Over the past decade, three high-profile US Supreme Court decisions—known by their shorthand names as Alice, Mayo, and Myriad—have generated significant uncertainty over what is and isn’t patentable.

This has made US trade secret law an increasingly valuable tool for protecting IP. Uncertainty around patent eligibility reduces investment and related innovation and inhibits medical research advances. Protecting IP as trade secrets can also foster joint ventures, such as those between startups that create the IP and more established companies that can mass-produce, market and distribute the products.

As a result, companies often use trade secrets in tandem with, or instead of, patents to protect their IP. Given the role that life science and biotech IP can play in healthcare, increased use of trade secret protection in these sectors benefits society, as well as individual industries and companies.

Trade secrets versus patents

A patent is not secret. By having patented IP on file with the US Patent and Trademark Office, the patent holder tells the world about the invention in specific terms. Patent applications typically contain a precise description of the IP, and drawings where appropriate.

Patent infringement can be stopped, and infringers may be liable to the patent holder for damages or royalties, as well as being subject to an injunction barring the infringer from using the patent.

But patents expire, and a no-longer-patented product—which is disclosed to the world via the patent application and/or patent—may be made and sold by a competitor after patent expiration.

By contrast, a trade secret—by definition and as the name suggests—remains secret and does not expire. A party who misappropriates a trade secret may be subject to damages, royalties, and injunctive relief.

The evolution of trade secret law

For years, US states had their own trade secret laws which varied in substance and enforcement. Those disparities led to the Uniform Trade Secret Act (UTSA) which created a model statute that governed trade secrets including claims alleging trade secret misappropriation, which has been adopted in every state except New York.

Despite the word “uniform” in its title, UTSA-based laws varied in different states, creating problems in multi-state and global commerce. Therefore, in 2016 Congress enacted the Defend Trade Secrets Act (DTSA) to create a national body of American trade secret law, including providing victims of trade secret theft with claims and remedies against those who stole that IP, as long as the misappropriated trade secret is “related to a product or service used in, or intended for use in, interstate or foreign commerce”.

What constitutes a trade secret?

The DTSA and UTSA both define a trade secret as information that is subject to reasonable efforts to maintain its secrecy, and whose economic value is based on not being generally known to or readily ascertainable through proper means.

Trade secrets range from the formula for Coca-Cola and the recipe for Kentucky Fried Chicken to a sophisticated process for extracting conjugated oestrogens from the urine of pregnant mares for use in a pharmaceutical drug, and much more.

Private customer information, sales data, financial data, manufacturing processes, testing techniques, business plans, and compilations of public data, not easily or readily compiled, may also be trade secrets.

Under the DTSA, scientific, technical, or engineering information, including formulas, designs, prototypes, methods, techniques, processes, whether tangible or intangible, may also be subject to trade secret protection.

Life sciences and biotech processes, including for example from three different court decisions, nano-solubilisation, sustained-release pellet technology, hot melt extrusion, and liposome formulation, and “cryopreserved injectable allograft derived from human placental tissues” as well as “mouse COX-l DNA and amino acid sequences,” a “restriction map for that mouse COX-l DNA sequence,” and a “mouse COX-l cDNA clone,” are well suited for trade secret protection.

Trade secret remedies

The UTSA, DTSA and New York common law define “misappropriation” as essentially the wrongful acquisition of a trade secret by a person who knows or has reason to know that the trade secret was acquired by improper means; or the disclosure or use of a trade secret without the owner’s consent.

Victims of trade secret theft may obtain injunctive relief, royalties and other damages. Moreover, in extraordinary circumstances, the DTSA provides for the ex parte seizure of the misappropriated trade secret.

The DTSA also amended the Racketeer Influenced and Corrupt Organizations Act (RICO) to include misappropriation of trade secrets as a “predicate act” for the purposes of establishing a RICO violation.

The DTSA also applies to actors and actions that occurred outside of the US, if acts “in furtherance” of the misappropriation occur in the US. US courts have defined such conduct broadly to include, for example, mere advertising, promoting, and marketing products in the US made with the misappropriated trade secret information—apparently even if the IP was stolen overseas.

Trade secreting, as opposed to patenting, life sciences and biotech

The US Supreme Court held that mere discoveries—as opposed to creations—are not patentable. In other words, products or knowledge based on the “laws of nature” and “natural phenomena” cannot be patented.

IP can be patented only if it is more than just the discovery or the mimicking of what already exists in nature. This distinction poses a significant threat to the patentability of certain life science and biotech IP whose goal, purpose or function is to copy or replace natural biological substances, such as cells or DNA.

As the Supreme Court explained, even a discovery that is “groundbreaking, innovative, or even brilliant” can still be non-patentable.

For example, as IP lawyer Nicholas Ulen explained in a 2019 article in the Chicago-Kent Law Review, “naturally isolated proteins” may no longer be patentable because “the protein itself resembles a naturally occurring product of nature”.

However, if an inventor did more than “simply isolate a naturally occurring protein, but actually synthesised and purified it through a non-conventional method, it could be patentable … as a unique alteration” of a naturally occurring phenomenon.

While the Supreme Court noted in Myriad that “a lab technician unquestionably creates something new when making synthetic DNA (cDNA), for example where “non-coding regions” (itrons) are removed, a federal trial court in Utah found that cDNA may be patent-ineligible if it still contains itrons and is therefore “indistinguishable from natural DNA and presumably not patentable”.

A federal appellate court in Washington DC ruled that cDNA “with a function similar to that found in nature can only be patent-eligible” if “it has a unique structure, different from anything found in nature”.

Gene-based diagnostic method patents require a similar analysis because they contain what has been called a “natural expression of DNA” and information in those genes. For example, a federal trial court in California held that an “assay for detecting an anti-vinculin antibody” to diagnose irritable bowel syndrome (IBS) was unpatentable because the efficacy of that assay “is dependent on the correlation between IBS and anti-vinculin antibody” which, in turn, is dependent upon “a core law of nature”.

The Supreme Court’s law-of-nature exception could substantially limit the patentability of life science and biotech IP. In that context, life science and biotech companies should carefully evaluate whether, when, and how to use trade secret protection.

John A Stone is a partner in the New Jersey and New York offices of DeCotiis, FitzPatrick, Cole & Giblin. He can be contacted at jstone@decotiislaw.com

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