS protection in biotechnology is similar to that ascribable to any
commercial enterprise – current & future business plans, research
plans, expansion or building plans, financial records.
Trade secret protection seems most appropriate for subject matter that is
unlikely to be discovered by anyone else because it is so specific to a
particular process or product that it is unlikely that a duplicate set of
experiments will be conducted.
For example, if, in the production of a particular recombinant protein, it is
found that a particular fusion partner permits very high expression in a
particular host organism (and the fusion partner is cleaved before the
product is marketed), it may very well be that the probability of
discovery by competitors is quite low. If so, trade secret protection will
be fine.
Biotechnology
• Yet, if it is found that a particular type of cell is extremely effective in
providing large product yields for recombinant products in general, it is
probably a mistake to attempt to keep it as a secret. Chances for
independent discovery are great and, should independent discoverers
decide to obtain a patent themselves, the trade secret holder might
have to stop using its "secret" to avoid infringing their patent.
• There is lot of collaborative research in this field. This type of trade
secret may not be available to nontrade institutions such as universities
and research foundations. But with the increased tendency of such
institutions to participate in commercial development through out
licensing programs, and even equity investments in commercial
enterprises, they are quickly falling in the ambit of TS.
Biotechnology
Some examples of what all can be Trade secrets:
• Cell lines for monoclonal antibody production; ideas;
formula and production details; experimental procedures;
production strains; details of medium design and
formulation; hybridization conditions; ways of conducting
assays
• Protection for such things will work, of course, only if they
cannot be reverse engineered (the composition discovered
from analysis of products acquired in the marketplace).
Biotechnology
Additional precautions (besides the points discussed before):
• Reserving clear title in any transfer of biological materials.
• Use of transfer agreements, even for transfers between
universities or other non-profit institutions.
• In case of government sponsored research activities it may
have "march-in" rights.
• Establishing policies governing premature disclosure,
licensing, ownership "of inventions, discoveries, trade
secrets and software," royalties, and equity and
management participation in businesses created to develop
intellectual property.
• Separating laboratory facilities from teaching and office
facilities
Biotechnology
• Physical security may be facilitated by carrying out the containment
practices and guidelines for biosafety
• The most important element of containment is a strict adherence to
standard microbiological practices and techniques.
• Identification of potentially proprietary biological materials is possible
through genetic engineering. For instance, combinations of genetic
markers in unusual patterns tend to prove that a given strain was
derived from the proprietary strain. Of course, the more unusual the
combinations, the better and well documented records are of
paramount importance. Non-critical alternations in DNA, RNA and
protein sequences may also be utilized to identify such strains. If
working with genomic eukaryotic DNA sequences or if concerned with
non-coding sequences in prokaryotes, such alterations may be made in
the non-coding sequences. Use of strains weakened to protect against
inadvertent release into the environment are useful in protecting against
misappropriation..
Biotechnology
• In many ways, these practices mimic standard practices
used in the publishing industry to detect copying of
published works by disbursing randomized, recorded
typographical errors throughout such works
• Keeping a "paper trail“ thereby establishing for all materials
exiting the laboratory by requiring multiple clearances/
review including administrative review.
• Transfer of organisms via a contract of bailment which
maintains title with the inventor to both the organism and
any progeny derived from the organism.
References & acknowledgements
• Biotechnology by John E. Smith; fourth Edition; Cambridge University
Press; 2004.
• http://w.w.w.wipo.int
• WIPO Magazine, April 2002, p-12-14
• Article by AG Roy in Journal of Intellectual property, Vol. 11, May 2006,
p-192-200.
• Intellectual property and International trade the TRIPS Agreement.
Editor Carlos M. Correa & AbdulQawi A. Yusuf, Published by Kluwer
Law International, 2nd Edition 2008.
• http://www.legalserviceindia.com/article/l436-Trade-Secret.html
• BIOTECHNOLOGY TRADE SECRETS, UNIVERSITY RESEARCH
AND INTERNATIONAL PERSPECTIVES by C. Steven McDaniel
(www.conleyrose.com)
Acknowledgement
The author/ presenter acknowledges Ranbaxy Laboratories Ltd. for giving
permission to make this presentation.
The author/ presenter acknowledges & thanks WIPO for providing this
opportunity.